The virtues of the forex market

As we mentioned in the article "The forex market vs stock market, there are certain virtues in the FX market make this a more attractive market for investors. In the first part we saw some of them now look other forex market.

Minor errors in execution of orders.

In general, while shorter the process to fulfill an order, the lower the probability of error. The online trading in forex market is a process that consists of three steps. An investor makes an order in which platform you are using, the house broker executes the order immediately, and finally, the confirmation is displayed by the investor. This process is met, usually in seconds. For an investor in shares, the order must meet at least five steps. Finally, the customer receives confirmation of his broker. Because the forex market, there is this chain of steps, the costs are lower and the possibility that a mistake has been committed prejudicial to any party.

Similarly, being a market where orders meet fewer steps, limiting the risk that the price at which the compliance order is different from the requested price. In the stock market, orders are executed at the best possible price resulting in the investor start or close a position at a price that is not favorable.

It is the perfect market for technical analysis.

For technical analysts, currencies rarely remain long in negotiation limited ranges and are more likely to develop strong trends upward or downward. About 80% of the volume traded is speculative and therefore the market often over-extended and then corrected to their average levels. Technical analysis works very well in the fx market and an investor-versed in this technique can easily identify new trends and when they arise, so that you will find multiple opportunities to enter and exit the market. The graphs and indicators are used by all professional investors participating in the forex market and the Japanese candle charts are common platforms for transaction. Many of the traditional indicators that have equal validity in the stock market. These indicators are the setbacks of Fibonacci, moving averages, RSI, MACD and levels of resistance / support, among others.

Investors who are making the transition from the stock market forex market these technical indicators to find that they can employ the same strategies that were used.

The virtues of the forex market Conclues

Reduced transaction costs.

The existence of lower transaction costs makes the forex market is quite attractive for investors. In the stock market, the investor must pay a commission or a spread. In line with the commission, the commissions can be of the order $ 20 per transaction, if an American. Positions of U.S. $ 100,000, the average cost for commissions can be as high as USD $ 120. The structure of Non forex market removes the commissions they charge for bags brokerage, which reduces the cost charged to these customers. Costs were further reduced by the efficiency created by the use of advanced technology platforms that allow investors to negotiate directly with the market maker. Because the market offers immediate liquidity 24 hours a day, investors receive a lower spreads and more competitive throughout the day. Investors in stocks are more vulnerable to liquidity events (not to sell or buy an action because there is no demand or supply) and therefore receive higher spread, especially if it is negotiated outside of market hours. Low transaction costs make the online trading in the forex market is the best option for short-term investors. For an active investor in the stock market that regularly traded 30 times a day, a commission of $ 20 could mean the end of the day cost of USD $ 600. This reduces significantly increases its profits or losses. These commissions are high and must be paid to a group of people that the transaction is carried out in addition to paying the fees they charge their members pockets. In the FX market, being decentralized, there are no such committees.

Custom Leveraging

While many investors know that greater leverage brings greater risk, investors are human beings and very few would reject an opportunity to achieve a profit with the money of another. The FX market is perfect for this type of investment offers the greatest leverage of any existing market. The vast majority of foreign exchange brokerage firms offer 100:1 leverage for regular accounts in the account and 200:1 smaller. Compared with the 2:1 leverage that is offered to the average investor in the stock market in United States, or 10:1 to large investments and you can see because the forex market is the choice for many investors. The deposit required for collateral leverage in forex market is not seen as a down payment to purchase an asset, as is often the case in other markets. He is seen as a repository of performance or to ensure protection against losses incurred. This is useful for short-term investors who need to improve their capital in order to gain quick profits. Leveraging is custom made. This means that the investor has a higher risk aversion can use a 10:1 or 20:1 leverage or do not take any leverage. However, leverage is a double-edged sword. Without proper risk management a high degree of leverage can lead to huge losses.

Wins in a market upward or downward

In the FX market, opportunities abound in both gain market upward or downward. Since currency trading always involves selling one currency and buying another, there is no structural bias in the market. Therefore, if an investor has long position in a currency, he will be automatically short in another. As a result, profits will always exist whether the market is up or down. This is different to the equity markets where investors prefer long positions to short the market at low investors tend to suffer more.

The Virtues of the Forex Market Begins

In the previous article we outlined some of the virtues of the market compared to the stock market fx. In this article we explore in detail some of them: FX market is open 24 hours a day, reduced transaction costs, and leverage personal gain in a market upward or downward.

The market is open 24 hours a day.

One of the main reasons why the forex market has become so popular is because investors can negotiate almost all day. Being open all day, gives you immediate access to the market and thus able to negotiate according to the political events and / or economic occurring around the world. This feature gives the investor the opportunity to choose the day or days you want to negotiate. It is no longer necessary to wait until the market opens, so if a significant event occurs the investor can react immediately. In the stock market would need to wait for the opening to take a position with the risk that the price has created a gap against the position held.

Additionally, many people who want to invest a full time job during the day. The possibility of trading for 24 hours is the most suitable for this investor. Throughout the day the market offers various opportunities for negotiation and that all markets are involved in this global market, from Asia to America. In the forex market, negotiate outside of work hours provides the same liquidity and spreads (the difference between the offer price and demand) that in normal hours.

The market opens on Sunday at 5:00 pm Eastern time to U.S. After the markets opens from Sydney, Australia, then Singapore and Hong Kong at 9:00 pm EST, followed by Frankfurt, 2:00 a.m. ET, and London, 3:00 am. At four o'clock the European market is fully open and close Asian markets. North American markets open at 8:00 a.m. on Monday, and European markets close at 11:00 a.m. ET. New York finally closed at 5:00 pm and the cycle begins again in Sydney.

The most active hours occurs when markets are open simultaneously, for example, Asia and Europe during the 2:00 a.m. and 4:00 a.m. ET, United States and Europe between 8:00 am and 11:00 am. During the time of crossing all the European and North American currencies are traded actively during the hours that most Asian currencies are traded are the GBP / JPY (British pound is the GBP), and AUD / JPY (AUD is the Australian dollar).

Forex market vs. the stock market

Traditionally the forex market has not been the most popular to negotiate because it was restricted primarily to arbitrage funds, multinational corporations and institutional investors, who possessed the capital and technology required by existing regulation.

One of the main reasons why the forex market has been used by these agents is because it is assumed that the risk can be adapted to suit each one. That is, an investor can use leverage of 100:1, while another may decide not to leverage. However, in recent years, many brokerage firms have opened this market to the small investor, providing leveraged transactions and automatic execution platforms and free graphics and real-time news.

The reason behind this trend is that investors are beginning to recognize that this market has many virtues compared to the traditional markets of stocks, bonds and futures.

These are some of the main virtues of the forex market:

1. The FX market is the largest and most liquid in the world.
2. Is traded 24 hours a day.
3. The investor can benefit in a market upward or downward.
4. Can be sold short without any restrictions.
5. Platforms for immediate implementation to avoid the errors and the orders are satisfied with the price you get.
6. Although the greater leverage involves greater risk, many investors see the forex market as more profitable.
   

And the virtues of the stock market:

1. There is a liquid acceptable, but it depends on each share and volume.
2. The market is open 24 hours a day. In many countries, open 7 hours or less. In Colombia open 9:00 a.m. to 1:00 pm
3. The existence of committees does make transactions costly small.
4. In many markets there are rules for short selling in an action, in other there is not even that option, such as the Bolsa de Valores de Colombia.
5. The number of steps required to complete an order to raise the likelihood of errors and that the order is not met the expected price.
   

The volume and liquidity in the forex market, one of the most liquid of the world, has enabled investors to access the market 24 hours a day with low transaction costs, high leverage, the ability to gain both a rising market to the downside and a lower risk of getting a price different from that expected. Investors can implement in the forex market the same strategies that are used in the stock market. For technical investors, the FX market is perfect for technical analysis as this is the tool used by professional investors. Therefore it is important to analyze in detail each of these attributes and virtues to understand that this market is so attractive. Entrarremos in the next article on this subject in detail.

Forex and financial markets

The foreign exchange market or Forex as it is known in English is the generic term is called the set of global institutions that exist to exchange or currency trading. It is also called the FX market. This is a market, "over the counter," meaning that there is no centralized, or common market institutions that are responsible for ensuring compliance with orders. FX traders and market makers are connected to each other via phone, fax and computers, thus creating the market.

During recent years, currency trading has become very popular among medium and small investors. The growth in volume traded in recent years has been 57% on average. In 2004 the daily volume traded reached $ 1.9 trillion USD, which is twenty times the value of which is traded daily on the New York Stock Exchange and NASDAQ. One explanation of the increase in turnover is in the emergence of online transactions, which have allowed the entry of new players into the market, most small investors.

Another factor behind the rise of the Forex market is the relationship with the market for bonds and equities. This has led many investors to pay attention to this market has to make more informed business decisions. These factors are:

The dealers or traders involved the stock market, especially those who trade with European companies that export to United States, monitor exchange rates to predict future earnings and profitability of business. When the rate EUR / USD (U.S. dollars to pay for one euro) raises the earnings of European companies exporting declined because their products are more expensive for U.S. importers. For example, in 2003 the Dutch State Mines chemical company warned that a 1% increase in the EUR / USD would reduce its profits between 7 to 11 million euros.

Foreign investors, especially Americans, should be attentive to the relationship between the USD / JPY (Japanese Yen JPY mean) and the Nikkei stock index. Recently, the Japanese economy out of a period of stagflation (economic stagnation with inflation) and many U.S. institutional investors had underestimated the market in their global investment portfolios. When the economy began growing again, these funds rushed to rebuild their portfolios and Japanese began to buy shares in order to exploit the economic recovery of this country. Arbitrage funds or hedge funds began to borrow in dollars to finance these investments; however the increase in interest rates in United States has increased the cost of these resources and limited the Japanese bull market. The U.S. Federal Reserve, or Fed, has increased its interest rates to finance the growing current account deficit. This has made investments in dollars are more attractive. Therefore, monetary policy has an effect on U.S. dollar and indirectly on the Japanese stock market.

George Soros. In the world of bonds, some of the most famous in the history of the forex market is George Soros. He is known as the man who broke the Bank of England. In 1990, the United Kingdom decided to join the Exchange Rate Mechanism (ERM) or exchange rate mechanism of the European Monetary System in order to participate in a stable European economy and low inflation rates generated by the monetary policy of the German central bank or Bundesbank. This alliance linking the pound with the deutsche mark, which means that, the United Kingdom was subject to the monetary policy set by the Bundesbank. In the early nineties, Germany aggressively increased its interest rates to avoid an outbreak of inflation resulting from German reunification. However, national pride and commitment to fixed exchange rates within the ERM prevented the United Kingdom devalued the pound sterling. On Wednesday, September 16, 1992, also known as Black Wednesday, George Soros leverage their entire fund (USD $ 1 billion) and sold U.S. $ 10 billion pounds by betting against the existence of the ERM. This essentially "broke" the Bank of England and forced the devaluation of its currency. In just 24 hours, the British pound fell 5% or 5000 pips. The Bank of England promised to increase its interest rates to attract speculators to buy the pound sterling and stop his fall. As a result, bond markets experienced extreme volatility, with the one-month LIBOR rate increased one percent and then back in the same order of magnitude in less than a day. If investors in bonds had been aware of what is happening in forex market, would not have been amazed at what was happening in their market.

The revaluation of the Yuan and bonds

Over the past years have speculated on the revaluation of the Yuan (Chinese currency) and in effect since 2005 China has allowed small revaluation of its currency in order to reduce the trade imbalance with the other world powers. China has kept its currency artificially within a narrow trading range in order to ensure the competitiveness of their business and maintain its economic growth. This has led to rejection by companies and governments around the world. It is estimated that the Chinese exchange rate system has kept the Yuan below its real value between 15 to 40%. To achieve this system, the government has sold Chinese Yuan and buying dollars whenever the exchange rate is above the upper band. With the dollars that bought the government purchase U.S. Treasury bonds. Thus the Chinese government has become the largest holder of U.S. bonds and the demand for Treasury bonds has kept interest rates low. A revaluation of the Yuan brings problems for the Treasury bond market, and that means lower demand from its main participant. This would mean higher interest rates and lower prices. Therefore, investors in the bond market should follow carefully what happens in the forex market, in this case with the Yuan.

How to open a forex account

In the previous article we presented the general forex market and the ease of entry and the potential risk that a market existed to be leveraged. This article will discuss how to open an account to start forex trading.

There are several brokers who provide services via the Internet, many of them are resellers of most major suppliers and usually charge a commission rate for either performance and / or administration. It is best to go with the big and open an account with them and Forex Capital Markets are among the best known and used by traders around the world.

Forex Capital Markets (FXCM) has more than 50,000 active accounts and allows you to open an account with only $ 300 USD in your account type mini, which allows negotiation between 10,000 (10K) and 100,000 (100K) units. The margin for each lot is $ 50 USD is a lot of 50K requires a minimum capital of USD $ 250. FXCM provides a platform for transactions that can only be downloaded and installed on a PC.

This platform or station has a built-in graphics function where you can choose the currency pairs, the length and technical indicators that are needed. Additionally it has a form of news provided by IFR Markets, which offers news and analysis by currency during the day. There is also an option of reporting, which allows you to see clearly all the transactions in a given period of time, as well as balances, interest paid and received. The disadvantage is that FXCM lot minimum is 10K, which allows smaller fractions which if true of OANDA.

OANDA has its technology platform based on Java and the Internet, i.e. it is necessary to go to your page to gain access to your platform. This module also provides an analysis and graphics, which unfortunately are not as friendly as those of FXCM. In addition, OANDA has many more coins to negotiate, but many are "alien" as the Mexican Peso and usually have a very high spread between buying and selling. OANDA's main advantage is its ability to split the contracts, such contracts can be negotiated 1K or 0.1K, which is useful for those who are starting up now and do not want to risk much capital or strategies that depend on scalar positions .

FXCM offers mini account is opened with USD $ 300 and $ 500 USD with OANDA. My experience tells me that these minima are not sufficient and that the best start-up capital is USD $ 1,000. FXCM offers the possibility of making a bank transfer, send a check from a U.S. bank or use a credit card. For its part, offered only OANDA interbank money orders and checks Americans.

In this part I will focus on the requirements of FXCM to open a mini account:

Download the registration form, which requests basic information (name, address, etc.) and makes an investor's profile (income, risk level, etc.).

Submit this form to the fax number indicated with a copy of your passport and a receipt to confirm the address of residence. If you live in Colombia and have the RUT, you can send.

Once received, they e-mailed confirmation of your password and user name.

Make the shell: if credit card is in the same place as FXCM. If bank transfer, it should be brought before the bench with the data provided by FXCM.

Once the tank, this should appear on the display of the season.... And ready to start negotiating.

Forex Principles

The forex market, where they negotiate the world's major currencies, moving to $ 2 trillion daily, while the stock market moves in New York averaged 60 billion dollars. Many of the investors in this market are large financial institutions, mutual funds, arbitrage (hedge funds), corporations, central banks and investors. The gains can be enormous, but equally may be lost. Thanks internet now investors can access this small market and the risk for those who love the forex market offers opportunities to offer capital markets and bonds.

What are the attractions of the forex market?

First, there is no commission on transactions conducted. The gain accruing to firms that offers their services as brokers, resulting from the sale price and purchase. For example, the broker buying 1.2000 euro at 1.2003 and resold to, so that the investor receives a sales price of 1.2003 and when it wants to sell, the broker will buy at a lower price. The screen shows a price that implicitly includes a margin that allows them to earn profits. That no matter how many contracts that the investor wants to buy or the number of transactions you make. Second, leverage is higher than other markets. Indeed leverage can be between 100:1 and 400:1, i.e. it is only necessary to invest a dollar to buy 100 units of another currency. This increases profits significantly, however, also increases the level of risk.

The forex market is open 24 hours a day seven days a week, starting Sunday with the opening of Asian markets and ending with the close Friday with the U.S. market. This allows at any time can be opened or closed positions and strategies to adjust to the news that emerge.

Fourth, the margins are executed automatically. Due to the leveraged nature of the market, brokers need to maintain a margin to cover adverse movements in a certain position. In a contract of 10,000 units (10K) usually the margin is USD50, i.e. if you have an open position and is against this loss, the performance margin is paid once the capital falls below USD50. This is done automatically, so the capital never reached zero.

Finally, when buying and selling currencies can earn interest, this is known as "carry trade" and emerged in nineties when Japan decided to reduce its interest rates to zero in order to stimulate its economy. The "carry trade" involves buying a currency that pays a higher interest that the currency you are selling. For example, if you buy dollars and sell yen (long position in USD / JPY), is winning by 5% and would have dollars to pay 0% to sell yen, the difference is 5% for this position. If the position is short, would be paying 5%.

Entries in the fast Forex

The entries are given by the fast time that we have a position in the market, which is between 5 to 10 minutes, regardless of the result, this temporality is what we propose as fast, which fits inside the parameters of most brokerage houses. The recommendation for such entries is to open them with the least possible number of blocks or lots, thus lowering the level of risk in operations such short life.

The volatility in the forex market is the time where the market offers opportunities for entry with good benefits, especially if we follow the trend caused by the breakdown of a technical level or the announcement of a fundamental. To operate within input and output volatility to the market quickly, we must first identify the general trend of the market and second we have to identify the trend generated upon entry, this will tell how profitable the position and the maximum time that we have open.

Operate a position with the volatility not only requires an optimal risk management requires a timely entry, and enter when the trend is exhausted state the position in unnecessary losses. To see one of the many ways to deal with volatility we can go to the training of Japanese candle patterns as will be seen in the following graph:

Also note that the man hanging, which we expressed in the 5 minutes chart of a trend change, we need to break the trend can not force the 1.9665 level. Pivot level that will most clearly in the following graph of a time:

As you can see the first sign of fall is determined not overcome the resistance of 1.9665, confirming the fall is to break the floor and cover the wing upward, downward movement is caused by two key reports: the publication of the catchments capital in U.S. treasury bonds and industrial production, both showing good results for the USA. We can see the first chart entry in 10 minutes of volatility will yield 50 pips down if we do not take the journey from beginning to end, and a distance of 70-100 pips taking early signs of weakness as a firing tickets intra day.

The second signal strength corresponds to an upward movement generated by the current account balance of the USA, which was at levels close to the estimate, so the market again technically does not find reasons to support the pound, the confirmation downward motion is given by the crossing of the 1.9531 low.

Recommended it to operate volatility dynamic is to put a stop to 15 pips at least this will give room to mature our position and we will cover in the event of a movement against it.

It is inadvisable to enter the market when there is little or no volatility in financial markets, because the movements performed by the market during these periods can lead to making wrong decisions, thereby affecting the operational capacity of the account and could also psychological impact upon the operator of the account.

It is also not recommended in the operation when the volatility of our account with each open batch is greater than 10% of the total bill, this will expose us to greater risk. Significantly affecting our movement has a loser.

Finally, it is inadvisable to operate in the volatility when the level of knowledge about fundamental and technical analysis is low or zero in these cases we recommend training or a trader to let you operate the account.

After the previous general also need to reflect on the quality of our broker, ie, if the broker with which we operate or maintain their spreads move in times of high volatility, ie low ranking parameters as a scalping strategy and finally reliability of the platform. If any of the conditions because we doubt it is better not to operate especially when the low volatility spreads or broker opens freezes prices.

In general inconvenience of being cataloged by the broker as the scalp, ie have an entry strategy least 3 to 5 minutes per position, are many. The first is that in times of high volatility will be denied our operations, instructions for entering or leaving the market will have to be confirmed by hand, wasting time and market opportunities.

But how to avoid falling into the scalping is to design an appropriate strategy to consider operation of the operator profile, the source of funds (life savings, inheritances and percentage holding in our investment of our total forex assets) used in the forex, in support of goals and lost profit. What we will bring entries accordingly studied the market, avoiding operations seconds or minutes that we punish the brokers.

Forex, FX and Alerts

Forex is about to begin. In a nutshell, Forex or FX is a term used to describe the multiple forms of currency trading throughout the world. Some want to get into FX just because they like the idea of how exciting and exotic it sounds to trade in foreign currency, but there are many risks and benefits involved. To begin, the foreign exchange market is huge. There are over 100 times more offices of the New York Stock Exchange with about two billion trading each day. In addition to the incredible volume of currency trading is also almost entirely speculative, that gives a bit of a higher risk that some may be accustomed. Another big difference is that unlike trading through an exchange like the NYSE, trading occurs in the over the counter or OTC market. Trades like these are made directly between the seller and buyer by phone or online. One of the biggest differences in my opinion, that can have a positive or negative impact is that trade is conducted 24 hours a day in major cities around the world, unlike the major stock markets, which closed the specific day.

Forex is an extremely important since it will have a direct effect on the form of trade. I take this anecdote is not related, for example, and see how a positive attitude can change your approach to things. There was a family man who once took his family in the desert. Fleeing persecution and they had to hide the desert for quite some time. They hunted their own food and built their own shelter. One day, while your teens are out hunting with his own steel arch that broke the arc. Bow that was his source of food. All the teens left their home and went to tell her dad. The whole family is distraught and discouraged because they didn't know how to survive without their only source of food. Your young teen decided instead of sitting around doing something. So I made a new, not so strong, wooden arch. As they hunt all day and finally, that the food for the family. Imagine how this scenario would be different if there was one who stood up and something about their situation. Solution that did not exceed its previous position, but serves its purpose and resolve problems. Many conclusions can be drawn from this story that can help your trading.


Forex market is a much more efficient than the stock market, the opportunities that are much faster. To react quickly to signals for buying and selling currencies is critical to its success. Send alerts at the exact moment they occur through Yahoo Messenger, so you do not have to sit at the computer all day watching the charts and waiting for the opportune moment. Alerted by the sound of a message to you, all you have to do is give the order to your broker. Forex can be apart from the competition by offering real-time real signals, which are sent to customers at the exact moment when the movement is produced, not by orders given in advance the runner to catch any movements may never occur. Much of the signal services which was announced as the competition is based on highly profitable program that automatically calculate the entry points to a possible retraction of the dominant trend in the event that there should be an investment that is achieved when point and what they offer to their customers are not real negotiations on the signals in real time, but requests to be included in the system of corridors that will be activated after a certain amount, so you can call in real time signals are almost zero. One of the problems that arise in the above situation is that a market trend of the values end up not being reached and therefore the orders end up not being activated, while in a market without a defined trend is likely not an investment rate of this value is very high, which ends up putting a negative which in turn, has just been arrested. He still has the drawback that small movements to the main trend are not used, they fail to win for many potential overseas offices. This is not about guessing the future and not to negotiate at the exact moment when movements occur, which makes all the difference.

Forex alerts are a handy way to stay on top of the market

Exchange because it covers the whole world and 24 time zones, forex is a 24-hour market. This is good in that it results in billions of billions of dollars of transactions per day. But it also means that foreign exchange traders have a constant flow of information to track, unlike the stock market once trading closes at 5 pm, that's all. How can traders to keep abreast of things? Most of them use foreign exchange descriptions of some kind.

Forex alerts are available from many online foreign exchange brokers and other companies. A change of alert is only a message informing the user of the latest developments in the foreign exchange market, often recommending action of some kind. These alerts can be sent by e-mail or cell phone text message.

The idea behind them is that no one can follow all the markets all the time. Even if just to "large" - U.S., Eurozone, United Kingdom, Australia, Japan and Switzerland - which is still 15 currency pairs to keep an eye on. What is more, sometimes things are stable for long periods, while others are characterized by periods of great activity.

Sites that offer forex alerts in two ways. Some simply send alerts every 24 hours, offering the latest information on the currency market. Others send alerts only when something important happens. These systems use their own formulas for determining what constitutes "fundamental" and that may charge more for their more specific alerts. And, of course, is still every trader or to act in disregard of the information will be sent in the descriptions.

Some descriptions include Currency brokers as part of its service, while others charge for them. Some are part of a wider alert program that also handles your stocks and bonds. You can customize the type of alerts you get based on whether you are a conservative or aggressive trader, and how you plan to trade actively.

Serious traders who used currency alerts swear by them. No system is perfect, of course, and a smart businessman always do a little browsing through your account to make sure his latest alert did not miss anything. However, alerts are an invaluable way for busy investors to go about their daily lives without having to constantly look at the exchange rates.