Trading volumes are huge. The daily turnover of only Forex - international market exchange rate is more than 4 trillion dollars a day. This daily turnover is much higher than the total value of shares changing their masters in the world stock markets in the whole year. The possibility of obtaining fast and unlimited profits while working with these tools - the reason why many businesspeople prefer Forex and commodity markets work on the sites''slow''stock exchanges. In conjunction with prudent and reliable mechanisms for risk control, trading on global markets may become the basis of long-term financial success.
Market Forex - is the interbank market, which was formed just 70 years of last century, when international trade shifted from fixed exchange rates to floating ones. Thus the rate of one currency relative to another is determined by the most obvious way - by sharing what the relation between them, on which both parties agree.
Strictly speaking, Forex is not a "market" in the traditional sense of the word. He did not have a specific place of trade, such as the Stock Exchange. Trading takes place by phone and through computer terminals simultaneously in hundreds of banks around the world. And another advantage of the Forex market from an investor perspective, is that the Forex is open 24 hours a day, and exchange throughout the week goes on. Almost every time zone (ie, in London, New York, Tokyo, Hong Kong, Sydney, etc.) has dealers willing to buy or sell currency. While the stock market stops trading at the end of the day and resume the next morning.
Foreign exchange and other related operations in money markets - one of the most complex, and very specific type of activity, called the foreign exchange dealing, which is implemented by highly skilled professionals - dealers.
There are three basic types of operations:
- Operations such as Spot, where the delivery date is the second business day after the date of the transaction.
- Forward operation, where the delivery time may take from several days to several years.
- Currency futures and options, where the delivery time specified by the exchange in accordance with exchange rules.
First of all, we should say that currency speculation belong to a class of margin transactions that do not governed by regulatory bodies such as the SEC and the margin loan, or "shoulder" is defined only by agreement between the customer and the bank or brokerage firm that provides him access to the Forex. The size of the margin loan depends, in fact, only the amount of commercial mortgage client and is usually 1:50 or 1:100. That is, making a deposit of $ 2000 and having a "shoulder" 1:100, the customer may execute transactions for an amount equivalent to $ 200.000. And the rest of the currency trade account operates as a broker and a margin investment account.
Depending on a variety of commercial, economic and other indexes, interest rates, central bank policy, time of day, preferences and expectations of participants speculation from many different causes of quotations, that is, currency prices are in continuous motion. The task of the dealer to try to determine the direction of price change currency and buy the currency, the price of which increases, or sell the currency price at which the falls and then, carrying back the transaction, make a profit.
The key to successful trading in the global Forex market is the reliance on such aspects of the investment process as:
- Fundamental Analysis
- Technical analysis
- Risk - management
- Psychology
Fundamental analysis involves the interpretation and assessment of major economic indicators, which appear in the news published by news agencies and bodies of state statistics. Fundamental indicators are published in the predetermined dates and times, as investors and traders are aware of the specific form the calendar. It is usually given the past value of this index, average, expected at this time, as well as the spread of the maximum to the minimum expected value. Based on this information, an experienced trader can prepare for the exit rate. Usually, traders at the time of publication of significant fundamental indicators are trying to close all open positions before or at least reduce their size so that the surprise could not significantly affect the trader's trading account.
Technical analysis is conducted to determine the direction of price movement and time for transactions. Using technical analysis, we can estimate the current direction of price movement. Options are:
- Upward movement
- Downward spiral
- Flat
To assess the validity of the trend:
- Short-term trend
- Long-term trend of
To assess the duration of the trend:
- The beginning of a trend
- Maturity trend
- End trend
To assess the amplitude of price fluctuations in the current direction (volatility):
- Slight change of course
- Strong change of course
Defining these components of the dynamics of prices, we can, with reasonable certainty, to buy or sell the instrument being analyzed.
Knowledge of technical and fundamental analysis only affect the percentage of successful transactions in total transactions. But you can have a magnificent result for the ratio of successful and unsuccessful transactions, and thus be permanently lost. It is to solve this problem and there is a risk-management.
The impossibility of predicting the exact outcome of commercial transactions dictates the need for the trader to perform a number of key rules aimed at reducing the risk of loss than previously planned or expected for each transaction. Strict adherence to these rules guarantee a long life of each financial trader.
Skills to use methods of analysis of Forex market trading and intelligent tactics are necessary but not sufficient conditions for being an investor in the financial market. Another necessary to understand the psychology of market participants, in their motivation and driving force that ultimately determines the understanding of what is happening in the market Forex. All positive and negative characteristics of the trader as a person displayed in a kaleidoscope of fast change of market developments and have often pivotal to the result of trades.
Blinkered and weak, self-confident and hesitant, indifferent and slow, all of these "financiers" are doomed to become victims of the market. Knowing their own pros and cons of character may help avoid bankruptcy. If, however, in addition to the trader to learn how to evaluate the psychological state of the market and the behavior of the market crowd, his chances of success dramatically increase.
We have considered only the basic strokes associated with the activities of traders in financial markets. This activity is interesting and versatile, it allows each person to find their way to financial freedom, and perhaps to a different way of life.
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