Online Forex Trading Introduction

The online Forex market, also known simply as Forex, FX or the foreign exchange market is the biggest trading market in the world, with daily Forex trading that exceed $2 trillion.
Even tough we are talking about a huge market, Forex trading is quite simply - the buying of one currency while at the same time selling of another currency. If the trader can predict correctly which currencies will drop and which will rise - he will benefit from his investment.
There are a lot of benefits in Forex investing over other investment markets.

Why is Online Forex Trading Profitable?
The online Forex market has existed since the early 70's. Only in the past few years though, it has become accessible to millions of people through the development of the internet. Because the Forex market is available 24 hours a day, it's the only market that allows you to trade at your convenient time.
Today, because the economy is much more dynamic than it used to be, and the world has become a global village, economic conditions in various countries are also constantly changing, according to such factors as production rate, inflation and unemployment.
As a result, the rate of a specific currency changes and moves up and down in comparison to other currencies. This is the main reason of the process of rate fluctuations in the online Forex market.
In order to evaluate and predict these Forex market changes a trader can use fundamental analysis or technical analysis as a tool for investment. Where as fundamental analysis is a more broad exploration into the economic factors influencing the online Forex, technical analysis uses charts and other indicators to asses price patterns taht re-occur over time and can help predict the forex market.

Foreign Currency exchange rate
Currency exchange rate is the ratio of one currency valued against another. For example, "EUR/USD exchange rate is 1.2505" means that one euro is traded for 1.2505 dollars. If you've already invested in other markets before, you'll find the Forex trading system quite similar, and the transaction to online Forex trading smooth. An example of a Forex trade: During October 2006 you buy 10,000 BRP when the BRP/USD rate was 0.56. A month later, the exchange rate grew to 0.58. This means a profit of $350 in less than a month time.

Online Forex Trading Profits
Another example of an online Forex trade: If you buy EUR/USD, this means you are buying euros, and simultaneously are selling dollars. Your expectation therefore is that the euro will appreciate (go up) relative to the US dollar.
If you believe that the US economy will weaken and this will hurt the US dollar, you would execute a buy EUR/USD order. By doing so you will buy euros in the expectation that the currency will appreciate against the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a sell EUR/USD order. By doing so you have sold euros in the expectation that they will depreciate against the US dollar. More information concerning online Forex trading is available at Forex Floor.
Brat Milman - Managing Editor

The Forex Trading Bid & Ask Prices and Spread

This page covers everything you need to know about the bid and ask prices in the online Forex trading market, From the definition of Forex bid & ask prices, to the use of the bid & ask spread.
A Forex Trading Bid price is the price at which the market is prepared to buy a specific currency pair in the Forex trading market. This is the price that the trader of Forex buys his base currency in. In the quote, the Forex bid price appears to the left of the currency quote. For example, If the EUR/USD pair is 1.2342/47, then the bid price is 1.2342. Meaning you can sell the EUR for 1.2342 USD.
A Forex asking price is the price at which the market is ready to sell a certain Forex Trading currency pair in the online Forex market. This is the price that the trader buys in. It appears to the right of the Forex quote. For example, in the same EUR/USD pair of 1.2342/47, the ask price us 1.2347. This means you can buy one EUR for 1.2347 USD.
The Forex bid & ask spread represents the difference between the purchase and the sale rates. This signifies the expected profit of the online Forex Trading transaction. The value of Bid/Ask Spread is set by the liquidity of a stock. If the stock is highly liquid, it means many stock units are being bought and sold, and the Forex bid/ask spread will be lower. Traders prefer foreign currency with a lower bid/ask spread, because it means their money pair only for the currency and is not wasted on the bid/ask spread difference. A lower Forex bid/ask spread allows the trader to cut down on his losses.
Jim Barns, Market Analyst

How to Use Forex Trading Limit and Stop Orders

In this section we will explain about the different limit order and stop orders that are available and are used for Forex trading strategies. Limit and stop orders have a similarity to support and resistance levels, as they are also usually at the far edges of the currency price graph, and are set either to reap profits or prevent losses.
Limit orders
Forex Trading Limit entry orders are executed only if the currency price touches but not breaks the price you set. Limit orders are done when traders want to set the limit price. These orders are executed only if the currency reaches the limit price you set. Limit orders are used when you want to buy and sell a currency only if it reaches a certain price or better. Let's say the currency pair EUR/USD is worth 1.245, and you buy a limit order of 1.249. This means that the transaction will be executed only if the currency price rises to 1.249.
Stop orders
A stop order is placed to accumulate profits or to prevent losses. To place a stop order, simply specify the price where you'd like to place the stop on. Stop orders are sometimes names stop loss orders, and can occur for both bid and ask transactions.
A stop loss order is a type of Forex Trading limit order that serves as a protection against a large drop in currency price. If the currency price falls beneath the price you set, it is automatically sold, thus ensuring you do not lose too much money.
Take profit orders are limit orders that are set to help investors reap currency price raises. Let's say you buy the EUR/USD for 1.245, and you want to place a stop on 1.240. This means that if, after you buy it, the currency drops to 1.240 or below, your currency will automatically be sold off, and you will prevent any further losses from occurring.
Trailing stop orders
Forex Trading Trailing stop orders are used to lock in profits. Let's say you buy GBP/USD for 1.6540, and the price rises to 1.6570, making you a profit of 30 pips. Now a new stop order is placed at 1.6560, so you lock in the previous rise. When you place a trailing stop you specify the positions of the trailing points, and the increase in the stop will be done automatically. Tania Raven, Market Analyst

How to Utilize a Forex Trading Margin Account

Online forex trading on the margin means you can buy a large sum of foreign currency with actually paying only for a fraction of the investment. This means you pay much less for the currency you buy, by leveraging your initial investment. All of the online Forex trading is done one the margin, and the next example will make it clearer.
For example, If you have $1,000 in a margin account that has a leverage ratio of 1:100, it means you can potentially buy foreign currencies worth up to $100,000, because you place the $1,000 just as a deposit for the leveraged currency.
The major advantage of using a margin trading account is that with margin trading you can increase your buying power and have bigger profits. This is one of the biggest advantages of the online Forex trading.
Avoiding Risks in Margin Trading
-With a Margin Forex trading account, you increase your losses, as well as your profits. So if a currency drops, even by one pip, you are essentially losing 100 times the drop.
-If you invest in a margin account, a drop in the currency can liquidate your account and also leave you owing money. This is why it is important to check and make sure you are also covered in cases of losses.
-Stop losses are one of the tools you can use to ensure your account doesn't drop and is not lost.
-Investing in the margin also needs to take into account how stable the currency is. If the online Forex trading currency is dynamic and has a high rate of fluctuations, a smaller leverage is recommended. To check if the currency is stable you can use technical analysis to examine the different options.
Every time you perform a new trade, part of the account balance in the margin account is put aside as the initial margin requirement of the trade. Before you invest, you should calculate the amount used as the margin requirement. To calculate this, multiply: the current currency price*the units traded*times the margin percent/100. If the requirement is larger do not invest in that currency.
Make sure you invest wisely and read the terms and conditions of the margin Forex trading account thoroughly before the investment.
Paul Gatton, Technical Writer

How to Handle Forex Trading Losses

A smart online Forex trading investor should keep a close record of his trading losses. This is to make sure that the currency doesn’t drop, are updated with its development, and that you have the option to settle trading losses if you start to lose.
To start writing records, first acquire a notebook for the sole propose of online Forex trading record keeping. In this notebook you should write a chart with the following titles:
The trading date
The Beginning balance
The number of trades
The pairs traded
The strategies used
The ending balance
Forex Trading losses
In the lines underneath these columns you need to write the dates in which you do your online Forex trading.
Mistakes to Avoid While Forex Trading
Always Trade with a Stop-Loss Limit Order
The most important thing for an experienced trader is to secure his investments and prevent large Forex trading losses. The option of the stop loss will give you that extra protection that is vital for any investor. In Online Forex trading, the investor online is the one calling the shots, so don't be afraid of using this option to secure your account.
Always Trade with a Take-Profit Limit Order
For the same reasons previously stated, the sound investor should always set a reasonable take-profit limit order. If the currency will rise, you can advance and raise your investment without risking the money you have.
Do not Trade Too Many Pairs All At Once
It is hard to follow up with many Forex trading currencies all at once. This is because for each trade you will have at least three charts, making it hard for you to keep track of your investment. There is also a larger probability that one of your Forex trading currencies drops, something that can endanger all your investments. Focusing on a few pairs will cut down, for the long run, on your trading losses.
Do Not Trade Minor Forex Currencies
Trading minor currencies are more risky, and there is more chance of trading losses. It is not advised to trade in the minors because it fluctuates more risking you funds. This is recommended because most online Forex trading is done for major currencies.
Trade with a Plan
Before starting Forex trading, review several charts that will give you more information about the currencies you want to trade in. These include the 5-second, 1 hour, and 1-day charts. Technical analysis and fundamental analysis can also help your trade. When you analyze the charts, try and find out what is the long term direction of the Forex currency fluctuation.
Cut Your Trading Losses Down
Sometimes it happens that a currency you invest in drops. If you notice a trend early on you are better to cut your trading losses and not continue losing more money. This is because of sunk cost- money that you have lost is better to be left and not counted upon.
Jim Barns, Market Analyst

Moving Average Convergence Divergence (MACD) Simplified

Moving Average Convergence Divergence (MACD) is one of the most used technical analysis indicator in the Forex market commonly known as a lagging indicator because it is based on the moving average but is more sensitive of the price movements.
Moving Average Convergence Divergence (MACD) is one of the most used technical analysis indicator in the Forex market. It is a lagging indicator because it is based on the moving average but is more sensitive of the price movements. This economic indicator is developed and introduced by Mr. Gerald Appel.
MACD uses exponential moving averages (EMA). It should estimate the difference between two exponential moving averages to calculate MACD and is recommended to apply the 26-day and 12-day moving averages of a currency pair. MACD indicator consists of two lines. The first line is the MACD line that uses the 12 period exponential moving average of the price minus 26 period exponential moving average of the price.
MACD = EMA [shorter period] - EMA[longer period]
or
MACD = EMA [12] of price – EMA [26] of price. Signal line is what we call the second line that uses 9 period simple moving average of the previous line (MACD line). Signal = MACD – SMA [9] of MACD
Positive MACD indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. This positive momentum is considered bullish, in which we expect a rise in prices. On the other hand, negative MACD indicates that the rate-of-change of the faster moving average is lower than the rate-of-change for the slower moving average. And this negative momentum is considered bearish.
Therefore, we can say that the MACD indicator is Bullish and Bearish signals generator that used to forecast the market movement. The most used methods of MACD trading are moving average crossing, centerline crossing, and divergence. Traders use MACD to see indications of crossovers, which is regarded as the most significant signal to buy or sell. Traders use MACD to determine whether a particular currency pair is overbought or oversold. It is also used to indicate trend reversals. When the MACD and the currency price move into different directions from one another, it means there is trend reversal. Applications of Moving Average Convergence Divergence includes trend confirmation, measuring the strength of a currency pair, indicator of currency pairs being either overbought or oversold and indicator of reversals.
In summary, MACD chart has the ability to overshadow on trend change, which triggers the sell off or buy in signal. A negative divergence indicates a change of bullish trend to bearish. A positive divergence indicates a change of bearish trend to bullish. MACD is a very simple approach and is now often used together with other technical analysis. And remember that knowledge and right trading platform are the two things needed to be successful in Forex trading.

What is an Average True Range (ATR)?

Average True Range (ATR) is the moving average of the true range values. It is the indicator of market volatility. ATR was developed by J. Welles Wilder and introduced in his book ‘New Concepts in Technical Trading Systems in 1978’; Commodities were frequently more volatile than stocks in 1978. These commodities were subjected to gaps and limit moves. At that time Wilder though to design ATR with commodities and daily prices. So Wilder sought to account for gaps, limit moves, and small high-low ranges in his calculations in order to accurately reflect the volatility associated with commodities.
The ATR was developed for commodities but it can also be used for stocks and indexes. Wilder then started the concept of True Range (TR) that defines the current high less the current low, the absolute value of the current high- less the previous close, and the absolute value of the current low less the previous close. If the current high-low range is large, then it will be used as the True Range. It is likely that one of the other two methods would be used to calculate the True Range if the current high-low range is small. When the previous close is greater than the current high (signaling a potential gap down or limit move) or the previous close is lower than the current low (signaling a potential gap up or limit move), then the last two possibilities usually will arise and absolute values were applied to differences in order to have positive numbers.
How to calculate the ATR? In today’s trading, the range is imply high-low, which means that true range extends it to yesterday's closing price if it was outside of today's range:
true range = max(high, close prev) − min(low, close prev)
Take note: the n-day exponential moving average of the true range values is the average true range. The 14- period smoothing is what Wilder recommends. Traders will continue to bid up or sell down a stock through the course of the day if there is a large or increasing range. On the other hand, decreasing range suggests waning interest.
After a sheer fall in prices occasioned by panic selling, Average True Range can often reach a high value at the bottom of the market. On the other hand, low values of the indicator are typical for the periods of sideways movement of long duration which happen at the top of the market and during consolidation. Therefore, True Range can be interpreted according to the same principles as other volatility indicators. In summary, Average True Range (ATR) principle is that the higher the value of the indicator, the higher the probability of a trend change; the lower the indicator’s value, the weaker the trend’s movement is.

What are Accumulation Distribution and the Formula to Compute It?

Accumulation Distribution applies volume to substantiate price movements or inform of weak movements that could result in reversing the prices.
• Accumulation: Volume is considered to be accumulated when the day's close is higher than the previous day's closing price. This is called "accumulation day"
• Distribution: Volume is distributed when the day's close is lower than the previous day's closing price. Many traders call this term as "distribution day"
Accumulation Distribution is an indicator for price and volume. It increasingly tracks the volume, and displays the result as a single line with values above and below zero. It use to compare the open and close of the present price bar, with the range of the current price bar, and utilize the result to weight the volume of the current price bar. This type of indicator is displayed on its own chart, separate from the price bars.
Actually, this type of indicator is an alternative of the more commonly used indicator On Balance Volume. Both of these are used to bear out price changes by means of measuring the respective volume of sales.
As a result, when a certain day is an accumulation day, the day's volume is an additional to the previous day's Accumulation Distribution Line. In the same way, when a day is a distribution day, the day's volume is subtracted from the previous day's Accumulation Distribution Line. The main use of this type of indicator Line is to detect divergences between the price movement and volume movement.
• Increasing and decreasing prices are confirmed by increasing volume.
• Increasing and decreasing prices are not confirmed and warn of future trouble when volume is decreasing.
• Description: this indicator is a comparison of the price movement and the current range, with the result being used to weight the current volume.
• Calculation: AD = ((Close - Open) / (High - Low)) * Volume
A definite part of the daily volume is added to or subtracted from the present accumulated value of the indicator. The closer it is on the closing price to the minimum price of the day is, the greater the subtracted share will be. The closer it is on the closing price to the maximum price of the day is, the more the added share will be. If the closing price is exactly in the middle of the maximum and minimum of the day, the indicator value remains unchanged.
This method is usually used as a divergence indicator, with long entries signaled by bullish divergence, and short entries signaled by bearish divergence. It can also be used as an exit indicator, by showing the end or the weakening of the present movement. When the indicator grows, it means accumulation or buying of a particular security, as the overwhelming share of the sales volume is related to an upward trend of prices. When the indicator drops, it means distribution or selling of the security, as most of sales takes place during the downward price trends.

Forex Trading Trend Patterns - The Ascending and Descending Triangle

These Forex trading trend patterns are similar to the symmetrical triangle figure, as they also occur after a certain Forex trading trend is followed. With these Forex trading pattern rapid rises and drops in currency price also occurs. The difference is that either the tops or the bottoms of the trend patterns stay the same.
With Ascending triangles - the tops remain the same.
With Descending triangles - the bottoms remain the same.
Both ascending and descending triangles are right-angled triangles, and when the tip of the triangle is formed, the currency trend continues as before the trend pattern occurred.
Try and use these and other types of triangle patterns in your Forex trading systems, and your profits are bound to increase very rapidly.Paul Gatton, Technical Writer

Forex Trading Trend Patterns - The Double Top

A double top is a type of Forex trading reversal patterns. A double top is recognized like so:
- First you see a long rise in currency price.
- This rise is followed by a top and a small drop, and a bottom.
- Then another small rise appears.
- The double top Forex trading pattern is complete when another top is formed and the currency starts to drop again.
The last drop of the reversal pattern is a long one, and it indicates the trader to either liquidate the currency he already has, or perform a sell order for the bid price.
The quick recognition of this 'M' shaped trend pattern can help your investment, and can justify the saying 'forex trading made easy'.
Double tops usually don’t appear as perfect 'M's, but over time these trend patterns are easily recognized as the more basic Forex trading trends are. Tania Raven, Market Analyst

Forex Trading Trend Patterns - The Double Bottom

The double bottom Forex trading trend pattern is similar to the Double top, only the other way around. Trading Forex should involve a constant search in chart for patterns similar to the double bottom, and can be recognized through the following details:
- You first see a long drop in currency price.
- This is followed by a short rise, and the first bottom.
- Next comes the short rise, and a top.
- Finally comes the second bottom, followed by a long expected rise.
The double bottom Forex trading trend pattern can be recognized easily by noticing the 'W' shape. The trader needs to initiate the buying of the ask price right when he notices the final long rise.Jack Dempsky, Consultant

Sideways Forex Trading Trend Strategy - Waiting for a Turn

As mentioned in our Forex trading trend guide, sideways trend lines are seen as horizontal lines, that occur in between drops and rises in currency price.
Forex trading sideways trends are a good entry point for investors, because they are stable places where the currency price behaves steadily, on a relative perspective of course.
Sideways trend lines cannot continue for a long time, and it is a good advice to try and estimate where exactly the currency is going to go next. Following this Forex trading courses can help you pin point when a sideways trend is going on and invest more wisely.
A Forex trading sideways trend can nevertheless last for days and weeks. This period of time is considered congestion, and after this period of congestion there usually occurs a rapid rise or drop in the currency price. Another thing you should know is that the direction that a currency price continues after a Forex trading sideway trend is usually the original direction that presided before the sideways trend took place.
Using the right sideways trend strategy means figuring out the following direction of the trend by seeing the previous market direction history.
Sideways trends can be found inside support and resistance levels that are near each other. Inside the Forex trading trend line the currency price still fluctuates, but with rather small ups and downs. A sideways trend is said to be broken when the currency price goes outside the previous limitations of the trend line. You might like to make sure that the price goes outside the barrier of the trend line twice before being sure the sideways trend is broken.Tracy Jones, Forex Senior Editor

Sideways Forex Trading Trend Strategy - Waiting for a Turn

As mentioned in our Forex trading trend guide, sideways trend lines are seen as horizontal lines, that occur in between drops and rises in currency price.
Forex trading sideways trends are a good entry point for investors, because they are stable places where the currency price behaves steadily, on a relative perspective of course.
Sideways trend lines cannot continue for a long time, and it is a good advice to try and estimate where exactly the currency is going to go next. Following this Forex trading courses can help you pin point when a sideways trend is going on and invest more wisely.
A Forex trading sideways trend can nevertheless last for days and weeks. This period of time is considered congestion, and after this period of congestion there usually occurs a rapid rise or drop in the currency price. Another thing you should know is that the direction that a currency price continues after a Forex trading sideway trend is usually the original direction that presided before the sideways trend took place.
Using the right sideways trend strategy means figuring out the following direction of the trend by seeing the previous market direction history.
Sideways trends can be found inside support and resistance levels that are near each other. Inside the Forex trading trend line the currency price still fluctuates, but with rather small ups and downs. A sideways trend is said to be broken when the currency price goes outside the previous limitations of the trend line. You might like to make sure that the price goes outside the barrier of the trend line twice before being sure the sideways trend is broken.Tracy Jones, Forex Senior Editor

Forex Trading Downtrend Strategy - Selling at the Top

When new investors view downtrends, they often avoid placing transaction, because they do not understand that the Forex trading market can be profited from in both ways - through buying and through selling.
In order to use Forex trading downtrend strategy, first glance at the hourly chart and try to figure out what the big picture is concerning the currency. Take special notice of support and resistance levels that will be a good guide to invest within. Also glance on the 15 minute chart and compare the Forex trading downtrends of this chart with the hourly chart.
Ask yourself this - Is the current trend a Forex trading downtrend? If so, is it a substantial one? What are the odds the currency price will continue in this direction, and for how long? You do not have to have exact answers to these questions, only assumptions based on the knowledge you'll attain over time. Using this Forex trading downtrend strategy, you will eventually be able to use Forex trading for a living.
Other techniques include :
Using the moving averages indicator, and comparing the current price with 60 other price examples. The current price should be lower than the moving average, and this indicator should point to a downtrend.
Comparing the current price with the previous highs and lows of the currency.
Noticing the levels of tops and bottoms over the last week.
If the previous information point to a Forex trading downtrend, then you should go ahead and sell the currency pair. If the results are ambiguous, stay updated and continue to keep track of changes in the currency that can point to a good timing for entry.Tracy Jones, Forex Senior Editor

Forex Trading Uptrend Strategy - Buying for Low Prices

So you've recognized an uptrend, what then? How can you use your knowledge in order to invest in the Forex trading currency more wisely? In this guide we will teach you the Forex trading guidelines for uptrend strategy.
It is actually not very difficult to invest using uptrend. We will make it easier for you and dissect it into segments.
Uptrend are very useful for technical analysis, because they help you know when to buy a certain currency that is on the rise.
- First, make sure you are certain about the occurrence of the uptrend, and remember that the steeper the uptrend is the more profits are there, but also the sooner it is expected to change direction.
- Next, examine the previous developments of the Forex trading trends, and especially notice the length of previous uptrends. A common phenomenon is for recurring lengths of uptrends.
- Do not wait for the uptrend to finish rising, and try to invest in just starting trends. Placing stop and limit orders can help you be protected in cases of currency drops.
Using uptrend strategy is a basic in forex trading education, and the rest of the rules for uptrend will be gathered as you practice the real thing.Jim Barns, Market Analyst

Trend Analysis - Recognizing Forex Trading Trends

We have already covered various Forex trading trends, but it is also important to learn Forex trading strategies for recognizing trends.
In this guide we will first teach you about what are trend lines, and then go on for an elaborate explanation of the various trend strategies:
Basic trend pattern strategy
Sideways Forex trading Strategy
Uptrend Forex trading Strategy
Downtrend Forex trading Strategy
Reversal trend patterns
Double top
Double bottom
Head and shoulders top/bottom
Continuation patterns
Symmetrical triangles
Ascending triangles
Descending triangle
Flag/pennant
Rectangle
Gap Patterns
Breakaway gap
Runaway gap
Exhaustion gap
Island reversal gap
A Forex trading trend line is sketched by drawing a straight line above the daily highs for a downward trend and below daily lows for an upward trend. Forex trading trend lines are very fun to use, because you need to use your mental skills in order to recognize the different patterns in the right Forex trading chart. This is not an easy task, as the chart is usually filled with chaotic lines that constantly rise and drop. With the right practice though, you are able to improve your chart skills and recognize trends in no time. Attend each forex trading class that we offer, and you'll actually become a well educated investor.Paul Gatton, Technical Writer

Forex Trading Momentum Analysis

Momentum analysis is a measure of the change in Forex trading trends over a certain period of time, similar to the RSI. The difference between momentum analysis and the RSI is that momentum gives you the option to analyze a specific rate variation in the time frame, while the RSI measures all of the rate changes in the time frame.
If the momentum is above 0, or it is seen as a rising curve, then an uptrend is present.
A buy signal is given when the momentum rises above 0, and a sell signal is given when the momentum drops below 0.
If the time frame is two weeks, for example, then the Momentum is calculated by decreasing the present day price to the price of the currency 14 days ago.
If you are in the process to learn forex trading online, then momentum analysis can really help you, giving you another tool to recognize market trends and invest accordingly.
Tracy Jones, Forex Senior Editor

What are Regulators in Forex trading and How to Choose a Good One?

In some cases Regulators determine that firms have been concealing retail or customers accounts and have found out that they are breaching the Regular T margin rules in the process. Sorry to say, arbitrary and selective enforcement by regulators in a prejudiced manner has proprietary traders and firms to restructure, modify how they transact business and to close down doing business in their current manner.
Since more and more scams are involve with regulators and brokers, here are 9 good questions that you can ask in choosing a Forex broker. Although looking for a broker can be a quite a complicated search for traders, you have to be certain to make sure to ask prospective brokers for you to have a reputable broker to work with. These questions may be a good basis for choosing a good broker.
1. Ask the broker what regulatory authority is your brokerage firm registered with and in what country. The NFA or National Futures Association conducts audit on books and is one of the best present regulators. The Forex market is presently far less regulated than stocks, bonds, and commodities.
2. Know how fast they can execute the order. Apparently, it should be a second or less than a second. With the present modern technology, there is no reason for it to take any longer.
3. Inquire if the broker is attached to any bank or lending institution. Banks are more greatly regulated, which provide extra peace in mind, in addition to financial security.
4. Demand from the broker what country is their corporation being held. The suitable answer is any country with firm and strict banking laws and supervision. The incorrect answer would be anywhere else.
5. Ask what type of broker he is. There are different kinds such as Market Makers (MM) and Electronic Communications Networks, and you will want to know the variance between the two and which fits your needs best.
6. Have an idea what is the minimum account trading size from your broker. This is vital to remember to make sure your position is not closed out because you are short on funds to cover.
7.Inquire what the margin requirement is. 1% is considered standard, but lower than that is better. The more control you have, the better.
8.Also ask if your money will be held by a public or private company. You should demand it should be held by a public company, because they are insured. If there is a time a company goes bankrupt, you have a better chance of getting your money back.
9.Know how long your broker has been in business and how many clients does he have. Apparently, the longer they have been around, the better the sign. Having a large number of customers for a long time can also help to dispel any fears.
Hope these few things will assist you in finding the right brokerage that works for you.

What is Rate of Change (ROC) and How To Compute It?

Rate of Change or ROC is a technical indicator that measures the changes between the percentage compared to the most recent price and the price "n" periods in the past. It is also said that it monitors the momentum of the market. It estimates the market’s rate of change comparative to the previous trading intervals. In the highest level, the indicator might say a market is quite overbought. Valleys or troughs also points out an oversold market situation.
It can also stand alone as an essential indicator used by many technicians interested in market momentum. It has a horizontal median called equilibrium. It is this median that tells us everything we need to know about this type of rate. A few technicians in the market often use a very simple approach for the Rate of Change learning. It is concern with buy and sells signals based upon the zero line or the midpoint. This presumes oversold or overbought market conditions which pave the way of crossover. You may sell when the rate of change line go across from above to below on the other hand you may buy when the indicator intersect from below to above.
It trades with price changing amount during the exact time and match to it as an oscillator that shows the cyclical movement. It goes up along with the prices up-trending and it decreases when the prices go down. If prices go high, changes gives the according significant rate changing.
Mostly, it is best to use this indicator as an antecedent to change in market direction. One good thing to do is to establish extreme zones for the study, much like the Relative Strength Index or Stochastic. However, a good technical analyst must know how to tolerate the study in extreme bull and bear markets. It can generate many sham signals under those market conditions. In addition, the indicator is parallel to an oscillator when it comes to the market accelerating or decelerating.
To compute it, here’s a good example:
Period (10) - the number of bars, or interval, used to calculate the study using the value you specify, it may be computed as the change from the current price relative to the price from the number of specified intervals prior to the current price.
The general formula is as follows:
ROCt = (Pricet / Pricen) * 10000
ROCt is the rate value for the current period. Pricet is the current price. Pricen is the price you specify for the nth interval (open, high, low, close, midpoint or average).
Take the example below which use current price of 7485 and a 7440 price n intervals ago:
ROC = (7485 / 7440) * 10000 = 1.006 * 10000 = 10006
There is a tendency to loss in futures trading. Past results on the other hand are not analytical of future results.
It may also be calculated by using the following formula:
(Closing Price Today - Closing Price "n" Periods Ago) / Closing Price "n" Periods Ago

How Does the Order Cancels Others Move Work?

Order cancels others or OCO is a two sided order that occasionally is used to range a price when you are not sure about the price direction and instead decide to go with the breakout either way. This type of order states that if one part of the order is filled the other part of the order is canceled. Actually this type of order is a mixture of 2 limit orders and / or stop – loss orders. Two orders with price and period variables are positioned above and below the present or current price.
Considered to be a dual specification, “order cancels others” commands the floor trader to load one of the other of two orders. When the market decides to let one of these two to be executed or carried out, the transaction is considered complete and the second order is then considered canceled. The order cancels others are used primarily as an exit strategy by customers to assists them in either capturing gains or avoiding losses. If a position price is reduced, a stop loss order slashes the loss, and the limit order is canceled. So if the price increases, a limit order try to capture the gain, and the stop loss order is canceled.
Since the broker is given both orders so that each can be filled in the suitable place in his deck, the member firm employee must be certain to get both orders back from the broker when one is filled, checking to be sure the other order has been called and not full in error. An investor with inadequate funds may lay an order to buy both stocks and bonds and specify that it’s a “one-cancels-other-order”.
In short, if the market supports stocks and they are bought, the order to buy bonds will be canceled. On the other hand, if the market proposes that bonds are the way to go, the order will be to buy bonds and the order to buy stocks will be canceled. For instance, an investor can put a stop-loss order and a limit order on one stock as a one cancels other order. So if the price of the stock turns down then the limit order is canceled and the stop order is carried out in order decrease losses. If the price of the stock boosts then the stop order is canceled and the limit order is executed.
You can also place two separate orders in this situation, but the trouble is that both may be filled in a wavering market. You could be imprisoned into a quick loss or end up with a larger position than you desired.
For example, you decided to go short in a market so you had OCO order placed, one limit order above current price to sell if ever prices go up and one stop order below the current price. You only have to get one position, but prepared for both eventually. This type of order tells the broker to fill one order, not for both of them, to get you short whichever way prices move.

What Does Parabolic SAR Do and How Does it Work?

The Parabolic SAR is a technical Indicator which was built-up to analyze the different market trends. This indicator is greatly shown on the price chart. This type of indicator is quite alike to the Moving Average Technical Indicator having the only difference of that Parabolic SAR moves with higher acceleration and may change its position in terms of the price.
Mr. Welles Wilder made the Parabolic System who at the same time developed the Relative Strength Index (RSI), which is usually referred to as the Parabolic SAR or the stop and reverse. He planned this indicator to append the other systems which have followed certain trends. It is an outstanding indicator for presenting exit points which shows sell signals when the parabola moves above the price while buy signals are created when the parabola falls below the price.
This type of indicator gives useful advantage to catch up on the prevailing market trend which offers excellent buy and sell signals. Such signals are needed to be confirmed by the price action itself and other complementary indicators. Long positions should be taken if the price submerged below the SAR line; on the other hand, short positions should be taken when the price moves above the SAR line. It is quite often that the indicator serves as an irregular stop line. A parabola below the price is generally chipper while a parabola above the price is generally endurable.
If the price intersects the Parabolic SAR lines, the indicator will turn and its auxiliary values are positioned on the other side of the price. When the indicator makes a turn, it will give a signal of the trend end correction stage or flat, or in short its turn. When such an indicator turn does happen, the maximum or the minimum price for the previous period would serve as the starting point.
The SAR may be calculated independently for each individual price trends. If a price is in an uptrend, the SAR moves below the price and gather together upwards towards it. Corresponding to it, on a downtrend, the SAR is above the price and touch downwards. In every step of the boundaries of the trend, this is calculated ahead of time. Meaning, the value is already constructed using the data that is available today. The parabolic SAR formula that you should use is:
SARn + 1 = SARn + a (EP- SARn)
SARn and SARn + 1 should be taken as today’s and tomorrow’s numeric values. EP is the extreme point. It is a record that is maintained at each trend which shows the highest value that prices have reached during the current uptrend while the lowest value during a downtrend. On every period, if a new maximum or minimum is viewed, the EP will be updated to correspond to that value. The a value on the other hand stands for the acceleration aspect. More often than not, this is set to a value of 0.02 and each time a new EP is documented this factor is increased by 0.02. In other words, each time a new EP is observed, it will definitely increase the acceleration feature.

The Use of Requote in the Forex Market

The Forex market holds the largest financial market trading in the world. There are more than $3 trillion value trades per day. Did you know that everyone plays a vital role in the trade of currency? Being a citizen of your country that has a currency automatically makes you as an investor of your countries currency. You decide whether you will hold on with the currency of your country or you want to trade it to other foreign currency. Currency trading is done at the Foreign Exchange market otherwise known as Forex or simply FX market.
The Forex market operates in a global electronic network which consists of financial institutions, banks and Forex traders which all involved in buying and selling national currencies. Unlike the stock exchange, the Forex market does not have any central location instead it involves an inter-bank system of trading. The Forex market transactions are done in real time which operates 24 hours a day. With a colossal number of traders around the world, the Forex is the busiest trading market in the world. Trades are made over an electronic network worldwide or by telephone. Sydney, London, Tokyo, New York and Frankfurt are the main centers of trading.
During the earlier years of the Forex market, access to trading was only made available for large business institutions and banks but later was made available for individual Forex traders and money managers. Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. However, with advances in technology over the years along with the industry's high leverage options, the Forex market is now available to money managers and individual Forex traders. This was made possible through the use of computers and internet connection. Currency trading is basically instantaneous buying and selling of one currency to another. Example of trade are; Euro – US Dollar, GB Pound – Japanese Yen. This process is called cross trading.
Another type of trading which can be done is in the spot market which involves the largest volume and the most important trading in the Forex market. These trades are done on the spot which means that it doesn’t take two banking days. There are many advantages in trading in the Forex market compared to other trading systems. The major advantage is that trades can be made 24 hours a day which allows traders to immediately decide and react on breaking news which greatly affects the market price. Another great advantage for investors is that trades which are done in the Forex market do not charge any commission. With the Forex market there are always opportunities to gain a profit. Currencies sometimes weaken and sometimes strengthen. When you trade currencies, they exactly work against each other. For example, if you think that the Euro will decline against the US Dollar or vice versa, you would sell your Euro and later buy Euro again at lower price to earn a profit.
However requotes occur which may lead to decrease of profit and even lose of your investment. Requotes happen when a broker quotes one price but then quotes another. Brokers might even fill your order at a different price commonly higher when you attempt to trade. So before investing your money, make sure to check the policy of the broker regarding requotes.

What is an ECI or an Employment Cost Index?

The Employment Cost Index (ECI) is used to measure the changes in the expenses with regard to the labor in the economy. It is done quarterly by certain agencies in the government. It aids in the measure of inflation with regards to the wages, salaries, and benefits that the employers pay to their employees.
Although the ECI talks about cost index, it is closely monitored by the finance sector, it still get less attention from the media and the press, than the Consumer Price Index (CPI). It even gives sign whether the employment cost is rising or falling.
ECI then makes sure that there is the accurate data regarding the employers’ compensation cost that depends for the making of policies and the success of the business planning. When ECI is on its decision making process, it also affects the main interest rate.
The result of the ECI is based on the surveys conducted related to the employers’ payroll every month of the quarter. It even traces the movement of the labor cost, the wages, benefits and bonuses for the employees of all company levels.
Why analyze the ECI? It is because wage pressure increases together with inflation for the reason that compensation tends to increase even before the companies increase the price for the consumers. It simply implies that an increase in the wage of the employees also increases the price of the goods or services, since labor that comes from the employees is a component in order to make the commodity and services.
There is no wonder, why there are companies that cannot easily increase the compensations, salary or wages of the employees. It’s because it will directly affect the price of the goods and services they offer.
It is said that ECI is the best way to measure the compensation growth of wages and benefits. It mainly lies on the capacity of the ECI to show whether the wage or benefit cost excess or grows faster than inflation.
On the other hand, ECI is a less timely indicator of employment cost than those with the hourly information found in the monthly reports of employment. This hourly reports are made available on the first week of the next month while ECI data will be available a month after the quarter ends.
Yet, the ECI has two advantages over the hourly earnings series. Benefits included are, the non-wage element of employment costs. Benefits covered by the ECI include paid leave, insurance benefits, and retirement and saving benefits. Another one, it is free from employment shifts among occupations and industries since like the consumer price index (CPI), the ECI relies on a fixed service like occupations.
Since the ECI includes overtime payments as a fixed increment to wages, short-term increases in overtime will not change the index.

Simple Moving Average (SMA) and Technical Analysis

One of the easiest methods in Technical Analysis is the Simple Moving Average or SMA. It is the simplest type of all the moving average. The SMA shows the average price of a given time period. And each period carries the same weight for the average. SMA helps to smooth the price curve for better trend identification. In fact, the longer the SMA period selected, the smoother the curve.
Since it is the simplest of all the moving average, the math behind SMA is also simple. The average price of a certain period is represented by SMA and it is calculated by summing up the prices of instrument closure over a certain number of single periods divided by the number of time periods. Take note that short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react.
SMA = SUM (CLOSE (i), N) / N
Where:SUM - sum; CLOSE (i) - current period closing price; N = number of periods in calculation.
For example you want to plot a 5 period simple moving average on a 1-hour chart, you should add up the closing prices for the last 5 hours and then divide it by 5. If you want to plot 5 period simple moving an average on a 30 minute chart, then you should add up the closing prices of the last 150 minutes and divide it by 5. So if you want to develop an SMA chart for USD/JPY closing price in a 5-day time frame, how would you do it?
For example the first 5 days USD/JPY closing prices are 125.0, 124.0, 126.0, 123.0, and 127.0. The average of the first 5 days USD/JPY closing price that will be the first dots of the SMA graph is 125.0. The second SMA point will be (124.0 + 126.0 + 123.0 + 127.0 + 126.0)/5= 125.2 if we assume the USD/JPY closing price for the day six is 126.0. So the calculation goes on for the following dots. And joining these SMA dots defines the SMA chart. In other words, SMA is the average stock price over a certain period of time.
Formula for the 5 period SMA 5 period SMA = (Price1 + Price2 + Price3 + Price4 + Price5) / 5
Simple Moving Average operates with a delay just like any indicator. You are forecasting of the future price, not a concrete view of the future, because you are just taking the averages of the price. Although all calculations will be provided by most charting packages, it is important to understand how simple moving averages are calculated. By understanding, you can decide on which type of tool is best for you.

What is a Limit Order and What Are Its Advantages?

A Limit order is a type of order that positions the maximum or minimum at which you are agreeable to buy or sell a specific stock. Stocks are a matter of pure chance in common cases. Unavoidable events such as weather disturbances and wars can ruin chaos on share prices of stocks. It is better to set limits on your activity so you would not be burned out. Whether you want to buy or sell your own stocks, you must be contingent on at least one other person or entity to eventually perform the transaction. This person will act as your own and you have to tell this person your desire to buy or sell at a certain price. You have to decide your chosen price that you are willing to settle for this transaction, and then this agent will tell you what that price would be. This is what we may call a limit order.
In order to avoid buying or selling a stock into a higher or lower price that what you wanted, you have to place a limit order rather than a market order. This limit order could give you a chance to buy or sell a security at a particular price. You may carry out a buy of a forex limit order at the time of limit price or lower, while you may execute a sell of this type of order at the limit price or higher. When you place a market order, you won’t be able to control the price at which your order will be filled.
The primary advantage of this currency trading limit order is that it guarantees that the trade will be carried out at a specific price, on the other hand, your broker agent might charge you with a higher commission for this order and it is potential that your order will be executed once the limit price is not attained. This allows you to have the advantage of determining the price.
Limit order is a safeguard against momentous loss of money. It is not certain to take effect, on the other hand. The share price may never reach your limit order level, if that happens, then this type of order has not been filled and it either stays in effect or is cancelled after a certain or definite amount of time. An investor with a long position can set a limit order at a price higher than the current market price to gain profit while investors with short position may set this type of order below the current or present price as the initial target to manage risks along the way.
Always remember that there are no rules that regulate investors from using different types of orders to manage their positions. Each order has different risk tolerance and it is always a personal decision of an investor what order should be applied.

What You Need to Know About Directional Movement Index (DMI)

Directional Movement Index (DMI) is one of the tools that technical traders use in order to check trend trading strategies. It identifies the presence of a definable trend as well as assessing its strength. Technical Indicator DMI was developed by J. Welles Wilder. It is a valuable tool for assessing price direction and strength for trading strategies as it differentiates between strong and weak trends. DMI, directional movement only allows a trader to enter only the strongest trends. Aside from the fact that it can be applied to any underlying vehicle, stocks, mutual funds, exchange-traded funds, futures, commodities and currencies, DMI also works on all time frames. The concept is based on the assumption of upward trend and downward trend: today’s highest price is higher than yesterday’s highest price, and today’s lowest price is lower than yesterday’s lowest price, respectively.
How Directional Movement Index is calculated? DMI is calculated using the price, compares the current price with the previous price range, and displays the result as an upward movement line (+DI), and a downward movement line (-DI), between 0 and 100. In order to reflect the buying and selling pressure in the drawing of a DMI indicator chart, two lines are needed. These two lines are the positive directional indicator, which marked as +DI and measures how strong the price movement in an upward trend is; and the negative directional indicator, which is marked as -DI and measures how strong the price movement in a downward trend is. When checking the DMI lines, it is suggested to look at which of the two lines is higher.
Usually, traders refer line on top as the dominant DMI line and consider it stronger and more likely to forecast the trend direction. In short, the higher the value of the DMI is, the stronger the signal for a trend. On the other hand, the lower this value is, the less the potential for a trending price movement. Furthermore, when the DMI on bottom crosses up through the dominant DMI on top, crossover happens. This crossover is something that is obvious but what traders do when they see the crossover is they confirm the entry or exit signals to increase their chances of making a profitable trade, by using another indicator. Traders consider crossovers unreliable, giving untrue signals when volatility is low and late signals when volatility is high. But they take note crossover as the first indication of a potential change in direction.
How to interpret Directional Movement Index? DMI confirms price action this way: +DMI rises when price rises, and it falls when price falls. On the other hand, -DMI behaves in the opposite manner and moves counter-directional to price, which means that -DMI rises when price falls, and it falls when price rises. Likewise, we can say that price direction is up when the +DMI is dominant and rising. Price direction is down when the -DMI is dominant and rising. However, it is important to consider the strength of the price.

The Value of Trade Balance to Local Economy

The balance of trade also referred as trade balance, which sometimes is symbolized as NX, is the difference of the monetary value of imports and exports in one economy in a given period of time. The balance of trade is considered the biggest part of a country’s balance of payments.
Imports, domestic spending, foreign aid, and investment abroad are called debit items while credit items includes exports, foreign investments in domestic economy and foreign spending in domestic economy.
A trade surplus is a positive balance of trade which is consists of more exporting than importing. A trade deficit is the negative balance of trade or sometimes called a trade gap. The trade balance can sometimes be divided as services balance and goods balance just like in the United Kingdom which they use the terms invisible and visible balance.
The balance of trade is a part of current account which includes transactions that includes income derived from international investment and international aid. Thus, if the current account comes as a surplus then the nation’s international net asset increases also while deficit will decrease the international net asset.
A good trade surplus is achieved when a country exports products more than buying imported goods. A trade deficit is eventually experience as a result of the opposite of a trade surplus. The trade balance is alike to the difference of a country's output and the domestic demand. These factors may affect the trade balance: prices of goods manufactured, taxes and tariffs, trade agreements, business cycle (home or abroad), and exchange rates.
The trade balance is different in many business cycles. For instance, export growth like oil and industrial goods which improves when there is economic expansion.
In developed countries like; Japan, China and Germany usually run at trade surpluses in which they experience a higher savings rate. Around the world there are different natural resources which a country may have for instance, countries from the coastal regions are major producers of fish, Canada can be a major producer of lumber because of its huge forests while in the Middle East, has the most oil reserves.http://www.forexfloor.com/trade-balance.html
International trade is important so in order to sustain the balance of trade. A country should be totally self sufficient without international trade. Through international trades, each country will have the opportunity to produce specialize goods efficiently. In relation, when a nation specializes in producing these goods, the total production increases instead of trying to be self sufficient. Nations will benefit from international trades and also meets their needs. Generally, nations will trade to other nations when they gain from the trade. But the gains are not usually equal in terms of benefits and profit.

How Is Stop Limit Order Done?

A Stop Limit order is same as stop order wherein a stop price will trigger the order. Such an order will be placed by a broker that merged the features of both the stop order and those of a limit order. This is a combination of both a stop order and a limit order. Once this is activated, the stop limit order becomes a buy limit or a sell limit order and can be carried out at a particular price or a better one. This will be executed after a stop price has been reached, and once reached, it becomes a limit order to buy (or sell) at the limit price or for a better one. As with all limit orders, a stop limit order could not be filled unless the security price reaches the specified stop price.
The benefit of this type of order is that it allows the traders to control over when is the best time order should be filled. Investors can manipulate the price at which the trade will be implemented. Of course, like all limit orders, the trade will be filled or guaranteed unless the stock’s price or commodity never reaches the specified stop or limit price. Mostly, this incident happens in fast moving markets since prices tend to vary or fluctuates outrageously.
Since this type of order can help you in the possibility of getting a lower buy price or a higher sell price than a limit order alone, there are few tips which might be useful for you.
1.If you are unfamiliar with the process of using a basic type of limit order, read some articles about how to issue a limit order, for you to have an overview about it.
2.Be aware of the difference of using a stop limit order from a limit order. As a substitute of having one price point, you must need to set two. The initial one will be a “trigger” point that will stimulate your order. The second will represent the price at which you intend to actually buy or sell the stock.
3.Decide what you desire to have with this type of order. You may use one to sell your stock at a particular price point after it tapped above your trigger point. As well, you can use one to purchase a stock at a particular price after it moved below your trigger point. This can be helpful if the stocks you are selling heads up and keep moving or the one you intend to buy drops down and keep falling. On the other hand, just like the basic limit order, there is no assurance that you will achieve the price you set; your stock could either hit the trigger or have the reverse direction. As much as possible, keep in mind that the further apart your trigger and target prices are, the less you will be able to achieve both objectives in one day.

What is a Transaction Cost and How to Calculate Them?

In economics, transaction costs are the rate acquired when making an economic exchange. This costs incurred when buying or selling securities or stocks. This is also referred as transaction fees. Transaction costs also comprise of brokers’ commissions ad spreads (difference between the price that the dealer paid for a security and the price it may be sold. This is what the broker or bank produce for being a middleman in a transaction.
For instance, most people when buying or selling a security or stock, pays a commission to their broker and that commission can be considered as the fee or transaction cost for doing that stock deal. When evaluating a potential transaction, it is crucial to think about these costs that might prove significant. Mostly, in financial markets, the initial cost for these transactions is commission which is paid to brokers upon trade execution. This costs becomes increasingly important the shorter the holding time of an investment.
Many market models disregard transactional costs, presumptuous instead those markets are non resistant. While this thought is invalid, for many applications such costs are low enough that they can be disregarded. The lesser the cost for a transaction, the more effective and competent a market is said to be. The Foreign exchange market and stock market have lower costs for such transactions of any major asset class.
It is considered to be much more cost- efficient to trade in Forex in terms of both commissions and transaction fees. An online website for example charges no fees or commissions and at the same time offer traders an access to all relevant market information and trading tools. On the contrary, online stock trade commission ranges from $7.95 - $ 29.95 per trade and up to $100 or more per trade with full service brokers.
Another thing to consider, which is an important point is the width of the bid / ask spread. Regardless of the deal size, foreign exchange dealing spreads are normally or common in 3-4 pips (anyway a pip is .0001 US cents) in the major currencies. Generally, the width of the spread in a foreign exchange market transaction is less than one tenth (1/10) that of a stock transaction, which could contain a .125 or one eight (1/8) wide spread.
Since transaction costs are paid via bid/ask spread, there has to be no charges to trade or hidden fees. There are instances that there would be extra charges asked by good brokers for some non compulsory services or access to particular reports. A smaller spread is visibly better. Since brokers are taking the other side of all the customer trades, brokers gain profit by making the spread between the bid and offer prices. You may find that find spreads vary by broker.
In order to be successful in trading on the foreign exchange market, you have to find a good broker.

How to Utilize a Forex Trading Margin Account

Online forex trading on the margin means you can buy a large sum of foreign currency with actually paying only for a fraction of the investment. This means you pay much less for the currency you buy, by leveraging your initial investment. All of the online Forex trading is done one the margin, and the next example will make it clearer.
For example, If you have $1,000 in a margin account that has a leverage ratio of 1:100, it means you can potentially buy foreign currencies worth up to $100,000, because you place the $1,000 just as a deposit for the leveraged currency.
The major advantage of using a margin trading account is that with margin trading you can increase your buying power and have bigger profits. This is one of the biggest advantages of the online Forex trading.
Avoiding Risks in Margin Trading
-With a Margin Forex trading account, you increase your losses, as well as your profits. So if a currency drops, even by one pip, you are essentially losing 100 times the drop.
-If you invest in a margin account, a drop in the currency can liquidate your account and also leave you owing money. This is why it is important to check and make sure you are also covered in cases of losses.
-Stop losses are one of the tools you can use to ensure your account doesn't drop and is not lost.
-Investing in the margin also needs to take into account how stable the currency is. If the online Forex trading currency is dynamic and has a high rate of fluctuations, a smaller leverage is recommended. To check if the currency is stable you can use technical analysis to examine the different options.
Every time you perform a new trade, part of the account balance in the margin account is put aside as the initial margin requirement of the trade. Before you invest, you should calculate the amount used as the margin requirement. To calculate this, multiply: the current currency price*the units traded*times the margin percent/100. If the requirement is larger do not invest in that currency.
Make sure you invest wisely and read the terms and conditions of the margin Forex trading account thoroughly before the investment.
Paul Gatton, Technical Writer

Introduction to Technical Analysis

Any forex trader must apply a certain method in order to predict the future price of a certain currency, that's a given fact. The entire concept of speculative forex trading is based upon future fluctuations in currency prices. You make profit by buying a certain currency in one price and selling by another.
Therefore, the most important thing for any trader, novice or expert, is to have some sort of prediction to future price changes. Thus came to life several different methods of market analysis, each tries to incorporate different methods and data in order to give some sort of prediction to the future price of various currencies.
The first method we will review in this series of articles is Technical Analysis. Technical analysis is based on the concept that it is possible to predict future prices using only market generated data. All the data and history regarding a price is represented in various charts and imply assorted methodologies. Every trader, no matter what trading style he uses, uses this method at some point. At the very least, these charts help to determine what the ideal buy or sell position is, at any given time. It helps to give a broader look on he trends and patterns in the market.
Many critics accuse the Technicians of ignoring the fundamentals of the market, but they claim in return that all of the market's fundamentals are already represented in the charts. In their opinion any fundamental market rule is already enveloped in the current price and more importantly in the price's history.
Forex trading can be easy using the right reading materials and tools. Follow our latest articles and download our software here at Forex Floor.

What Is a Product Price Index (PPI) and How to Read It?

The Product Price Index (PPI) is just one of the many measures of changes in commodity’s prices. The prices for this data are based on the products sold. As a result, the prices covered by the PPI refer not to what a purchaser pays but to what the producer receives. Thus, it does not include indirect taxes like sales taxes and tariffs since the money does not go to the components of production like labor, capital or profit. Any other expense that does not directly involve in the making of the product is not included in the Product Price Index.
For a certain industry, the PPI is based on the finished product ready to be sold or delivered to the consumer which excludes any transportation expenses that happens after the product is released outside the factory gate that does not include distribution services performed by the retail or wholesalers. It is then called, Industrial Product Price Index (IPPI).
The PPI series in the industry is considered a high-quality or high-value indicator for several reasons, the most important being its relevance, namely what the PPI in the industry measures. The index measures the movement in prices for manufactured goods destined for domestic or export consumption. This translates to a ready measure of economic performance of the manufacturing sector. As well, the PPI in the industry series is of value in analytical studies of price formation and behavior, it is frequently used in the process of contract escalation, and often serves as a representative input into other price index series. At times, its involvement is important if not indirect, as in the case of trade issues or disputes. For example, in the case of softwood lumber, certain provinces tie their stumpage fees to the relevant PPI in the industry series.
In a certain farm for example, the PPI is considered as the monthly series that measures the changes in the prices that farmers for the agricultural goods they produce and sell. They call it Farm Product Price Index (FPPI).
For the farmers, the PPI is an important indicator of the economic activity in the agriculture sector. The data provided by PPI in the farm is useful to the producers, producers groups, and analysts from private sectors like the grain companies, meat processors, international exporters, the banking sectors, and the government agencies responsible for agricultural policies.
Another factor that affects the PPI is the rise and fall of the value of such country’s currency against the US. The PPI of those products that are being exported changes for time to time. Then, when the prices of raw materials, labor, and other components of the product change, surly, the PPI will vary.
Better yet, the cheaper or lesser the raw materials and the labor in making the product, does not mean that the product is of good quality. PPI is only one of the many factors to be considered in the business.

Making Use of Quote Conversion

Wherever you are in the world, currency exchange market subsists as long as there is an ongoing trading of currency, that means one currency or legal tender is traded for another currency. This is where currencies are freely purchased and sold. As long as this kind of business thrives, so is quote conversion.
The term quote conversion cannot be understood fully if one doesn’t know where does it operate, why it exists, for what is it and when to use it.
Quote conversions exist in currency market as a part of daily routines which involves currency trade. We cannot deny the fact that the foreign exchange market is one of the most independent and most stable markets in the world. Huge sums of money pass in the shed of this market every day. The amount of money that enters this market for the use of trading reaches up to more than US$ 3 trillion everyday.
It is irrefutably the biggest monetary market in the world. The traders in this market ranges from large banks, multinational corporations, central banks, other interested organizations, currency entrepreneurs and even governments.
Foreign exchange was commenced in the 1970’s in advent of the introduction of free exchange rates. Since then, foreign exchange diversified and has its players able to devise new techniques and strategies in currency trading business. Currency price is determined by participants or traders against each other through the determination of supply and demand.
Freedom of trade is one of the most valued characteristic of the currency market. The market itself is virtually free from external powers and has exhibited a free competition, thus, creating a perfect market.
But despite all of the promising assurance the market shows, the presence of great danger of losing is still obvious. One can become a millionaire in no time just because of the fact that the returns or profits in foreign exchange were large, though the losses one will endure is tantamount to its profit also if the business is not taken seriously. No one is immune to losses of this kind in business, not even experts.
Quote conversion, together with currency conversions make a perfect tool in currency trading for ones own benefit if studied sincerely. These processes can help traders to discern any trends in currency trading that may lead to any of the end results in trading.
When trading for a currency pair, quote currency is as important as its base currency, and converting a quote using quote conversions in a right manner will lead to a successful trading life. No matter how harsh a currency market is, as long as you are equipped with all the knowledge needed in the field, all you have to do is sit back, relax, and watch your profit grows.

What is a Market Order and How Do I Place One?

A Market Order is an order which you buy or sell a stock at the present market price. This type of order can be placed anywhere in the world. A broker enters a market order like this one when being asked by his or her client. Such an order is the easiest type of order for a broker to complete. He is the only person who should be on the floor in order to fulfill the transaction. He is given a task to look for the best price available at that moment. Therefore, an investor who wants to invest, buy or sell shares must contact her or his broker and allow them to take care of the rest. You should also remember that once this type of order is placed; the customer has no control over the price of the transaction.
Market orders are sometimes referred as an “unrestricted order”. Once it is placed, it is guaranteed that it will be executed. On the other hand, it depends on the willingness of the buyer or seller. Instructions for this order can be simple or complicated. This type of order also is usually cheaper than a limit order. Since this order guarantees execution, it often has low commissions because little effort of work is needed for brokers to perform such an action.
One disadvantage for a market order is that when the order is executed, the price you pay may not always be the price you get hold of from a real-time estimate service or the price you were quoted by your broker. This is evident in fast moving markets where stocks are unstable and more impulsive.
There are certain criteria’s that you should meet when starting to invest using this type of order. First, the average daily volume (number of shares traded per day) is over 100,000. This is considered still a low number and a higher number might be an advantage to be used as a measurement. You may check the average daily volume online. Second, as much as possible, the bid and ask prices are fairly close at the same time known as the spread. Within 0.40% of the stock price may be considered a better gauge. Third, you are not buying a large amount of shares so it is ok to have 1000 shares or less. If these three criteria are met, such order is easy and would work best. This only means that a market order immediately executes at the best price available to meet your order amount.
One more thing to watch out for is the thought that by using market orders on stocks with a depleted average daily volume, in such conditions in the market where the ask price is a lot higher than the current market price which may result in a large spread. Meaning, you may end up disbursing a whole lot more than what you originally anticipated. So it is much safer to have this type of order for high volume stocks in that sense.

Major Currencies and Major Participants of the Forex Trading Market

In the Forex trading market, you have several currencies to choose from. Most Forex trading deals are done using the major currencies. These are the seven most frequently traded currencies.
The major currencies include:
USD – United States Dollar
EUR – The European union Euro
JPY – The Japanese Yen
GBP – The UK Pound
CHF – The Swiss Franc
CAD – The Canadian Dollar
AUD – The Australian Dollar
All currencies other than the major currencies are called minors
Trading these major currencies are banks, companies, investment firms, hedge funds and Forex trading brokers.
Banks do a lot of the trading themselves. These include trades that are done for the bank's clients and ones that are done for the bank itself. Banks can trade huge amounts of major currencies, depending on the size and funding of the bank.
Central bank can influence and change the Forex trading market by increasing interest rates, for example, or manipulating with other economic factors.
Companies are also important contenders in the Forex trading market, trading goods and services between countries and nations. With some of the deals made of large companies, the Forex trading market is liable for rapid change and fluctuation. This is why it is important to stay updated with economic factors.
The behavior of companies in the Forex trading market is analyzed through fundamental analysis, so changes can be predicted.
The private investors, trading major currencies from all around the world, consist of only a small portion of Forex traders. Nonetheless, these traders can take an active part in the Forex trading market whenever they want to, and in doing so join other banks and large companies. Using margin Forex trading also allows you to participate in Forex trading of major currencies for larger sums of cash.Jim Barns, Market Analyst

What is Gross Domestic Product and What is Its Function?

In a country or territory, the GDP or Gross Domestic Product is the market value of all the goods and services produce by labor and property in that country/region in one year and it is the monetary value of a region’s/country’s goods and services in a span of a particular period of time, such as a year. Usually, increase in GDP also equates to increase in standard of living but not necessarily in increase of purchasing power of its people, if the reason for growth in GDP is increase or high inflation or population growth. Stable increase of Gross Domestic Product is a good example of stability and reliability of the region economy. Positive GDP is determined by growth of labor force and the capital stock, which is in pace with the technological advancement. On the other hand a negative GDP implies that the country has a higher unemployment and lower standard of living of its people. Gross Domestic Product is usually a big factor in assessing the country’s economy, is used by investors, financial institution and other institution.
There are 3 approaches in calculating Gross Domestic Product GDP. Expenditure approach- GDP is the sum of the consumption and investment plus the country’s spending plus the output in export(less the imports).
Product approach or the market value of the goods and services produced in a year.
Income approach or the total of all the income collected by all the producers in a year: This equates to the compensation of employees (wages, salaries including the contribution to social security) plus the profits (gross operating surplus) plus the Gross mixed income (small business).
These 3 are all equivalent, each having the same result. World top 10 –Gross Domestic Product 2003-2004
1. U.S.A- with a 10,082 billion US dollar Composition by sector on GDP of USA Agriculture: 0.9% industry: 20.5% services: 78.5%
2. China- with a 6,000 billion US dollar Composition by sector on GDP of China Agriculture: 11.3% industry: 48.6% services: 40.1%
3. Japan- with a 3,550 billion US dollar Composition by sector on GDP of Japan Agriculture: 1.4% industry: 26.5% services: 72%
4. India- with a 2,660 billion dollars Composition by sector on GDP of India Agriculture: 17.6% industry: 29.4% services: 52.9%
5. Germany- with a 2,184 billion dollars Composition by sector on GDP of Germany Agriculture: 0.8% industry: 29% services: 70.1%
6. France- with a 1,540 billion dollars Composition by sector on GDP of France Agriculture: 2.2% industry: 21% services: 76.7%
7. United kingdom- with a 1,520 billion dollars Composition by sector on GDP of United Kingdom Agriculture: 0.9% industry: 23.4% services: 75.7%
8. Italy- with a 1,438 billion dollars Composition by sector on GDP of Italy Agriculture: 1.9% industry: 28.9% services: 69.2%
9. Brazil- with a 1,340 billion dollars Composition by sector on GDP of Brazil Agriculture: 5.5% industry: 28.7% services: 65.8%
10. Russia- with a 1,270 billion dollars Composition by sector on GDP of Russia Agriculture: 4.7% industry: 39.1% services: 56.2%

What is an ECI or an Employment Cost Index?

The Employment Cost Index (ECI) is used to measure the changes in the expenses with regard to the labor in the economy. It is done quarterly by certain agencies in the government. It aids in the measure of inflation with regards to the wages, salaries, and benefits that the employers pay to their employees.
Although the ECI talks about cost index, it is closely monitored by the finance sector, it still get less attention from the media and the press, than the Consumer Price Index (CPI). It even gives sign whether the employment cost is rising or falling.
ECI then makes sure that there is the accurate data regarding the employers’ compensation cost that depends for the making of policies and the success of the business planning. When ECI is on its decision making process, it also affects the main interest rate.
The result of the ECI is based on the surveys conducted related to the employers’ payroll every month of the quarter. It even traces the movement of the labor cost, the wages, benefits and bonuses for the employees of all company levels.
Why analyze the ECI? It is because wage pressure increases together with inflation for the reason that compensation tends to increase even before the companies increase the price for the consumers. It simply implies that an increase in the wage of the employees also increases the price of the goods or services, since labor that comes from the employees is a component in order to make the commodity and services.
There is no wonder, why there are companies that cannot easily increase the compensations, salary or wages of the employees. It’s because it will directly affect the price of the goods and services they offer.
It is said that ECI is the best way to measure the compensation growth of wages and benefits. It mainly lies on the capacity of the ECI to show whether the wage or benefit cost excess or grows faster than inflation.
On the other hand, ECI is a less timely indicator of employment cost than those with the hourly information found in the monthly reports of employment. This hourly reports are made available on the first week of the next month while ECI data will be available a month after the quarter ends.
Yet, the ECI has two advantages over the hourly earnings series. Benefits included are, the non-wage element of employment costs. Benefits covered by the ECI include paid leave, insurance benefits, and retirement and saving benefits. Another one, it is free from employment shifts among occupations and industries since like the consumer price index (CPI), the ECI relies on a fixed service like occupations.
Since the ECI includes overtime payments as a fixed increment to wages, short-term increases in overtime will not change the index.

Forex Trading Moving Averages

Forex Trading Moving Averages is a technical analysis indicator that lets you see the average value of a currency over a period of time. In order to calculate moving averages for the past 20 days you add the last 20 currency prices and divide the addition by 20. Because days continue to advance, the sum you'll get through Forex trading will change on a daily basis, and this is why it is called moving averages.
The most commonly used Forex trading moving averages timeframes are 20, 30, 50, 100 and 200 days. Each timeframe can give you a different view and perspective on the future of the currency, and this is why all of these figures are used periodically. Using these different timeframes you can increase your profits and also protect you lots from unnecessary losses, so use it wisely, and frequently.
If the Forex trading timeframe is shorter, price changes will affect it more. If the timeframe is longer, the moving average will be smoother and less sporadic. Moving averages are used in order to recognize a certain trend the Forex trading currency is following, and also to view a clearer and straighter graph, without any added "noise".
Forex trading moving averages are the most popular indicator to be used for various Forex trading strategies and technical analysis. Tania Raven, Market Analyst

Forex Trading Support and Resistance Levels

In this Forex trading guide we will try to describe in detail exactly what support and resistance means in the following Forex trading lesson. Support and resistance levels are important indicators that can be used to set stop loss and take profit orders using technical analysis.
Support levels are the places where the price of the currency is expected to rise. This happens when there is enough demand for the currency in order to stop the downtrend and therefore causes it to go up.
In order to recognize support levels in Forex trading, take a look at the Forex chart, and try to find a few lows that fluctuate in a horizontal line. This line will be set as the session's support level.
If a support level is penetrated, and the currency drops below it, then it becomes a resistance level. This is caused when the currency reaches the support level again most traders will sell their currency and cause it to go down again.
Forex trading Resistance levels are also horizontal lines that appear on the upper side of the chart. Resistance levels are used to set the upper level of Forex trading, when supply levels surpass demand for the currency. After a resistance level is broken there is usually a change in the bid/ask price of the currency, and sometimes leaps upwards.
Hopefully, this Forex trading guide will help you make the right decisions in investments, and help you understand this concept of suport and resistance.

Forex Trading Trends - Uptrends, Downtrends and Sideway Trends

Forex trading trends are used in technical analysis, in order to view the general direction of the currency. Trends are identified as uptrends, downtrends and sideway trends. Without the use of trends Forex analysts wouldn't have the ability to predict the direction of the currency price at any given time.
Forex Trading Uptrends
An uptrend is a Forex trading trend that occurs when the general direction of the Forex trading currency you are trading is upward.
Forex uptrends are used by traders to make profits while the trend lasts and until it reverses. The goal of most technical traders is to identify a strong uptrend and to profit from it until it reverses, and with this Forex trading trend strategy, you are able to cut down on unnecessary losses. The best way to use uptrends is to sell the currency once the new peak become lower than the previous peek.
Forex Trading Downtrends
A Forex downtrend occurs when the general direction of the Forex currency you are trading is downward.
To use downtrend is similar to uptrend use, you simply monitor the currency chart and notice when one peek becomes higher than the previous peek, indicating a reverse in the Forex trading trend direction. Downtrends are also useful tools to determine potential trading losses
Forex Trading Sideway Trends
There isn't much to say about sideway trends, except that they are trend stages in between uptrends and downtrends. Sideway trends usually do not tell much about the currency situation, even though they can hint on a nearing reversal in the trend direction. These are Forex trading trends that are less frequent but still give important information for the online trader.
Now that you've learned all there is to know about Forex trading trends, go on and see how you can use it in the actual Forex trading market.

Introduction to Technical Analysis

Any forex trader must apply a certain method in order to predict the future price of a certain currency, that's a given fact. The entire concept of speculative forex trading is based upon future fluctuations in currency prices. You make profit by buying a certain currency in one price and selling by another.
Therefore, the most important thing for any trader, novice or expert, is to have some sort of prediction to future price changes. Thus came to life several different methods of market analysis, each tries to incorporate different methods and data in order to give some sort of prediction to the future price of various currencies.
The first method we will review in this series of articles is Technical Analysis. Technical analysis is based on the concept that it is possible to predict future prices using only market generated data. All the data and history regarding a price is represented in various charts and imply assorted methodologies. Every trader, no matter what trading style he uses, uses this method at some point. At the very least, these charts help to determine what the ideal buy or sell position is, at any given time. It helps to give a broader look on he trends and patterns in the market.
Many critics accuse the Technicians of ignoring the fundamentals of the market, but they claim in return that all of the market's fundamentals are already represented in the charts. In their opinion any fundamental market rule is already enveloped in the current price and more importantly in the price's history.
Forex trading can be easy using the right reading materials and tools. Follow our latest articles and download our software here at Forex Floor.

Consumer Spending Forex Trading Indicators

This Forex trading economic indicator is published by the Bureau of labor statistics in the U.S. Department of Labor, every 13th of a month. The economic index is relevant for the passing month, and measures the price of a fixed basket of goods and services that is bought by consumers. This is the most used measure of inflation, an important tool for the Forex trading market.
It is important to state that this Forex economic indicator does not measure technological commodities which change in price, and this is something the CPI has been criticized for.
When you use the CPI to measure Forex trading price changes, you should always remember to take into consideration the movements in the food and energy prices, because they can change and rise or drop regardless of the Forex currency or the inflation levels.
The CPI is also monitored on it's yearly Forex Trading indicator that tells a great deal on the condition of the Forex inflation levels of a currency.
Consumer Credit Forex Indicator
The consumer credit index is published by the federal reserve every fifth business day of the month. This Forex trading measure is used to evaluate consumer spending. This measure is liable to make considerable changes and fluctuations in its value.
Consumer credit consists of three categories: auto, revolving and other. All in all this indicator is less important than the CPI, but it can also help you gain an understanding of the online Forex trading market. Tania Raven, Market Analyst

Forex Employment Indicators

In this page we cover the most important employment indicators for the online Forex market, including the ECI, the household survey and the establishment survey. Employment indicators are important economic indicators, and are used often for fundamental analysis of the online Forex trading market.
The Employment Cost Index (ECI)
The ECI is an important Forex employment indicator, and is published in a quarterly report from the U.S. Department of Labor. It measures the growth of employees' compensation, and this includes the wages and benefits that employees get.
The information in the survey is based on a report that is held at the end of the month every quarter. The information that is tracked by the ECI is the wages movements, the fringe benefits and the bonuses that are given to employees at various levels of the organizations.
The report is used to foresee the online Forex trading currencies price movements. As employees increase the pressure for wage raises, this raises inflation levels, as consumer prices move up in their prices. The inflation is assumed to go up if the ECI increases. This in turn lowers the online Forex currency price.
The ECI is a Forex employment indicator that measures the number of jobs in more than 500 industries that cover 50 states and 255 metropolitan areas.
The Employment Report
This report contains two employment reports inside: the household survey and the establishment survey.
The household survey is an employment indicator concerned with households, and is smaller, covering only 50,000 households.
the establishment is about businesses, is more comprehensive and thus it is preferred by analysts of the online Forex market. It covers 400,000 businesses with 47 million people.
The Establishment Survey
Non-farm Payrolls - This is a very important employment indicator for the establishment report, and has crucial importance for online Forex trading. it measures how many people are there on payrolls for non-agricultural businesses.
Average Workweek - This measures the average hours worked non-farm payroll employees, and is a fine judge of the overall strength of the employment report.
Aggregate Hours Worked - This index combines the two previous indexes together.
Average Hourly Earnings - This employment indicator gives us a good idea of the personal income growth during the month, and is especially critical in times of strong economic growth, as an evidence of increasing wage pressures, which can influence the online Forex trading market considerably.
The Household Survey
The Unemployment Rate - This index is calculated through the division of the number of people unemployed by the number of people in the labor force.
There are other employment indicators in the employment report but these are the relevant ones for the online Forex trading market.
Jim Barns, Market Analyst