Using Trend-line Analysis in FOREX

Wikipedia defined the word trend as: 1) "the process of getting others to follow/copy, of their own free will your actions and/or style"; 2) "In statistics, a trend is a long term movement in time series data after other components have been accounted for"; and 3) "In market trends, it is a prolonged period of time when prices in a financial market are rising or falling faster than their historical average, also known as 'bull' and 'bear' markets, respectively." Definitions two and three better defines the use of trends in foreign exchange, and in layman's term, trends are the "trader's best friend."

There are several strategies and techniques that may be used in analyzing trends to get the most out of trading profits. In any markets, trend analysis is very important and the same applies with forex markets. Currencies in the world have the propensity to move in trends because of the different macroeconomic factors such as global trade and interest rates, international policies, and effects of political movements.

Let us be more precise here. Trend in forex may be described as a foreseeable response to price at its own level of support or opposition over a period of time. To illustrate, prices recover when they are near the apex in an upward trend. However, in a down ward trend, the opposite happens - reversals to price increase happen when it is near the opposition levels. This is, in fact, the first tool in identifying a trend - to determine opposition and support levels. This is called the trend-line examination.

Trend-line examination is frequently underrated. Some analysts say that much subjectivity is used into it and that it is retrospective. There is some grain of truth to those criticisms but they fail to notice the truth that trend-lines aid concentration on the essential price designs, weeding out extraneous factors in the market. Thus, we can say that trend-line analysis must be the first process to ascertain the being of a trend. Following such, if trend-line analysis does not show the existence of a trend, then probably, there is none.

Trend-line analysis may be best utilized using longer series of time say, daily to weekly. After this, we may carry them over into hourly timeframes where levels of support and opposition may be ascertained. This methodology has the benefit of providing more prominence to the more significant aspects in trends first rather than the less important details. Using this method, a trader reduces the risk of following a temporary leg up in the trend and missing a major long-term upward trend.

Forex: The Development of Exchange Controls

By 1914 and the outbreak of World War I, the world's foreign exchange system was quite developed and formed an efficient system of payment for international economic transactions.

In general, as a result of the expansion in international commerce, the twentieth century witnessed substantial growth in all phases of foreign exchange, despite a number of governmental restrictions. More and more foreign exchange business was transacted by the use of telephone, Telex, and telegraph. Instead of formal meeting places where traders gathered to transact business, foreign exchange markets became a multinational structure linked by communication networks.

A number of restrictions on free foreign exchange dealings were inaugurated by many countries during the years of World War I, as well as in those immediately following. Governments began to fear the effect on their economies, or the war effort, of letting capital and reserves move freely among the industrial countries.

As the war progressed, intervention in the foreign exchange markets was practiced by many of the belligerents and some of the neutrals, and various systems of exchange controls were adopted. The gold standard was abandoned by several European countries shortly after the outbreak of the war, only to be readopted later by some nations and finally abandoned by all, including the United States during the Great Depression.

In a country where the gold standard was abandoned, some form of the gold exchange standard was usually installed in its place. Under that standard, paper money is employed as the domestic currency and the country maintains a reserve of gold and convertible foreign exchange (convertible to gold), other currencies, or both) so it can protect its rates of exchange, continue to trade during periods of balance of payments deficits, and instill confidence in its currency.

Under the gold exchange standard, foreign exchange transactions are carried out by means of various forms of credit instruments and gold is only rarely employed for that purpose.

After 1918, the currencies of some European countries depreciated rapidly because of rampant monetary inflation, and sometimes little attempt were made to support their rates of exchange. With the advent of the Great Depression and its devastating effects upon the national economies, governments appeared to be at their wit's end to discover and apply remedies. Country after country devalued its currency.

The devaluing countries hoped that lower exchange rates would increase their exports by making their goods cheaper abroad and simultaneously check imports by increasing the prices of imported goods. Between 1933 and 1934, the United States devalued the dollar by raising the price of gold from $20.67 to $35.00 per fine troy ounce, a reduction of 59.06 percent.

However, the competitive devaluations did not have the anticipated results, because the devaluation of one currency was frequently countered by that of another.

In World War II, as in World War I, most of the belligerents and many of the neutrals adopted stringent exchange controls in an effort to associate declining international reserves. The declines in reserves resulted from a dire need for imports and an inability to export in sufficiently large amounts to balance imports.

The exchange controls were continued in the years immediately following the war and remained in effect during the postwar years until the late 1950s and early 1960s. In addition, the governments of a large number of countries intervened frequently and often massively on the foreign exchange markets in an effort to protect their exchange rates.

FOREX: Daring to Take the Risk?

There are numerable risks an investor should consider when trading in FOREX, especially when transactions are prone to immediate and sudden rate changes. So what are the factors involved in such risks and is it worth trading despite them?

Certain risks involved in Forex trading would be greatly affected by factors such as a company's basic purposes, an organization's mechanism and reason for achievement, a company's management which would strongly define its success or downfall, and the presence of a company's resources, and luck. It is understood that the Forex market stands independent from other comparable markets for the main reason that it is outside the boundaries of exchange. Due to the development of communication facilities, banks or operation houses are able to trade directly and do not need any special organization like stock exchange. Such a market has grown and developed at a quick pace worldwide, and is therefore, difficult, if not almost impossible to curtail.

Apart from the fact that there is hardly any regulation procedure in the Forex market for any single country, we can therefore surmise that such a market's broker is not required to possess any license or certification. The market is not an adjusted one despite the various potential problems that it can hold for a trader. Such qualities such as trust and honesty are essential in the continuous running of operations, and yet there are a potential number of risks, there are always ways in order for one to curb the risk of unnecessary financial exposure.

The Forex investor must at least know the basics of technical analysis. He or she should be able to understand and interpret financial charts and its movements. It is certainly one way of being less risky when it comes to one's investment as even those traders who are experienced are still unable to absolutely predict the market's behavior. Certain tools such as "stop-loss orders", which contain guides on how one can exit his position if the price of a currency has reached a particular point, are one of the obvious and common techniques to minimize one's investment risk.

Although certain risks are definitely present when trading in the Forex market, one should not be put off by them. Despite the risky factors involved, numerable companies from western countries like those of Europe and North America still participate in the Forex trade business, having it as their primary source of income. In fact, it is still known and indicated as one of the most fair and open trade investment opportunities one can find globally!

Investing in Online Currency Trading and FOREX

Currency trading on the internet involves more than just the role of a speculator or an investor in the light of complexities in current market. If you are managing a multi-company trading business, or merely investing on a property, positioning currencies around various exchanges at the proper time can attach a fairly considerable value to your end result.

Because majority of property deals involves hundreds of thousands of dollars, a minimal points modification on the daily exchange rate can possibly make or break the productivity of a deal.

There are several workshops accessible that are perfect if you are a newbie in Forex and have some knowledge in exchanging stocks or other goods. Whether you're seeking to expand your range, develop a new skill, or support your income, you'll discover if forex is ideal for you.

Currency trading online is conducted through foreign exchange or FOREX. It is the biggest global market averaging $1.9 trillion daily. Compared to other financial markets, Forex doesn't really have an exact material site.

The main reason is that it is conducted online and through banks with persons exchanging their local currency for another. Or, if they have just returned from a foreign country, then they might be exchanging foreign currency into their own currency. Because it is done online, you can deal in the market 24 hours everyday. However, you need to register yourself in one of the several companies offering these accounts to customers in order to avail of these services. You can set-up an account with one of the hundred companies accessible; and then trade currencies right away.

You would not want to avail of such service if you only change currency once every year, as you can avail of such at your local bank. While this kind of account is obtainable, large companies generally use online currency trading and they are the ones who utilize this service mostly.

But, in most situations, there are open firms that you can register with, that will handle everything for you for a minimal fee.

For the really sincere investor, there is a huge income to earn, and often huge money in jeopardy. There is a lot of information that can be grasped quickly, with laptops and wireless connections, anybody can do business from any spot in the world.

Likewise, these websites can give you the latest global exchange rates, so you will learn the exact cost that you will receive from your investment. It also allows you to have knowledge of the appropriate time to utilize these services. When the rates are ideal for you, then that is the time you can swap your money.

But, it is worth noting that some currency trading firms will require a couple of days before you can take out your money, so it is always smart to have an advance plan if your aim is to earn money with foreign exchange and utilize that money to settle bills or living expenditures.

Try it out, you may well discover a new investment venue to earn an income.

A lucrative market called FOREX

The Foreign Exchange Market, also known as the FOREX market, is more lucrative than any other investment market since this market is the largest in terms of total cash volume traded. With an estimated daily turnover of $1.9 trillion, the FOREX market is something that future investors should reckon with.

The demand for FOREX is almost inexhaustible since currencies such as the US dollar (USD), British Pound (GBP), Euro (EUR), and the Yen (JPY) and many others are in constant fluctuation. According to the Wall Street Journal, the FOREX market almost doubled from $1 trillion to $1.9 trillion in just a span of 10 years, in comparison, the market was just by $70 billion in the 1980's.

FOREX works by the simultaneous buying and selling of currency to another and it works around the fact that the value of currencies is not static but liquid. Simply put, FOREX is making money out of money itself.

For easier illustration, suppose that the value of the USD is 1.4 and the EUR had 1, meaning that Euros are cheaper than dollars by a margin of 0.4, however, current market indications points out that the EUR would eventually gain an upper hand against the USD in the near future, and you bought EUR 140,000 while simultaneously selling USD 100,000, and then wait for the Euro to increase its value. As you anticipated, the value of the EUR increased over the USD, it is now 1 EUR = 1.4 USD. Now, to profit from the exchange, you resell your EUR 140,000 while simultaneously buying USD 196,000 pocketing a whopping total profit of USD 96,000.

Of course, the real-time value of the currencies to be exchanged is far from the example above, it still points out that money can be made easy by buying and selling money itself. With carefully planned moves and good sense for market trends, an investor can make a fortune out of the FOREX market.

The introduction of the Internet to the market substantially increased the liquidity of the FOREX market since it allowed an unrestricted volume of money to be transferred across borders instantly; hundred of millions in various currencies are traded within a matter of minutes. The Internet also allowed the market to run 24-hours a day, making trading across the American, European, and Asian time zones unrestricted and allowing investors to react to currency fluctuations fast.

Because of the Internet and the wealth of information that it brought, many investors jumped on the chance that the FOREX market delivers. The Internet allowed these small-time investors to be up-to-date about the current market trends, currency value, and market risks, making FOREX safer to an extent compared to other investment markets.

Beginning Forex Trade

The Forex market and equity markets have many similarities. Nevertheless, there are still differences regarding these two. The main difference on the list is the broker.

In Forex trading there are a lot of brokers to choose from. To know how to look for the right broker, what to look for is as follows:

> Low Spreads - this calculates the pips. This is the big difference between the prices that a currency can be bought at, and the price that it can also be sold at, in a given point in time.

Usually, brokers don't charge commissions. The question is: How they can make money out of Forex trading?

> Quality Institution - Forex brokers are normally tied to huge banks or lending firms, since a large amount of money is required. Also, a true Forex broker must be registered with the FCM (Futures Commission Merchants) and regulated by the CFTC (Commodity Futures Trading Commission).

> Extensive Tools and Research - brokers provide their clients with many different platforms for trading. These platforms can provide real-time charts tools, support for trading systems, and real-time data/news. Before hiring a Forex broker, make a request for free trials to know the difference in trading platforms.

> Wide Range of Leverage Options - This is essential in Forex, since the price diversions are just fractions of a cent. The leverage usually is expressed as ratio between total capitals that are available to actual investment. This is the amount that the broker will lend their clients.

> Account Types - most brokers provide two-or-more kinds of accounts. The smallest of these is called the mini account that requires their clients to trade with a minimum of $250. The standard account lets traders trade with many different leverages; this requires from them about $2,000 in capital.

Here are the things that traders must watch for, and avoid.

> Sniping or Hunting - also known as prematurely selling or buying near preset points; these are shady acts committed by brokers to gain profits. There is no organization that reports such activities.

> Strict Margin Rules - your borrowed money will be at risk - this is what your broker will tell you. Your broker will simply liquidate your position in a trading position, or on a margin call.

The Forex market is the biggest market around the globe, and everyday individuals are increasingly interested in joining the market. But before anyone can begin trading, traders should meet with their brokers first for specific criteria. Traders should take time to look for the best strategy that works for them. The best way to learn how to trade is by signing up for a demo account and try it out to get a good feel for it

The 2% Rule On Forex Trading

The powerful tool that traders must use in Forex trading is the 2% rule.

By acquiring this rule you are utilizing a strategy that reduces the size of your financial losses during a losing deal, an important thought.

Nevertheless, there is one tiny caution that you ought to be alert to when you are utilizing the 2% rule to measure how many Forex shares you are going to purchase.

We all know that the number of shares you can buy is identified by your highest loss and the size of your break. It means that by accelerating your risk, you can also accelerate the value of the dollar of the location you open.

With merely reducing your break out size that is by mounting a closer break loss you can accelerate the value of the dollar location you open.

To ward off a circumstance where you could end up with too much of your foreign exchange trading float at risk you can introduce a spare rule. This rule would restrain the value of the dollar of a location to be no more than a set portion of the whole Forex trading float.

Let's say, you might conclude that you will never open a location that has the value of the dollar of more than 25% of the whole Forex trading float. This rule would only be performed if, after measuring the formula that identifies how many shares you purchase, you see the value of the dollar of that location would be bigger than 25% of your float. If this happens to you, you would sway down the location to ensure that it did not pass that 25%.

The portion that you decide across will rely on the kind of system you are trading, your float's size and your personal margin for risk.

Mostly, littler Forex trading floats could use 25%, and bigger Forex trading floats could use as little as 10% or even at 5%.

There are no standard numbers, and the portion that you select will depend on your personal situation.

When this inclination is corrected for you will have all your money management rules in position, ready to control your risk in the Forex trading market.

After all this, you must take the next step. Try your system to determine which of the variables will suit you; always remember that the position sizing is the most important part of any system design.

Forex: The Exchange Risk on Foreign Exchange

To start with the simplest type of solution, a businessman enters into an agreement to receive or make payment in a currency other than his own on a predetermined future date.

Let us assume that a U.S. exporter sells goods to an importer in the United Kingdom for ₤100,000 payable 90 days from date of sale. On the date of sale, spot sterling is selling at $2.40 per pound and forward sterling for delivery in 90 days is selling at $2.397 per pound.

The U.S. exporter enters into a forward contract with a U.S. bank for the delivery of ₤100,000 in 9 days at $2.397 per pound. When the pounds are paid to him by the U.K importer on the due date, they are paid to the account of the U.S. bank in London in settlement of the contract and the exporter's account in the United States is credited on the same day with $239,700.

No matter what changes occur, either from market fluctuations or from devaluation or revaluation, the exporter receives a precise amount in dollars. The U.S. bank has assumed the exchange risk.

Now what has happened?

Assuming that the exporter has not adjusted his price to compensate for a differential between the value or the currency he will receive and the value of the same currency at time of sale, he has paid $300 for insurance against any fluctuation in the value of the currency he is to receive.

On a per annum basis, that could be figured as $300 x 4, or $1,200, in relation to $240,000, which is equivalent to ? of 1 percent per annum. That would be included in the U.S. accounts of the exporter either as accost or as a reduction of the sale price. The U.K. importer's pound costs are fixed.

To turn the transaction around, the U.S. exporter now bills the same sale to the U.K. importer in dollars for $240,000. The U.K. importer buys forward form his U.K. bank the dollars required at the same rate of $2.397 per pound. That means he must pay ₤100,125 to buy $240,000. When the forward contract comes due, he pays his bank the ₤100,125 for $240,000 and has the dollars paid to the U.S. exporter in the United States.

On a per annum basis, the cost would be figured as 4 x ₤125, or ₤500, in relation to ₤100,000, which again is equivalent to ? of 1 percent. The importer normally takes into his accounts the total pound cost as the cost of the goods purchased. Here again the importer has no risk. Regardless of what happens to the relationship of the pound to the dollar, the U.K. bank takes the exchange risk. That is a normal banking function.

Becoming an Informed Online Forex Investor

Staying updated with the latest foreign exchange information is a hard task to follow, but first you need to know the most important factors that determine how the market will look in tomorrow's world.

Investing in Online Forex Cross Currency

A cross currency is a currency pair in which the two currencies being traded are neither USD. A cross currency is more libel for fluctuation because in actuality the trading done is between two UDS trades. For example, if you were to buy a GBP/CHF you would be actually doing a buying transaction of GBP/USD and a selling transaction of CHF/USD.

If you are thinking of making a cross currency trade in the Forex market, be aware of the difference between that and a regular pair change. The advantage of such a trade is that it gives you more choice and flexibility in deciding where to invest and which currencies to choose from in online Forex.

Base Currency is an Important Online Forex Issue

One basic quality any starting out Forex trader should take into account is getting to know the small details in the online Forex market. This in time will allow the trading to take into account all the factors that influence the Forex. Of these options a detail that is frequently neglected is the base currency. This is a term which describes the first currency in any currency pair. The base currency is given a numeric value against the second currency. The rate of other currencies is determined by the first used base currency- which is usually the dollar.

Trading Concepts

The most basic of concepts are here explained so you can use them when you decide to start trading in online Forex. These concepts are required to start grasping the online Forex market and its uniqueness over other similar markets.

The Online Forex is a Spot Market

A spot market is any market that handles the current price of finances. If the transactions done in the market deliver longer over several days or even months- it is not a spot market. The online Forex market settles instantly and this is why it is considered a spot market.

Major Online Foreign Currencies

These are the more substantial currencies that are most traded in the online Forex. They include:

• USD (US dollar)
• EUR (European Euro)
• JPY (Japanese Yen)
• GBP (UK Pound)
• CHF (Swiss Franc)
• CAD (Canadian Dollar)
• AUD (Australian Dollar)

Online Forex Currency Pairs

The online Forex has many currencies, but every trade consists of two currencies being traded, one being bought and one being sold. If, for example, you have $200 to invest in online Forex, you can invest in the EUR/ JPY, meaning buying Euros and selling Yens. The two currencies bought and sold are called currency pair in an online Forex trade.

Online Forex Trader's Basics

Being the biggest market in the world, the forex market is sometimes daunting for starting out users. In actuality, trading forex currency is much easier than most people think and can be explained quite easily.

FXTURBO.COM will let you know everything about the foreign exchange. Browse around in the website to get more profound details about trading currencies, and enjoy the different sections written to help you understand forex.

What Is Online Forex?

The Forex market was previously only opened for the use of organizations and banks to trade in. However, since the start of online forex trading the transactions done in the forex has been opened for everyone who wants to participate.

There are many online forex websites to choose from, but before you do get to know the basic ideas and concepts of the online Forex.

The Forex market (Foreign Exchange market) is where two currencies are simultaneously being exchanged- one currency is bought while the other is sold.

This basic idea is what holds the market 24 hours a day, all across the world. Without trading Forex a person only has one currency which stays without being bought or sold- for an American, for example, this currency is the USD. That currency can drop or rise, but it is in the Forex market that these dynamics of the coin can mean continuing profit for the sound investor. Reading the foreign exchange market means you need to follow up on the interest rates, the present currencies, and other important features that determine what will happen in the market.