FOREX SPECIAL
BEGINNERS GUIDE TO FOREX
What is Foreign Exchange?
The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world's currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.
FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or 'Interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
Who are the participants in the FX Market?
The Forex market is called an 'Interbank' market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.
When is the FX market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
THE BEST HOURS TO TRADE
If you want to earn extra cash aside from the cash you earn from your regular job or your business, maybe it’s time to you to enter the financial market. One kind of financial market that made a lot of people earn a lot of money is the Forex market.
Aside from the fact that the Forex market can give you an opportunity to earn a lot of money, you should also know that Forex is the largest and the most liquid financial market in the world with trade exchanges that amounts up to trillions of dollars each day.
Forex also operates 24 hours a day and therefore making it the most liquid market in the world. However, Forex is also a very risky market. Besides that fact that it generated a lot of people to become rich, it also made a lot of people lose large amounts of money. Therefore, you should consider that you should think twice before entering this financial market. You should have enough knowledge and skills before you enter this market. Part of the knowledge that you should know the best time you should enter this very liquid and very large market.
Sure you know how to trade, you know what currency pairs to trade, and you even know how to read charts. Perhaps, you also know one or two strategy when trading in the Forex market. However, you should also consider the fact that because the Forex market operates 24 hours a day, you need to know when you should trade.
Every minute in the Forex market counts. One minute you notice a currency is increasing in value, the next you notice that the same kind of currency you noticed a minute ago is decreasing in value. This is why you should consider the fact that Forex market is a very dynamic market with lots of price oscillations.
Minute by minute events are very important in order for you to be successful. Because of this feature that is found in the Forex market, you, as a Forex trader, can enter the market a number of times a day. This will allow you to earn some profits after every number of trades you do and perhaps maybe even lose one if you made the wrong trading decision.
Firstly, you have to remember that the Forex market beings at Sunday at 5PM EST to Friday at 4PM EST then it beings again at 5PM EST. Trading begins in Forex at New Zealand next at Australia followed by Asia, in the Middle East, Europe and ends in America. The major markets in Forex are London, Tokyo and New York with trading activities the heaviest when major markets overlap.
Basing from the times, you will see that there will always be someone anywhere in the world who is buying and selling currencies. You will see that when one market closes, another market opens. Trading in the Forex market is 24 hours a day.
Forex market transaction volume is always high during the whole day. However, it peaks the highest when the Asian market, the European market and the US market opens at the same time.
These are the trading hours in the Forex market you have to trade in, in order to get the highest possible trades. This are the hours that are also the most profitable.
Here are the open market times that you can use as reference:
• New York – 8am to 4pm EST
• London – 2am to 12nn EST
• Great Britain – 3am to 11am EST
• Tokyo – 8pm to 4am EST
• Australia – 7pm to 3am EST
If you look at the schedule and study it, you will see that there are two instances where two of the major markets overlap on trading hours. These are between 2am and 4am EST with Asian and European markets and 8am to 12pm EST with European and North American.
These are the things you should remember when trading in the Forex market. It is not only important that you know how to trade and know some strategies on Forex trading, But, you should also know when is the best time to trade in this very large and very liquid market.
If you follow all these, you can be sure that you can earn a potentially higher profit than on other trading times.
MAIN PLAYERS OF FOREX
Majors and agencies influencing forex
Ever wondered why US dollars are always occupying the hot seat of base currency. However, there are exceptions for the mention analyses, these constitute of primarily four other major currencies apart from US dollars that act as driving force for the trades operated in forex. Forex has five major currencies against which other currency are generally speculated, these are,
1) US dollars symbolized as USD.
2) EURO symbolized as EURO.
3) Japanese Yen symbolized as JPY.
4) Pound sterling symbolized as GBP.
5) Swiss Frank symbolized as CHF.
These five currencies together syndicate as majors on forex and the other currencies traded against them or for them are called crosses.
Among them US dollar occupies the prime position as more than 80% of the forex trade in the market are speculated against it. New York stock exchange has been trading around 50billion US dollar per day in the forex market and no wonder dollar has become the most sought after currency on the global forex markets.
Hypothetically it can be assumed that the bases for their major role are derived from their financial organization or the inventions and discoveries which have catered to their economic progress. We are all aware of the famous Swiss bank and its might. It is rumored and believed that bank of England holds much of the known gold as its reserves and can influence the stock and forex markets in a wink of an eye. Japanese technology and electronic tycoons have already over taken the world by storm. Ever since the conjunction of European union, the combined currency EURO has emerged as a formidable adversary for other currencies in the forex arena to recon with. Eventually the mighty United Sates of America which is indeed the most powerful nation of the globe and its political head the president, the most influential person known in the present era, US is not only mighty on the military front, but they have evolved as a nation which has capitalized every giant business ventures and opportunities present on our planet.
However, there are still other agencies present which can influence the exchange rate of the majors present in the forex markets. Following is the list of some of these agencies which can prove to be a driving force behind the scenes for a particular currency and can be held directly or indirectly of its upsurge or its upheavals.
1) Central banks and governments: -
forex is a huge markets necessitating tremendous amount of money in fact, the foreign exchange market derives its force with the liquid capital. Central banks and government of a country can play an extremely significant role for influencing a particular currency and there by improving their economy. For instance, India can gain tremendous advantage with its foreign exchange reserves of millions of dollars. By having the foreign exchange reserve of a currency even a developing country like India can be a proud faction of the US economy and can have a rampant advantage derived indirectly via the growth of US economy.
2) Banks: -
banks are playing a crucial role on the global front by investing millions or billions of dollars into the forex markets to gain monetary increments for their share holders. In other cases their clients may employ banks as brokers for investing huge amount of capital in the forex markets.
3) Funds:-
visualizing the upheaval of stock markets all around the globe, many funds have turned their heads towards forex and since time is not a boundation and leverage is also enormous, which can range from 100:1 to 50:1 maximum, not found in the primary stock markets. These funds are investing huge multitudes of capital in the forex markets to gain tremendously out of extreme volatility of the forex market.
4) Corporate:-
mammoth business corporate organizations who are done with the primary markets are now moving towards a much volatile forex markets which offers more opportunities for deriving monetary profits.
5) Travel and outsourcing:-
another factor which has recently evolved as a guiding hot spot for a a currency exchange rate and determining the literal value for it is the industry of travel and tourism with contemporary modern, technological advancements in the field of transportation there are millions of tourist and business man traveling from one part to the other. The most frequently visited country will achieve an elevated leverage for its currency as it will be frequently exchanged for other currencies. The global competition has given rise to the modest operands of outsourcing. Thousands and millions of US dollars are paid to employees working in the developing nations for MNC’s based in developed countries, these dollars are finally exchanged for the currencies of the developing nations, this has proved as one global trade which has in variable influence over the currencies in pairs meant for exchange.
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