The FAQs of Currency Trading

Exchange Money Conversion to Foreign Currency (Photo credit: epSos.de)

Trading currency in the foreign exchange market is literally a trillion dollar business. And it used to be only large financial institutions and very wealthy people could take part in the trade. Now, with the advent of the internet, the average person can trade on the market with the click of a button. If you’re interested in getting started in trading currency, here are some frequently asked questions that might help you get going.

What is the Forex?

“Forex” is a moniker for the foreign exchange market. You may also see FX.

What is a liquid market?

You will often hear the Forex referred to as the most liquid market in the world. A liquid market is one filled with liquid assets, or assets that can be sold instantly with almost no loss in value. You car, for example, is not a very liquid asset. Although you could probably sell it very quickly, you would have to lower the price. In order to find a suitable buyer willing to pay a suitable price, you’d likely have to wait a while.

In the Forex, because currency is such a massive asset, it can be traded almost instantly. The sheer size of the Forex (it’s a worldwide market) also means that no key players or institutions, no matter how large, can control the price of currency. This makes the Forex the most stable market in the world.

Who trades in the foreign exchange market?

Like I said, it used to be mostly large financial institutions, central banks, hedge funds, international corporations, and massively wealthy people who traded on the Forex. Now more and more individual people are able to take part. 

How is money traded on the market? Is physical money traded?

No. Most often money is simply traded virtually. In fact, there is no centralized market in the Forex. Trades take place between traders all over the world through the internet. The Forex is open 24 hours a day, five days a week (closed on the weekends), across all time zones. This means that as the market closes in the U.S., it’s opening somewhere else in the world, so the market is active at every point in the day.

How do you make money in the Forex?

Currencies are usually traded in pairs on the Forex. To make money, you basically have to correctly predict which currencies will gain and lose value. For instance, one popular pair of currencies is the U.S. dollar and the euro. Currently, the exchange rate between the dollar and the euro is .73 dollars to one euro. That means it takes about 1.3 dollars to equal one euro. In order to make money in the Forex, you would have to predict when the dollar would reevaluate or when the euro would devaluate, and buy currency accordingly.

What currencies are traded on the market?

Although some retail traders deal in less-known currencies, the most popular currency pairs are:

• EUR/USD (euro/dollar)
• USD/JPY (dollar/Japanese yen)
• GBP/USD (British pound/dollar)
• USD/CHF (dollar/Swiss franc)

As well as the three “commodity pairs.” The commodity pairs are so called because they are from countries that include a large amount of commodities. That means these pairs are highly correlated to changes in commodity prices. They are:

• AUD/USD (Australian dollar/U.S. dollar
• USD/CAD (U.S. dollar/Canadian dollar)
• NZD/USD (New Zealand dollar/U.S. dollar)
• 
  

What is “leverage” in the Forex?

Leverage is using borrowed capital to get a higher return on your investment. Let me unpack that phrase for you. Basically, leverage is borrowing money in order to trade more than you have. If you have a mortgage on your home, you are already leveraged.

In the Forex, there are often many high leverage opportunities, sometimes up to a 100:1 ratio. That means if you had a dollar in the Forex, you’d be able to leverage that dollar to trade one hundred dollars. If you have a thousand dollars, that amount goes up to one hundred thousand. This high leveraging makes it easier to trade large amounts of currency and keep the market moving.

What is carry trading?

To understand carry trading, you have to understand that each central bank determines the interest rate on currencies. Carry trading is all about funding the purchase of a currency with a high interest rate with a currency with a low interest rate.

For example, in 2005, many people bought New Zealand dollars (whose interest rate was 7.25%) with the Japanese yen (whose interest rate was 0%). In this interaction, because there was such a huge difference in the interest rates between the two currencies, carry traders were making money in the trade alone, without having to wait for the money to gain value. 

What does “long” and “short” mean in foreign exchange?

Because currencies are traded in pairs in the Forex, you are often “long” one currency and “short” another. For instance, if a person traded 100,000 dollars for yen, she would be “short” the dollars she just traded, but “long” the yen she received.

This is just the beginning of the Forex! It’s a very complex, but exciting market. If you’re interested in learning more about the trade, I’d visit Investopedia, as they have a lot of great resources about the fundamentals of the Forex.

Mary Kremer writes content for Dinar Daddy, the number one source of information for trading the Iraqi dinar.

Tens Ways in Which Forex Trading is Superior to Playing the Stock Market

English: A view from the Member's Gallery inside the NYSE (Photo credit: Wikipedia)

James Sheffley fancies himself a Jack-of-Some-Trades in the finance game. After graduating from the University of Chicago with a degree in economics, Sheffley began his incredibly lucrative career writing for e-econ blogs. As a sideline, he enjoys a marginally successful career as a stock and forex day (and night) trader. When not firmly ensconced behind his keyboard, Sheffley can be found following in the footsteps of his hero, Sudhir Venkatesh, tracking underground economies.

When the average self-respecting, cash-hustling, prospective Master of the Universe considers or mentions “playing the market”, chances are excellent that the market being referred to starts with an “s” and ends with a “tock”. And for laymen, “play”-able markets that aren’t the stock market are rarely, if ever, considered. That’s an unfortunate state of affairs, because the foreign currency exchange market (Forex) is in many ways superior to the stock market as an investment opportunity for average people. How so? Well, read on.

1. You Don’t Have to Worry About Middlemen

One of the primary benefits of forex trading is the trader’s ability to do so without a proxy. Traders, from hobbyist amateurs to seasoned pros can interact directly with the currency pairs being traded.

2. Saving Money on Every Trade

And what is perhaps the chief benefit of bypassing those middlemen (or middle-women)? Saving money. There are no commissions that need paying, no exchange, governmental fees and generally not even a cut from your pocket to a retail trader if you use one. Those guys are generally paid via the bid/ask spread.

3. Forex Offers Greater Liquidity than the Stock Market

The stock market is big- about $22 billion is traded on the NYSE a day. That’s not chump change. The currency market, however, is roughly 2500 times bigger than that. That’s $5 trillion a day. That’s “trillion” with a “tr”. With that much money being traded, you’re pretty much guaranteed to have someone on the other end of your currency trade willing to buy what you’re selling or vice versa. That’s definitely not the case with the stock market. 

4. The Market that Never Sleeps

When the closing bell rings in New York, the stock market slows down significantly. Not entirely of course, but significantly. However, the currency market is pretty much a non-stop party. There are certainly times when that party is particularly jumpin’- when the Forex markets in New York and London overlap, or those in London or Tokyo, you get some hotspots. However, even in the middle of the night for you, that guy on the other end of your currency exchange in Kyoto, Japan or Sydney, Australia might have just had his first cup of coffee.

5. There Are No Fixed Lot Size

The non-Forex market which perhaps most closely resembles Forex in the way it operates is the futures market. (I have a lot to say about Forex vs. futures). Those futures are purchased in lots, like 100 ounces of gold for instance, and there are futures contracts that determine the size of those lots. Not the case with Forex. You can trade with $25 or $25,000,000.

6. No Cornering the Market

Another benefit of the currency market’s incredible size is that no one (or more) facet of that market can be “cornered” by a very wealthy person, collective, corporation or even giant bank. Cornering a currency market would pretty much be the literal equivalent of buying a country.

7. Begin Trading with Less Money

Just like that more monetarily liberal lot-allotment can facilitate trading with less capital at your disposal, it also allows an entry into the market for less wealthy people. Currency trading, more so than stocks, can be accomplished without risking large sums of money. That means a lower “barrier to entry”.

8. Great Leverage

You may be asking, “Great, so somebody can open a forex trading a count with as little as $25. Why would anyone want to trade with $25?” Well, the answer is a two-parter. Part one: leverage. Forex brokers can, to a large degree, determine their own leverage ratios- like 50-1 for instance. So while $50 could net you $1250 in trading funds, kicking in $1000 or $5000 starts adding up to real money.

9. Real Time Preparation and Free Stuff

Another excellent bonus of the whole Forex-trading sphere are the free preparatory tools, demos and perks offered by the forex brokerage services. Demo accounts, forex tracking in real-time, forex news and more, all of which can be had for free. And not only is it convenient to take advantage of those tools, anyone planning on forex trading should get themselves a demo account and be consistently making (virtual) money before they start playing with real dough.

10. All of This Makes Forex Trading More Democratic

Demo accounts, a lower necessity-threshold for middlemen; a reduced or nonexistent threat of getting entirely rolled in some market-cornering coup; lower barriers to entry; the lack of fees, commissions, government taxes, etc.; far greater liquidity and the other benefits to forex trading both mentioned and missed here, all contribute to foreign currency market’s greater availability to the average consumer than the stock market.

Good luck and good trading.

Investing in Cars: 5 Money-Saving Tips for Buying a New Car

The mere thought of getting a brand new car causes some people to become filled with excitement. Although purchasing a new ride can be a wonderful experience, it will be much better if you strive to get the most value for your money. In some instances, you may have to make a few compromises when shopping for a new vehicle. Here are five money-saving tips for buying a new car.

Develop a budget

Before heading out to search for a new ride, you will first need to develop a reasonable budget. Being stuck with an expensive car that you can barely afford can be very frustrating. When establishing a budget, be sure to factor in the cost of insurance and the interest rate. Knowing your financial limits will give you more leverage when making a car deal.

Sell your current ride

Although you generally have the option of trading in your old ride, it is usually not as beneficial as selling it. The vast majority of car dealerships are unlikely to give you nearly the cash for your current vehicle on trade in that you could get for it otherwise. Selling your car on the open market is often a far better option if you want to get the most money from it. That money can then be used toward making a down payment on a new car.

Obtain the necessary funds beforehand

Waiting until you visit the dealership to seek a loan puts you in a very compromising position. Acquiring a pre-approved loan will eliminate the need to obtain a loan through the car dealership. Do not hesitate to get several quotes from a variety of lenders. This will help you to get the lowest interest rate available.

Purchase aftermarket upgrades

Often times, optional car features will add thousands of dollars to the total cost of a vehicle. If you desire to save some money, you can opt to purchase your own aftermarket upgrades. For example, you may be seeking a high-performance set of tires. Instead of paying the expensive premium demanded by the car dealership, you can save money by shopping at discounted online vendors such as http://simpletire.com or others.

Have patience

When searching for a new vehicle, it is critical that you exude patience. Do not settle for a vehicle that you really do not even like. Veteran car salesmen can smell a desperate car buyer from a mile away. Always be prepared to walk away from a deal that seems too expensive.

Buying a new car does not have to be a financial burden. You can find an amazing deal by taking the proper steps.

This article was written by Rianne Hunter with assistance from Rhett Stone. Rianne is a mother of three and an avid finance, auto, and family blogger.

Quick Insight into Top 4 Benefits of Online Share Trading

Investing in the share market is a great way to raise capital, given that you do the needed research and make the investment strategically. With the advent of Internet, today people can now easily access the markets and related information online, which were earlier only available through a broker. With such convenience, online share trading has slowly started replacing offline share trading due to its innumerable benefits. 

Online trading has given the modern traders of today the convenience, but this, in no way, means that they are investing in a smarter way. An increasing number of individuals opt to trade online as against offline trading today. People who learn to trade forex online today would never want to go back to the conventional method of offline trading. Let’s take a look at what has been attracting the investors towards this online trading strategy by understanding its benefits. 

Convenience

The first and foremost advantage of online share trading that has been appealing to investors is convenience. Traders can manage their investments online during any time of the day or night, which is extremely convenient to them. Such trading also lets the traders watch out their investments throughout and gain access to info that were earlier accessible only by brokers. Thus, online trading saves money and time by trading according to your convenience. You can trade from the flexibility of your home, office or internet café.

Apart from a computer and Internet access, the only other important thing that you need for online trading is a bank account for all your money transactions from time to time. Once you have the needed money in your account, you have the freedom to purchase your favorite stocks. Your share trading account and bank account will be linked to each other to enable you in purchasing shares online.

Diversity

The next benefit is the diversity of investments and assortments available. Few of the most popular online brokerages are AmeriTrade, Fidelity, and Scottrade. You will gain access to various markets like foreign bonds, and stocks based on the brokerage, which will open up your chances of making more money in the longer run.

Instant Access to Stock Markets

A trader gains instant access to his online share trading account and details pertaining to the stock market with just few mouse clicks. Further, he or she can avoid making decisions in haste since the investor can stay updated concurrently with the recent stock details and latest news about the firm in which they have invested or about any other potential firm they would want to invest in.

No Limit on Trading Hours

One more benefit of online selling and buying is that you can place your orders even during non-market hours. On the contrary, in offline trading buying and selling shares need to be done only during market working hours. The fact that there is no restriction with respect to market hours is an added advantage in online trading.

With these many advantages of online share trading at the fingertip of every online trader, there is no reason as to why any investor would want to ignore the convenience of online trading. So, become a smart trader, and leverage the power of Forex trading today.

Author Bio
Alisa Martin is an online share and stock market trader. She has been using this convenience ever since online trading was introduced in the market, and happens to be one of the veteran traders.

How the Car You Choose Affects The Kind of Finance Deal You Can Get

(Photo credit: Wikipedia)

Buying a second-hand car can be an excellent decision if you are trying to save a bit of money. However, one thing that you should remember if you want to buy a used car is that it may affect your financing options. Indeed, people are often surprised when they decide to buy a second-hand car only to find that they cannot get any access to financing. Here is a quick guide to the reasons behind this, and factors that you should consider when choosing a second-hand car if you want to get better access to finance. 

Used Cars Present a Greater Risk to Lenders

If you want to secure financing for a second-hand car, you may find that the lender has strict requirements about what they will lend you money for. For example, many lenders will not consider providing any financing for second-hand cars that have traveled over 100,000 miles, or for cars that are older than five years. 

The reason for this is that such loans are seen as higher risks by lenders. An old second-hand car, or one with many miles on it, is more likely to break down. If this happens, the person who borrowed the money may be more likely to stop paying back the loan. 

There is also the resale value of the car to consider. If you want to arrange a hire purchase agreement, the car is used as collateral. If the value of the car falls too low because it is too old, and you decide to stop paying for it, the lender will not be able to recoup their money. 

As a result, many lenders will not provide loans for buying second-hand cars. If they do agree to lend you the money, they will often insist on a much higher APR or a larger deposit. 

How to Choose a Used Car

It is not impossible to secure a good car financing deal when you buy a new car. However, to find the best deals, you should: 

• try to find a used car that is between six-months and five-years old. Although all lenders have their own specifications, you are more likely to get financing if the car is newer. 
• look for a car that has traveled less than 50,000 miles. The higher the mileage, the less chance you have of getting access to a good loan. 
• look for a make of car known for its reliability. If there is less chance that it will break down, a lender may be more likely to consider lending you money. 

In addition to the above, you may want to spend some time looking around for lenders that specialize in higher-risk loans. Alternatively, consider a different form of loan such as a secured loan. With this you will be able to use the money for any purpose, but remember that you risk losing your property if you fail to keep up with your payments. 

Find Financing for Your Used Car

Buying a used car can make a lot of sense if you need a vehicle but you cannot afford to buy a new one. However, take the above information into consideration to improve your chances of finding a suitable financing deal. Alternatively, do not completely rule out buying a new car. With the excellent financing deals that are available these days, and the fact that a new car will require less maintenance, it may still prove to be a better option in the long run. 

Neil Stelling has extensive experience in car sales and finance. In his spare time, he enjoys sharing his insights with others through blogging for a number of different websites. Click the car finance help link for more information.

Currency Trading

Currency trading can be a fascinating and profitable field of investment for those who learn the market well and have access to brokers offering good guidance. 

Through education and experience the currency market, or "forex" (FX) for short, can offer unlimited investment opportunities that are often as good or better than the traditional stock market offers. 

What is Currency Trading?

The currency market continues to grow in size, even though it is already the world's largest investment market. There are literally trillions of dollars in average daily turnover, in contrast to the mere billions in the daily volume that occurs on the New York Stock Exchange. 

It is a 24-hour market (excepting weekends) consisting of three trading sessions that include the United States, Europe, and Asia. Unlike the stock market, in which investors deal in single stocks, currency trading is done in pairs, buying one while selling another. 

The trick is to make these exchanges profitably. Currency markets are influenced by the same factors as the stock market, such as supply and demand, interest rates, economic data, and world events. 

How to Succeed at Currency Trading

Just as with the stock exchange, in currency trading, there is no automatic formula for success. With currency trading, you need to follow the market carefully and thereby learn the way various currencies typically respond to specific events and economic and political developments. 

Just like you would want to know something about the businesses in which you are buying stock, so you would want to know the economic and political factors influencing a specific currency. Many investors find this monitoring of the world currency markets fascinating. 




The Importance of early guidance in the currency trading market is easy to learn, but the strategies for making money consistently require a combination of both experience and sound advice. 

The regular use of an experienced forex broker is highly recommended in the early stages of entering this market so that you can be warned away from typical and potentially expensive beginner's mistakes. 

Once you gain enough knowledge and experience, you can determine what investment strategy works best for you. Many investors find that currency trading is more interesting and exciting than the New York Stock Exchange, with as many or more opportunities to profit financially. 

It is certainly worth talking with a forex broker to help to determine whether the currency trading market is right for you.

Forex Trading: The Trade of Today

Forex-sm (Photo credit: Wikipedia)

The foreign exchange market decides the flow and ebb of the global economy. It is here that the currency ratings decide the nature of trade for the day and the pace of business is set daily, anew. It is not run buy a group of people or an organization of banks, but is rather a communication portal between buyers and sellers that decide the game according to the simply policy of demand and supply. This determines which currency stands the most in demand and fulfills the charts of utility for the consumer to the maximum.

The forex trade not only determines the economic status of the globe but it also forges the way finance and trade could shape up in the near future. Therefore, a career in this field is one of the surest ways to make money. But like every business, the forex biz has its own clauses of risks and responsibilities and therefore a lot of new traders are advised to follow the necessary guidelines before they fully throw themselves in the trade.

The Forex trading companies lend a helping hand to the new bee in the business. They provide with a certain amount of guidelines necessary to consider while getting involved in the trade. First of all, it is necessary to treat forex trading as a form of business and trade and not as a form of gambling or an evening spent at a casino. It requires vision and planning at every step of the way and sheer commitment and determination to stick by certain principles which allow healthy trade and encompass the sound tactics of dealing with the ever changing nature of the market.

Next, it is important to consider all the pros and cons of the trade. It is a business like any other and therefore requires the readiness and preparation to deal with the associated possibilities of loss and profit. These possibilities can be further clarified if the trader knows his game well and plays his cards wisely. Knowing the simple policy of pricing action an entrepreneur can ensure a string of good deals since he is thoroughly aware of all the aspects of the dealings he consults and invests in those where he is pretty much guaranteed a good amount of money in return.

Knowing your skills is as important as planning your way through the current market scene. Your present actions will set the base for your future in the field and hence as a new trader it is wise to know everything about the trade before you start betting on appealing deals to invest in. It is advised that knowing the policy of pricing action enables a trader to see both sides of a deal thoroughly and therefore, provides him with a judgment that is not biased only towards the positives or the negatives. This ensures that all the aspects of the dealing are a clear picture laid out in front of the trader with his judgment as the final call.

Another aspect when it comes to forex trade is the cautious step of not over trading. Over trading is one of the major flaws that most of the professionals in the field succumb to. It is either caused by a streak of overconfidence due to a line of great dealings in the present or as an outcome of rage or depression due to a string of bad losses in the trade. Every new trader is therefore advised to be aware of this side of the business and to apply the stratagem of planning and executing so as to avoid this pitfall of over trading.

Bio: Huan Che is a forex trainer from China and has a group of intern traders under his care. He believes that every new trader in the field should have some prior training which will serve as an efficient groundwork when he steps into the trade all on his own.  Also he loves to write for http://www.admiralmarkets.in/

Different Financial Risk Types Explained

In an uncertain financial market, people with money to spare are always looking for investments with the perfect combination of low risks and high returns. 

Although no investment type is entirely without risk, by doing your research and trading wisely, you can still see big returns on your money. 

But which investment type is right for you? Here’s a quick guide to help you decide how to get the most out of your money. 

Share investment 

Investing in shares in generally seen as a long-term investment. It is extremely popular as the growth of shares normally out-performs inflation, giving you a greater return for your investment than a bank could.

When you buy shares in a company, you become a partial owner of that company. Depending on how many shares you have, you can vote in shareholder meetings and have a certain amount of say in the running of the company. 

If the value of that company goes up over time, so do the value of your shares. Therefore giving you a profit on your initial investment when it comes time to sell. 

Historically, investing in shares has produced some of the strongest after-tax investment returns over long periods of time. So if you’re looking for somewhere to put your money, this could be a great option. 

Two approaches can be taken when dealing with shares. You can either buy into a company and then hold on to your shares for many years. Or you can actively trade between companies, buying and selling shares as values fluctuate. 

Before you buy any shares, research potential investments as thoroughly as you can. Invest in the right company, and your money could be working for you for years to come but invest in the wrong company and it could be wiped out in an instant. 

Foreign exchange 

The foreign exchange market, also known as the Forex, FX and currency market is the name given to the market trading in foreign currencies.

Forex Money for International Curency (Photo credit: epSos.de)

Thanks to home computer programs and increased awareness of the Forex market, its popularity has grown massively over the last few years. In fact as of April 2010, average daily turnover in global foreign exchange markets was estimated at $3.98 trillion. 

To make money out of the Forex market, you have to buy and sell currency at the most opportune times. Exchange rates fluctuate constantly due to various factors; military action, natural disasters, and political activity all have an impact on market confidence and therefore the perceived value of currency. 

Trading in shares can be lucrative but risky 

Large companies can use this to their advantage by executing payments or purchases when currencies are at the right levels. Even the smallest change in rates can have a big impact on large transactions. 

Individuals can make money on a smaller scale by buying up one currency and then selling it when the exchange rates change. The margins are rarely massive, but it can give you a bit of extra cash in your pocket. 

Commodity trading 

Commodity trading refers to the trading of raw and primary products and the speculation on their values increasing or decreasing.
Raw and primary products include corn, milk, soybeans, sugar, precious metals and crude oil. Each product can only be traded in certain months of the year, so becoming familiar with the process is crucial before you start trading. 

Money can be made by speculating on crop performances. For example, if there is a bad crop of sugar the price of sugar will go up. So buying sugar before the price increase and then selling when it’s at its peak will give you a profit.

Geopolitical factors can also influence the commodities market. For example, political instability in the Middle East can drive up the cost of crude oil. Or military action in a coffee producing country could affect that year’s crop, also driving up the prices.

As with shares, commodity trading can be long term – buying a product at a low cost and waiting for the value to rise – or short term, where the products are sold high and then bought back lower. 

Dealing in commodities is like trying to predict the future 

Whether you invest money in shares, foreign currency or commodities, they all revolve around speculation, risk and luck. Outside factors can dramatically affect each market, changing the value of your investment over night.
So whichever market you decide to invest in, do your research, and study the market and most of all never invest more than you can afford to lose.

Tom Reynolds, financial analyst at currency brokers firm, Currency Index. He analyzes the changes in yields and financial markets on daily basis, creating predictions on how different financial risk will change in the future that helps the company to hedge its assets and secure their clients’ investments.