Forex Platforms

Forex Trading: Technical Analysis

Making decisions about forex trading strategies can be made a little easier when you have a method of analysis that can help you determine likely movements on the FX market. Technical analysis and fundamental analysis are the two main ways to analyze what you see happening on the foreign currency exchange. Technical analysis is mostly concerned with forex charts, however, and price action.

Technical analysis is mainly about looking at forex trading charts and making decisions based on the trends seen in the price. While some may look to a few outside factors that affect the foreign currency exchange, for the most part technical analysis is almost exclusively concerned with what is going on with the pure numbers that represent the exchange rate.

For the most part, a good FX trading platform will allow you access to forex charts so that you can see exactly what is happening. By looking at price trends over a set period of time (anywhere from hours to months), it is possible to get a feel for what a foreign currency may do next on the forex market. There are even different techniques to help you interpret what you are seeing and make your currency trading decisions.

There are primers that go into detail about different ways to read forex trading charts, and how you can use different methods to analyze the data. The two main methods, though, are Fibonacci and Elliott Wave. Both of these technical analysis tools require a bit of study to learn the knack of it. Luckily, it is likely that your forex trading platform has tools to help you make use of these types of technical analysis. (The forex platform from Deutsche Bank, dbFX, offers a number of technical analysis tools, including Fibonacci.)

While technical analysis can be very helpful, and while many forex traders (especially those interested in the short term) use technical analysis exclusively when developing forex strategies, it is important to remember that there are limitations. The FX market is volatile, and it is possible that sudden movements that defy usual analysis on forex charts can result in losses.

Tags: analysis, Elliott Wave, Fibonacci, Forex, Forex Trading, Technical Analysis

Why Forex?

The foreign exchange market is also referred to as FOREX or FX and is where the trading of one currency for another takes place. Forex started to gain popularity in the early 70’s due to the movement of world economies from a fixed exchange rate to a flexible or floating exchange regime.

A floating exchange rate is one that allows its currency to fluctuate according to the foreign exchange market. The foreign exchange market became a popular trading commodity quickly because of the tremendous profits being made in the short term and the ease and liquidity of which currency is exchanged on that market. Another attraction is the forex market is practically seamless and transactions can be made 24 hours a day every Sunday starting at 5:15 PM EST, until Friday 4:00 PM EST.

In a fixed exchange rate the rates are decided by its government. But in a floating exchange rate the rate fluctuates according to the foreign exchange market. Although there are many factors that influence these changes making the calculations for rate fluctuations can be very complex.

The fact that world currency markets are constantly being changed by supply and demand for each given currency is the main influence. What makes calculations complex is the diversity of each economy being combined in a giant mixing bowl of each countries own economic climate, political conditions and monetary philosophies and their ability to change and influence each other.

Knowing this you can conclude that not just stocks but forex trading can also involve a great deal of risk. In fact some would say there are additional risks associated with forex trading because it is not a regulated exchange. But forex trading provides better leverage than with traditional stock trading. This allows traders to control longer positions with less capital.

The perceived advantage is it gives the trader more capital to trade more markets. The caution to this philosophy is proper risk management is vital. Without it a high degree of leverage can lead to large losses, as well as large gains. Additionally forex trading eliminates the middle man and the inherent costs associated with stock market trading. These are some of the reasons along with current downtrends in stocks that many traders are switching from the stock market to forex trading.

Tags: Forex

What is Forex?

“Forex” is short for the “foreign exchange market,” where the buying and selling of currency takes place. One of the largest, most liquid markets in the world, the forex market is where large banks, central banks, and governments go to trade. In April 2007, the daily volume of trading exceeded US $3.2 trillion. Trading volume continues to increase.

The Basics of How Forex Works

There are two primary reasons that foreign currencies are traded. The first reason is that companies who do business abroad have a need to change the money they make into their home currency. For example, a Japanese company that does business in the United States needs to convert the dollars it earns in the US into Japanese yen so that it can pay its workers and so forth in Japan. This type of currency exchange accounts for only 5% of the daily trading.

The remaining 95% of currency trading in forex occurs when speculators buy up currency with the intention of selling it back at a higher price. For example, the British pound may drop, and an investor who believes the price will go back up later on may choose to buy the pound at the lower rate.

Who’s Who in Forex

While the biggest forex market is in London, New York, Singapore, Sydney, and Tokyo are also major players. As soon as one forex market stops trading for the day, another one somewhere in the world is just beginning.

The participants in the forex market span a broad range: banks, hedge funds, and commercial companies all play on the forex market in an attempt to increase profits for their companies or customers. Smaller players include retail exchange brokers, who buy currency with the intention of selling it again to foreign travelers or tourists.

Central banks play a different role in the market. They act on behalf of a given nation, and their main interest is stabilizing their nation’s currency by buying their own currency up when the price goes too low (thus driving the price of the currency up), and selling their own currency when prices get too high (thus protecting against boom-bust cycles).

Trading on the forex market has increased nearly 600% since 1988, and its continued growth is another sign of the interconnectedness of the world’s markets and the steady forward march of globalization. Watching the forex market can teach much about the collective future of the world’s financial systems.

Tags: Forex