Forex (FX) Currency Trading Forecast

Basic Forex forecast methods: Technical analysis and fundamental analysis.
This article provides insight into the two major methods of analysis used to forecast the behavior of the Forex market. Technical analysis and fundamental analysis differ greatly, but both can be useful forecast tools for the Forex trader. They have the same goal - to predict a price or movement. The technician studies the effect while the fundamentalist studies the cause of market movement. Many successful traders combine a mixture of both approaches for superior results.

Technical analysis
Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action. Technical analysis is concerned with what has actually happened in the market, rather than what should happen and takes into account the price of instruments and the volume of trading, and creates charts from that data to use as the primary tool. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments simultaneously.

Technical analysis is built on three essential principles:

1. Market action discounts everything! This means that the actual price is a reflection of everything that is known to the market that could affect it, for example, supply and demand, political factors and market sentiment. However, the pure technical analyst is only concerned with price movements, not with the reasons for any changes.

2. Prices move in trends Technical analysis is used to identify patterns of market behavior that have long been recognized as significant. For many given patterns there is a high probability that they will produce the expected results. Also, there are recognized patterns that repeat themselves on a consistent basis.

3. History repeats itself Forex chart patterns have been recognized and categorized for over 100 years and the manner in which many patterns are repeated leads to the conclusion that human psychology changes little over time.

Forex charts are based on market action involving price. There are five categories in Forex technical analysis theory:
* Indicators (oscillators, e.g.: Relative Strength Index (RSI)
* Number theory (Fibonacci numbers, Gann numbers)
* Waves (Elliott wave theory)
* Gaps (high-low, open-closing)
* Trends (following moving average).

Some major technical analysis tools are described below:
Relative Strength Index (RSI):
The RSI measures the ratio of up-moves to down-moves and normalizes the calculation so that the index is expressed in a range of 0-100. If the RSI is 70 or greater, then the instrument is assumed to be overbought (a situation in which prices have risen more than market expectations). An RSI of 30 or less is taken as a signal that the instrument may be oversold (a situation in which prices have fallen more than the market expectations).

Stochastic oscillator:
This is used to indicate overbought/oversold conditions on a scale of 0-100%. The indicator is based on the observation that in a strong up trend, period closing prices tend to concentrate in the higher part of the period's range. Conversely, as prices fall in a strong down trend, closing prices tend to be near to the extreme low of the period range. Stochastic calculations produce two lines, %K and %D that are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.

Moving Average Convergence Divergence (MACD):
This indicator involves plotting two momentum lines. The MACD line is the difference between two exponential moving averages and the signal or trigger line, which is an exponential moving average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that a change in the trend is likely.

Number theory:
Fibonacci numbers: The Fibonacci number sequence (1,1,2,3,5,8,13,21,34...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62%, which is 38%, is also used as a Fibonacci retracement number.

Gann numbers:
W.D. Gann was a stock and a commodity trader working in the '50s who reputedly made over $50 million in the markets. He made his fortune using methods that he developed for trading instruments based on relationships between price movement and time, known as time/price equivalents. There is no easy explanation for Gann's methods, but in essence he used angles in charts to determine support and resistance areas and predict the times of future trend changes. He also used lines in charts to predict support and resistance areas.

Waves
Elliott wave theory: The Elliott wave theory is an approach to market analysis that is based on repetitive wave patterns and the Fibonacci number sequence. An ideal Elliott wave patterns shows a five-wave advance followed by a three-wave decline.

Gaps
Gaps are spaces left on the bar chart where no trading has taken place. An up gap is formed when the lowest price on a trading day is higher than the highest high of the previous day. A down gap is formed when the highest price of the day is lower than the lowest price of the prior day. An up gap is usually a sign of market strength, while a down gap is a sign of market weakness. A breakaway gap is a price gap that forms on the completion of an important price pattern. It usually signals the beginning of an important price move. A runaway gap is a price gap that usually occurs around the mid-point of an important market trend. For that reason, it is also called a measuring gap. An exhaustion gap is a price gap that occurs at the end of an important trend and signals that the trend is ending.

Trends
A trend refers to the direction of prices. Rising peaks and troughs constitute an up trend; falling peaks and troughs constitute a downtrend that determines the steepness of the current trend. The breaking of a trend line usually signals a trend reversal. Horizontal peaks and troughs characterize a trading range.

Moving averages are used to smooth price information in order to confirm trends and support and resistance levels. They are also useful in deciding on a trading strategy, particularly in futures trading or a market with a strong up or down trend.

The most common technical tools:
Coppock Curve is an investment tool used in technical analysis for predicting bear market lows.

DMI (Directional Movement Indicator) is a popular technical indicator used to determine whether or not a currency pair is trending.

Unlike the fundamental analyst, the technical analyst is not much concerned with any of the "bigger picture" factors affecting the market, but concentrates on the activity of that instrument's market.

Fundamental analysis
Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. In practice, many market players use technical analysis in conjunction with fundamental analysis to determine their trading strategy. One major advantage of technical analysis is that experienced analysts can follow many markets and market instruments, whereas the fundamental analyst needs to know a particular market intimately. Fundamental analysis focuses on what ought to happen in a market. Factors involved in price analysis: Supply and demand, seasonal cycles, weather and government policy.

The fundamentalist studies the cause of market movement, while the technician studies the effect. Fundamental analysis is a macro or strategic assessment of where a currency should be trading based on any criteria but the movement of the currency's price itself. These criteria often include the economic condition of the country that the currency represents, monetary policy, and other "fundamental" elements.

Many profitable trades are made moments prior to or shortly after major economic announcements.

Forex Currency Trading Software

Forex trading software helps investors working in the sometimes complicated area of foreign exchange transactions and should be looked at by all serious investors.

Using the older methods of reading hard copy newsletters, magazines and books worked well during its day and age, but today decisions need to be made quickly, and having access to up to date information and the ability to make a trade quickly is something that forex trading software offers the investor and it greatly increases the ability of an investor trader to work the market resulting in profit.

For the investor who is interested in acquiring forex trading software there are many good options. Checking with a financial advisor you trust to see what forex trading software he or she recommends can be a good place to start. Also going online and doing a web search of forex trading software can show many programs available.

Many people when going online will log onto message forums or join online groups that discuss forex trading and see what other traders like to use. Simply posting a message on the group asking what forex trading software is poplar and what the advantages and disadvantages of each program are can add to a person’s knowledge base and allow him or her to make a good decision when purchasing forex trading software.

Remember also that some specific forex trading software programs are available for short free trial periods. Experimenting with several programs will help an investor make a decision as to which forex trading software will offer the options and ease of use desired. This try it before you buy it approach will help a person avoid decisions that might be regretted later

.If, as an investor, you are using one of the many reliable online trading systems, the company that you are working through may have forex trading software they can furnish you. Often this is available for quick and easy download to your home computer and is already set up for optimum operation with the system with which you are working.

If your company does not provide forex trading software they probably have programs that they can recommend, that they and their members have had good luck with in the past. Always ask what forex trading software they recommend before making a purchase.Since the companies that manufacture and market forex trading software are competing for your business their advertisements and websites will list many of the positive features of their product.

They often offer free e-books or free e-zines that provide information on forex trading. If a company is able to provide you with this information take a close and serious look at what they are offering. Consider this a part of your forex trading education, and learn from it. Use it as a way to add to your personal knowledge base and you’ll benefit.

Remember that the many choices of forex trading software are there because individuals involved in forex trading have different needs and different preferences, so learning all you can about a program, and about the forex trading market itself before buying will always pay off.

Information About Forex Trading Strategy

A forex trading strategy can provide profit for a skilled speculator. A FX trading strategy is, simply put, a method for using foreign exchange rates of currency from various countries to buy one country’s currency when it is undervalued, and exchange it for another country’s currency with it is of normal or higher value, with the difference being profit.

A common forex trading strategy could involve US dollars and the Euro, the official currency of most European countries. To use a simple example of a forex trading strategy, a speculator would buy Euros when they were undervalued; let’s say two Euros equaled one US dollar. This would be unusual because normally the two currencies are almost equal.

By spending one hundred US dollars to buy two hundred Euros a speculator would be able to buy more goods in Germany, France or other European countries. When the market changed and became more even, the speculator would have twice as many goods as he normally would have, and would be able to exchange those goods for US dollars once again.

The difference would be profit. This is a very simple explanation of a forex trading strategy, but gives the basics to the new speculator.Of course, when coming up with a forex trading strategy the trader should only use money that he or she can afford to loose. This is speculation, as opposed to investment. The chances for profit are real, and could come quick but if the market turns the opposite way than expected the trader could actually loose money.

A forex trading strategy can reap large profits, but if anyone tells you that all trades will result in profit, they haven’t studied the market as well as they should have and they are not correct. Still having a sound forex trading strategy for a competent businessman can be a profitable venture. It requires study of the markets, which takes time and is usually best accomplished by reading financial newsletters and using tools available on the Internet.

Getting the advice of a professional forex trading strategy specialist can also be a sound choice. Professionals have the time, education and skills and can generally help a trader come up with a forex trading strategy that will result in profit more often than one could do without their help.The most sound forex trading strategy options are generally used by large multinational corporations who are often able to make steady profits.

Watching what large corporations do who are involved in forex trading, looking for patterns they may have set, can help a trader to get the benefit of the very expensive expertise used by these large companies. Making watching of the large traders a part of a person’s education is definitely a good place to start a forex trading education. Identifying the state of the market, determining the time frame you are working in, and the currencies that have fluctuation and getting the advice of professionals through self study can be the wisest forex trading strategy option available.

Learn Forex Trading and Multiply Your Wealth

To many people that sounds amazing, and perhaps it is. It can be very profitable for investors and fortunes have been made by many. The incentive to learn forex trading is the oldest incentive by far, the incentive to make profit. If you learn forex trading you are learning how to make your money make more money for you, the goal of all investors.

If you choose to learn forex trading online you are not alone since thousands of people choose this method every year. If you learn forex trading online you have the benefit of choosing an instructor from almost anywhere in the world, or to choose multiple instructors.

When you learn forex trading in this fashion your virtual classmates could be from England, Hong Kong, Singapore, Paris, or any other exotic locale that you may have only read about in the past.

Obviously this diversity of culture and knowledge will be beneficial. During online chats and student discussions questions will be raised that you may not have thought of yourself, and you’ll be able to benefit by hearing the answers.

The ultimate goal of forex trading is to trade currency in a consistent manner that will result in profit. For instance, buying Euros with US dollars and then selling the Euros for more than you gave for them when the market changes.

This is the oldest rule of business, buy low and sell high. If you learn forex trading you’ll be able to do this on a scale you never would have thought possible, limited only by the amount of investment funds you have and by market conditions.

WHAT IS FOREX CURRENCY TRADING?


If you read about investing, you've seen the word forex trading. But because forex doesn't get much publicity in the major publications and websites, many investors don't know that forex is just short for "foreign exchange". So trading the forex market is simply trading foreign currencies.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex trading game. Recently, however, technology has developed to the point that any individual investor can hop right in and trade with one of the many online platforms.

When buying and selling in the forex currency trading system market, you'll see that there are four "currency pairs" that dominate the percentage of trades. Those four are the Euro vs U.S. Dollar, US Dollar vs Japanese Yen, US Dollar vs Swiss Franc, and US Dollar vs British Pound.

The goal when investing in currency is to be holding a currency that appreciates in value in relation to the other currencies. To use an overly simplistic example, if you bought 50 British Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds increased in relation to US Dollars, you could then convert those Pounds back into dollars for, say, $120.

Unlike the domestic stock markets, the forex currency trading is open for trades 24 hours a day. Much like the phrase "it's always noon somewhere," it's always business hours at some region of the globe. Since every country trades on the FX market, and it's open all day, the daily volume is roughly $1.2 trillion, which dwarfs that of the NYSE. Another comparison to make in order to truly realize the magnitude of the forex market is with the currency futures market (which has around 1% of the daily volume).

One other important distinction to make is that forex currency trading is not centered on an exchange like the NYSE or NASDAQ. There is no central body or organization required to act as middleman. Trading circulates between major banking centers around the world.

Until recently, there were strict financial requirements and massive minimum transaction sizes which prevented individual investors from trading. But with the advent of the internet came the FX brokers. A forex currency broker is similar to an online stock trading account such as etrade.

Anybody can open an account and buy and sell in any quantity. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors.

Although it is now easy to start trading forex, it is a complicated and complex market. While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry. Before trading forex, do your homework and read as much as you can find before investing your hard earned money.

Why Trade Forex?

The markets are open 24 hours a day
Round the clock trading gives the trader the opportunity to trade within any time zone around the world. The currency market is the largest and most lucrative market available and its trading hours extend from Friday evening 10h00 until Monday evening 22h00. In between these periods the markets are open for trading 24 hours per day.

The currency market is a 24-hour market. As a trader, this allows you to react to favorable/unfavorable events by trading immediately. It also gives traders the added flexibility of determining their trading day. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody.

Largest and most lucrative market in the world
If you add all the volume on all the stock exchanges in the world, it would still not get close to the volume on the Forex markets. Volume ensures that a trader will never be stuck with a position – if you want to buy there will be sellers and if you want to sell there will be buyers.

In excess of 1,5 trillion USD gets traded on a daily basis, this is more than all the other speculative markets put together and with more than 60 currency pairs available for trading daily it has a huge potential for day traders.

Unequalled volume and movement in the world
Together with volume a day trader needs volatility – price movement. The movement in the Forex market together with the gearing factor makes this one of the most lucrative markets in the world.

More currency than stock market shares are traded on a daily basis. There will always be buyers and sellers with the resultant opportunities to trade. You can also trade when the markets are moving upwards or downwards.

Offshore investment earning US Dollars
Most investors seek offshore investment opportunities. Currency trading not only offers you this opportunity but enables you to grow your investment by substituting your investment with profit earned from trading.

Limited Capital required to start and operate this business
Unlike most other businesses Currency trading does not need extra money to grow your investment or substitute your business with cash to expand your new plans. You simply grow your investment or new plans by locking in profits from your trading account.

Limited infrastructure required
You only need your computer, set–up with the appropriate software and the necessary training to conduct your business. No offices and other costly infrastructure stretching your cash flow to the extreme is required.

Little or no staff required
In this business it is predominantly you and your computer and you have no staff, no labor problems, no cash flow planning, no salaries and wages, to be concerned about.

No stock
No business can operate without stock be it production or even stationery stock, this in itself is a huge expense to keep and protect and many hours are spent to control and check your stock... now you can conduct a business without these expenses.

No theft and shrinkage
No losses to be concerned about and investing huge amounts of money to protect yourself against potential losses from theft or shrinkage.

No opposition
Because of the volumes involved in this market you will always have a buyer when you want to sell your currency.

Almost paperless business
All transactions are logged into your computer through the trading software. You can watch your trading bank account while locking in profits during your trade.

Free and user friendly software

Non-Simulated Demo trading account
You will see real movements in the market and be able to trade them without risking real money.

Forex Dictionary and Glossary of Terms

A
Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.

Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

Appreciation - A currency is said to 'appreciate' when it strengthens in price in response to market demand.

Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.

At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.

At or Better - An order to deal at a specific rate or better.

B

--- B ---

Balance of Trade - The value of a country's exports minus its imports.

Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

Bear Market - A market distinguished by declining prices.

Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.

Bid/Ask Spread - The difference between the bid and offer price. Big Figure Quote - Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes.. For example, a USD/JPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits i.e. "30/35".

Book - In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions.

Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.

Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

Bull Market - A market distinguished by rising prices.

Bundesbank - Germany's Central Bank.


--- C ---

Cable - Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800's.

Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

Cash Market - The market in the actual financial instrument on which a futures or options contract is based.

Central Bank - A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.

Cleared Funds - Funds that are freely available, sent in to settle a trade.

Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the postion.

Clearing - The process of settling a trade.

Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.

Collateral - Something given to secure a loan or as a guarantee of performance.

Commission - A transaction fee charged by a broker.

Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.

Contract- The standard unit of trading.

Counter Currency - The second listed Currency in a Currency Pair.

Counterparty - One of the participants in a financial transaction.

Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

Cross Currency Pairs or Cross Rate - A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP

Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc

Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD

Currency Risk - the probability of an adverse change in exchange rates.


--- D ---

Day Trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Dealer - An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Deficit - A negative balance of trade or payments.

Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.

Depreciation - A fall in the value of a currency due to market forces.

Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.

Devaluation - The deliberate downward adjustment of a currency's price, normally by official announcement.


--- E ---

Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.

European Monetary Union (EMU) - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

European Central Bank (ECB) - the Central Bank for the new European Monetary Union.


--- F ---

Federal Deposit Insurance Corporation (FDIC) - The regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed) - The Central Bank for the United States.

First In First Out (FIFO) - Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.

Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.

Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.

Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price.

Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.

Futures Contract - An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts - ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

FX - Foreign Exchange.


--- G ---

G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

Going Long - The purchase of a stock, commodity, or currency for investment or speculation.

Going Short - The selling of a currency or instrument not owned by the seller.

Gross Domestic Product - Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product - Gross domestic product plus income earned from investment or work abroad.

Good 'Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

--- H ---

Hedge - A position or combination of positions that reduces the risk of your primary position.

"Hit the bid" - Acceptance of purchasing at the offer or selling at the bid.


--- I ---

Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.

Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.

Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.


--- K ---

Kiwi - Slang for the New Zealand dollar.

--- L ---

Leading Indicators - Statistics that are considered to predict future economic activity.

Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.

LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)

Liquidation - The closing of an existing position through the execution of an offsetting transaction.

Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.

Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.

Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer numbe


--- M ---

Margin - The required equity that an investor must deposit to collateralize a position.

Margin Call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.

Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk - Exposure to changes in market prices.

Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.

Maturity - The date for settlement or expiry of a financial instrument.


--- N ---

Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.


--- O ---

Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price

Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open order - An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.

Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.

Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.

Overnight Position - A trade that remains open until the next business day.

Order - An instruction to execute a trade at a specified rate.

--- P ---

Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor's position.

Position - The netted total holdings of a given currency.

Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Price Transparency - Describes quotes to which every market participant has equal access.

Profit /Loss or "P/L" or Gain/Loss - The actual "realized" gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.


--- Q ---

Quote - An indicative market price, normally used for information purposes only.


--- R ---

Rally - A recovery in price after a period of decline.

Range - The difference between the highest and lowest price of a future recorded during a given trading session.

Rate - The price of one currency in terms of another, typically used for dealing purposes.

Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.

Risk - Exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.

Round trip - Buying and selling of a specified amount of currency.

--- S ---

Settlement - The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days.

Spread - The difference between the bid and offer prices.

Square - Purchase and sales are in balance and thus the dealer has no open position.

Sterling - slang for British Pound.

Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.

Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

Swissy - Market slang for Swiss Franc.


--- T ---

Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Tick - A minimum change in price, up or down.

Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.

Transaction Cost - the cost of buying or selling a financial instrument.

Transaction Date - The date on which a trade occurs.

Turnover - The total money value of all executed transactions in a given time period; volume.

Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.


--- U ---

Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.

Uptick - a new price quote at a price higher than the preceding quote.

Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.


--- V ---

Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Variation Margin - Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility (Vol) - A statistical measure of a market's price movements over time.

------W-----

Whipsaw - slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.


--- Y ---

Yard – Slang for milliard, one thousand million.

How to Chose an Online Forex Broker

Is the firm regulated, with solid financials?
First step – visit the NFA's website www.nfa.futures.org to confirm that the firm is a registered FCM. Among the registered firms, look for those with clean regulatory records and solid financials. Avoid non-regulated firms, period.

Who runs the firm?
Management expertise is a key factor, as a trader's end-user experience is dictated from the top and will be reflected in the firm's dealing practices, execution quality, etc. Review staff bios to evaluate the level of management and trading experience at the firm.

How much leverage does the firm offer?
Too much of a good thing? In the case of leverage, yes. Firms offering excessively high leverage are not looking out for the best interest of their customers. A good rule of thumb is to not employ more than 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts.

What resources are available?
Evaluate all of the free and paid decision support tools and resources offered by the firm including, charting, news, research, wireless trading, etc. Training & education are also valuable for investors new to the Forex market.

Is 24-hour customer support available?
Forex is a 24-hour market, so 24-hour support is a must. Can you contact the firm by phone, email, chat, etc. Are the reps knowledgeable? The quality of support can vary drastically from firm to firm, so be sure to experience it firsthand before opening an account.

How robust is the platform?
Open a demo account and test out the firm's trading platform. A sophisticated platform will be intuitive, with real-time P&L and position management. Advanced order capabilities are a must for a 24 hour market; not just stops and limit order but complex orders such as If/Then and trailing stops.




Is the firm regulated, with solid financials?
First step – visit the NFA's website www.nfa.futures.org to confirm that the firm is a registered FCM. Among the registered firms, look for those with clean regulatory records and solid financials. Avoid non-regulated firms, period.

Who runs the firm?
Management expertise is a key factor, as a trader's end-user experience is dictated from the top and will be reflected in the firm's dealing practices, execution quality, etc. Review staff bios to evaluate the level of management and trading experience at the firm.

How much leverage does the firm offer?
Too much of a good thing? In the case of leverage, yes. Firms offering excessively high leverage are not looking out for the best interest of their customers. A good rule of thumb is to not employ more than 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts.

What resources are available?
Evaluate all of the free and paid decision support tools and resources offered by the firm including, charting, news, research, wireless trading, etc. Training & education are also valuable for investors new to the Forex market.

Is 24-hour customer support available?
Forex is a 24-hour market, so 24-hour support is a must. Can you contact the firm by phone, email, chat, etc. Are the reps knowledgeable? The quality of support can vary drastically from firm to firm, so be sure to experience it firsthand before opening an account.

How robust is the platform?
Open a demo account and test out the firm's trading platform. A sophisticated platform will be intuitive, with real-time P&L and position management. Advanced order capabilities are a must for a 24 hour market; not just stops and limit order but complex orders such as If/Then and trailing stops.

Free Forex Sentiment Indicator

Forex(Akmos) Sentiment Indicator

What is "Forex(Akmos) sentiment indicator"?
It's a graphical representation of what Akmos traders think about market direction. Technically it's a relative number of open lots for each currency.

Free Real Time Forex Charts

Forex Training — Peter Bain Shows You How to Trade the Forex with His Amazing Pivot Trading System

Dear Forex Trader,

Do you wonder why some forex traders trade the Forex market successfully while others struggle? I mean, with all the trading systems, along with the latest and greatest forex trading technology, how is it that two people armed with the same knowledge can yield such totally different result?

Before I answer that question, I would like to introduce myself. My name is Peter R. Bain, and it seems like I have been involved in the wonderful world called currency trading since the earth cooled, even though it was only deregulated in 1997. I can’t tell you the number of mountains I’ve climbed, the number of tribes I’ve befriended, and the years of trading experience and research that have gone into developing the right approach in trading the Forex.

I learned the art of trading in the early days from some of the top traders in trading houses. I spent 18 hours a day over an 18-month period training and learning anything and everything I could about this business. Over the years, I have developed and refined a simple yet powerful trading system to copy what successful traders do. These are the same techniques used by many trading houses today. I teach my system to account and fund managers and bank traders world-wide and provide a comprehensive range of forex training products and services.

I founded Forexmentor in 2003 in order level the playing field for the individual retail traders. We believe while there's a huge opportunity in the Forex, there's also a very high failure rate. I have a famous saying regarding Forex trading:

"Start thinking it is easy and it will get harder...
Start thinking it is hard and it will get easier"

Forex Training...from the Expert

My home study forex course & video mentorship program explains in detail how to get your trading career off to a great start. Providing forex training through comprehensive forex courses and services, forex coaching, and as an Internet Forex consultant, I hear all of the 'How do I?' questions. My Home Study Forex Course & Mentorship program is designed to answer all those questions and many, many more.

Here are some examples of what you will learn through our forex training:

How to assess a currency for profitability.

Learn how to get the GOOD pip spreads and where.

Learn which currencies to trade and when to avoid others.

Discover which currencies are actually ready to make a move.

Information-packed pages of practical tips and real-life examples.

How to create the right approach that keeps you coming back for more.

Learn why 'conventional approaches' simply don't work in Forex trading.

Get an easy-to-understand 5-step overview of my Forex trading process.

Discover the top mistakes that 'normal' Forex traders make, and how to AVOID them.

Discover the features your Forex broker must have to get the best value for your buck.

"How To" strategies to save you money, time, and effort while building your business.

Can You Sum Up Your Trading System?

Here's the skinny on how my simple system works...

All professional Forex traders pay very close attention to key support and resistance levels. This is the foundation of my currency trading system. My system is built around the proven concept of "commercial support and resistance tendencies".

Let me explain...

Volatile currency price fluctuations are usually initiated by external forces such as global geo-political events, world news, monetary policies, economic reports, etc. As currency traders, we are not concerned about what caused the movement. We are traders - not economists. We are only interested in profiting from the aftermath volatility as a result of these global fundamental events.

When a market reaches certain low levels, they are at a support level (support being a level that attracts buyers simply on lower prices). It could be that the market reached those levels on several occasions before and bounced off them. Markets that reach support levels will often rise as buyers are re-attracted to those price points. Then the herd instinct kicks in and price rises.

If a market rises, and a price level is rejected by buyers because the sellers are asking too much, the price will begin to move downwards from that level of resistance. Other sellers join in, the crowd factor eventuates, and price swoons. Support and resistance levels are extremely dynamic in the forex market – meaning that they are subject to change from day to day. These levels must be recalibrated from day to day..

My currency trading system uses mathematical formulas to calculate these support and resistance levels known as "pivot levels". These pivot levels are extremely important because when the price of a currency pair trades near these levels, professional traders & automated trading systems will automatically kick in to buy or sell the currency. This facilitates price movement predictability.

So, in essence, these two factors alone account for why my system will compete favorably with systems which are based on"lagging" indicators. These other so called systems will simply pale in comparison.

To further improve my trading odds, I combine pivot levels with a small number of the consistent, reliable and re-occurring formations. The ones I am particularly interested in are the powerful reversal formations at tops and bottoms of price ranges.

When you apply chart pattern recognition skills together with the use of the pivots, benefits accrue for certain. The targeted support and resistance numbers are like an early warning system. Being aware of an important price target level, accompanied by a pattern, you can then anticipate your move.

It just doesn't work any better than that!

Let me tell you this... if you are trading the forex without the guidance of pivot points, you could be trading in what I called 'NO MAN'S LAND' - these are danger zones. Improve your chance by taking trades in and around pivot points.

Forex Trading History

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, he had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit.

The bank's refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold. The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system.

Under the gold. exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation. But the gold exchange standard didn't lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money. As a result, money supply would shrink, interest rates rose and economic activity slowed to the extent of recession.

Ultimately, prices of goods had hit bottom, appearing attractive to other nations, which would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold. After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed.

Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as set up in Bretton Woods. The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations became more freely floating, controlled mainly by the forces of supply and demand which acted in the foreign exchange market.

Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization. In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later. The Euromarket A major catalyst to the acceleration of foreign exchange trading was the rapid development of the euro-dollar market; where US dollars are deposited in banks outside the US.

Similarly, Euromarkets are those where assets are deposited outside the currency of origin. The Eurodollar market first came into being in the 1950s when Russia's oil revenue-- all in dollars -- was deposited outside the US in fear of being frozen by US regulators. That gave rise to a vast offshore pool of dollars outside the control of US authorities. The US government imposed laws to restrict dollar lending to foreigners. Euromarkets were particularly attractive because they had far less regulations and offered higher yields.

From the late 1980s onwards, US companies began to borrow offshore, finding Euromarkets a beneficial center for holding excess liquidity, providing short-term loans and financing imports and exports. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. London's convenient geographical location (operating during Asian and American markets) is also instrumental in preserving its dominance in the Euromarket.

TRADING FOREX

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