ForexGen Fundamental strategies, technical analysis and risk management techniques

You can learn all these strategies either by learning the various steps yourself or by joining a training course. If you decide to learn on your own, then you may require some time before you get the hang of using them or before you formulate some strategies of your own. If you decide to join a training course, then you can learn all the strategies from an experienced trader and learn to use these strategies in the market during the course itself.

There are several training institutes out there who have associated themselves with the best forex dealers in the market currently. These institutes bring you up to speed with all the latest tools being used in the market these days. They will help you evolve your own trading strategies that you can use to make profits in the market.

Some of the institutes also allow you to trade on some of the best platforms with the best traders that these institutes have associated themselves with. The institutes help you in learning the fundamentals of devising your own strategy. They will teach all the basic terms and definitions and update you with the latest developments in technical analysis. They stress on risk management as this is one of the most fundamental factors of forex trading.

Different levels of courses are offered by these institutes. Most of the courses are aimed at the novice trader where they teach you all the basic concept and strategies. In the advanced courses, complex strategies are discussed and its use is practised. They will also teach you various risk management strategies and money management techniques. They build the psychological edge you need to succeed while trading in the forex market. They also have courses aimed at the various corporate who want to protect their exposure to the foreign currency by building positions in the market that hedges their various foreign currency exposures.

These institutes also offer you the choice of learning through the internet which are also known as virtual classrooms or through various physical classrooms. You can choose any of the above options depending upon the one which will suit you the most. If you feel like you need one-to-one coaching and help while trading in the markets then the physical classroom is the choice to make. Another advantage of choosing physical classroom is the amount of networking that you can do while attending the course. This will stand in good stead as you will be able to discuss any future trades with these people.

Forex training is really useful and any opportunity to attend such a training course should not be wasted. If you want to trade in the forex market and make money but you are unsure of yourself, then you should attend a training course as this will put you in the path to making large amounts of profits.

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Foreign Exchange as a Financial Market

Currency exchange is very attractive for both the corporate andindividual traders who make money on the Forex - a special financialmarket assigned for the foreign exchange. The following featuresmake this market different in compare to all other sectors of theworld financial system:• heightened sensibility to a large and continuously changingnumber of factors;• accessibility to all traders in the major currencies;• guaranteed quantity and liquidity of the major currencies;• increased consideration for several currencies, round-the clockbusiness hours which enable traders to deal after normal hours orduring national holidays in their country finding markets abroad openand• extremely high efficiency relative to other financial markets.This goal of this manual is to introduce beginning traders to all theessential aspects of foreign exchange in a practical manner and to bea source of best answers on the typical questions as why are currencies being traded, who are the traders, what currencies dothey trade, what makes rates move, what instruments are used forthe trade, how a currency behavior can be forecasted and where thepertinent information may be obtained from. Mastering the content ofan appropriate section the user will be able to make his/her owndecisions, test them, and ultimately use recommended tools andapproaches for his/her own benefit.

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Foreign Exchange in a Historical Perspective | ForexGen Tips

Currency trading has a long history and can be traced back to theancient Middle East and Middle Ages when foreign exchange startedto take shape after the international merchant bankers devised billsof exchange, which were transferable third-party payments thatallowed flexibility and growth in foreign exchange dealings.The modern foreign exchange market characterized by theconsequent periods of increased volatility and relative stability formeditself in the twentieth century. By the mid-1930s London became tobe the leading center for foreign exchange and the British poundserved as the currency to trade and to keep as areserve currency.Because in the old times foreign exchange was traded on the telexmachines, or cable, the pound has generally the nickname “cable”. In1930, the Bank for International Settlements was established inBasel, Switzerland, to oversee the financial efforts of the newlyindependent countries, emerged afterthe World War I, and to provide monetary relief to countriesexperiencing temporary balance of payments difficulties.After the World War II, where the British economy was destroyedand the United States was the only country unscarred by war, U.S.dollar became the prominent currency of the entire globe. Nowadays,currencies all over the world are generally quoted against the U.S.dollar.

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Futures Market | ForexGen Tips

Currency futures are specific types of forward outright deals whichoccupy in general a small part of the Forex market (See Figure 3.1).Because they are derived from the spot price, they are derivativeinstruments. They are specific with regard to the expiration date andthe size of the trade amount. Whereas, generally, forward outrightdeals—those that mature past the spot delivery date—will mature onany valid date in the two countries whose currencies are beingtraded, standardized amounts of foreign currency futures matureonly on the third Wednesday of March, June, September, andDecember.There is a row of characteristics of currency futures, which makethem attractive. It is open to all market participants, individualsincluded. This is different from the spot market, which is virtuallyclosed to individuals - except high net-worth individuals—because ofthe size of the currency amounts traded. It is a central market, justas efficient as the cash market, and whereas the cash market is avery decentralized market, futures trading takes place under oneroof. It eliminates the credit risk because the Chicago MercantileExchange Clearinghouse acts as the buyer for every seller, andvice versa. In turn, the Clearinghouse minimizes its own exposure byrequiring traders who maintain a non-profitable position to postmargins equal in size to their losses.Moreover, currency futures provide several benefits for tradersbecause futures are special types of forward outright contracts,corporations can use them for hedging purposes. Although thefutures and spot markets trade closely together, certain divergencesbetween the two occur, generating arbitraging opportunities. Gaps,volume, and open interest are significant technical analysis toolssolely available in the futures market. Yet their significance extrapolates to the spot market as well.Because of these benefits, currency futures trading volume hassteadily attracted a large variety of players.For traders outside the exchange, the prices are available from onlinemonitors. The most popular pages are found on Bridge, Telerate,Reuters, and Bloomberg. Telerate presents the currency futures on28composite pages, while Reuters and Bloomberg display currencyfutures on individual pages shows the convergence between thefutures and spot prices.

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Forward Market | ForexGen Tips

The forward currency market consists of two instruments: forwardoutright deals and swaps. A swap deal is unusual among the rest ofthe foreign exchange instruments in the fact that it consists of twodeals, or legs.26All the other transactions consist of single deals. In its original form,a swap deal is a combination of a spot deal and a forward outrightdeal. Generally, this market includes only cash transactions.Therefore, currency futures contracts, although a special breed offorward outright transactions, are analyzed separately.According to figures published by the Bank for InternationalSettlements, the percentage share of the forward market was 57percent in 1998 (See Figure 3.1). Translated into U.S. dollars, out ofan estimated daily gross turnover of US$1.49 trillion, the totalforward market represents US$900 billion.In the forward market there is no norm with regard to the settlementdates, which range from 3 days to 3 years. Volume in currency swaps longer than one year tends to be light but, technically, there is noimpediment to making these deals. Any date past the spot date andwithin the above range may be a forward settlement, provided that itis a valid business day for both currencies. The forward markets aredecentralized markets, with players around the world entering into avariety of deals either on a one-on-one basis or through brokers. Incontrast, the currency futures market is a centralized market, inwhich all the deals are executed on trading floors provided bydifferent exchanges.Whereas in the futures market only a handful of foreign currenciesmay be traded in multiples of standardized amounts, the forwardmarkets are open to any currencies in any amount. The forward priceconsists of two significant parts: the spot exchange rate and theforward spread. The spot rate is the main building block. The forwardprice is derived from the spot price by adjusting the spot price withthe forward spread, so it follows that both forward outright and swapdeals are derivative instruments. The forward spread is also knownas the forward points or the forward pips. The forward spread isnecessary for adjusting the spot rate for specific settlement datesdifferent from the spot date. It holds, then, that the maturity date isanother determining factor of the forward price. Just as in the case ofthe spot market, the left side of the quote is the bid side, and theright side is the offer side.

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Spot Market | ForexGen Tips

Currency spot trading is the most popular foreign currencyinstrument around the world, making up 37 percent of the total activity The fast-paced spot market is not for the fainthearted, as it featureshigh volatility and quick profits (and losses). A spot deal consists of abilateral contract whereby a party delivers a specified amount of agiven currency against receipt of a specified amount of anothercurrency from a counterparty, based on an agreed exchange rate,within two business days of the deal date. The exception is theCanadian dollar, in which the spot delivery is executed next businessday.Trading 24The name "spot" does not mean that the currency exchange occursthe same business day the deal is executed. Currency transactions that require same-day delivery are called cash transactions. The twodayspot delivery for currencies was developed long before technological breakthroughs in information processing.This time period was necessary to check out all transactions' detailsamong counterparties. Although technologically feasible, thecontemporary markets did not find it necessary to reduce the time tomake payments.

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Kinds Of Exchange System | ForexGen Tips

Trading with Brokers Foreign exchange brokers, unlike equity brokers, do not take positions for themselves; they only service banks. Their roles are:• bringing together buyers and sellers in the market;• optimizing the price they show to their customers;• quickly, accurately, and faithfully executing the traders' orders.•The majority of the foreign exchange brokers execute business viaphone. The phone lines between brokers and banks are dedicated, ordirect, and are usually in-stalled free of charge by the broker. A foreign exchange brokerage firm has direct lines to banks around theworld. Most foreign exchange is executed through an open boxsystem—a microphone in front of the broker that continuouslytransmits everything he or she says on the direct phone lines to thespeaker boxes in the banks. This way, all banks can hear all the dealsbeing executed. Because of the open box system used by brokers, atrader is able to hear all prices quoted; whether the bid was hit orthe offer taken; and the following price. What the trader will not beable to hear is the amounts of particular bids and offers and thenames of the banks showing the prices. Prices are anonymous theanonymity of the banks that are trading in the market ensuresthe market's efficiency, as all banks have a fair chance to trade.Brokers charge a commission that is paid equally by the buyer andthe seller. The fees are negotiated on an individual basis by the bankand the brokerage firm.Brokers show their customers the prices made by other customerseither two-way (bid and offer) prices or one way (bid or offer) pricesfrom his or her customers. Traders show different prices becausethey "read" the market differently; they have different expectationsand different interests. A broker who has more than one price on oneor both sides will automatically optimize the price. In other words,17the broker will always show the highest bid and the lowest offer.Therefore, the market has access to the narrowest spread possible.Fundamental and technical analyses are used for forecasting thefuture direction of the currency. A trader might test the market byhitting a bid for a small amount to see if there is any reaction.Brokers cannot be forced into taking a principal's role if the nameswitch takes longer than anticipated.Another advantage of the brokers' market is that brokers mightprovide a broader selection of banks to their customers. SomeEuropean and Asian banks have overnight desks so their orders areusually placed with brokers who can deal with the American banks,adding to the liquidity of the market.

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