Forex trading or foreign currency trading refers to a transaction in the Forex market involving the purchase and sale of different currencies. You don’t need to be a specialist or possess degrees to trade in foreign currency. It is fairly simple to understand and learn foreign currency trading.
Let us start by understanding who the players are in this trading. Foreign currency trading is done between and among major financial institutions, central banks, retail currency traders or speculators, large international companies, government institutions, companies with overseas operations and the like.
Trading in stock market is regulated by central exchanges. In foreign currency trade transaction is carried out at the Inter bank Market, which is also regarded as an OTC Market. The trade transaction is directly done between two counterparts over global electronic network. The main Trading centers of the world are Sydney, Tokyo, London, Frankfurt and New York operating 24 hours a day. Foreign currency trading begins each day in Sydney, and moves around the globe by moving to Tokyo, London, and New York. This offers flexibility to investors to take advantage of currency movements that are often caused by political, economic or social causes any time of the day.
Anyone who intends to learn foreign currency trading with the goal of making profits in the market must understand the importance of tracking and analyzing price movement of foreign currencies. Various currencies of the world are given a three-letter code to be used in forex trading. Foreign currency trading always involves currency pairs, which basically is the exchange rate of one currency over another. The commonly traded currency pairs are GBP/USD, EUR/USD, USD/JPY, USD/CHF, AUD/USD
How does one actually book profits in forex trading?
The thumb rule remains the same as any other product – buy low and sell high. To give an example a trader may decide to buy EUR and sell USD. Simultaneously he may buy USD and sell AUD. This buying and selling in Forex terminology is referred to as the trader going long or short respectively. In each currency pair the first currency is the base currency and the second one is referred to as the counter or quote currency.
Another set of unique terminologies that you will come across frequently when you learn foreign currency trading is Bid and Ask price or spread. Bid price is the price at which a broker is willing to buy and ask price is the price at which the broker is willing to sell. Therefore Bid price is the price at which a trader should sell and ask the price at which a trader should buy.
Forex trading is fairly simple to learn and you don’t need to be a genius to make profits in the Forex market. You have the choice of selecting the pair of currencies that you wish to trade in the, the size of the transaction and the price at which you wish to trade. Irrespective of the currency rate movements you can decide to buy or sell. And then again physical possession of the currency is not required to perform the transaction – you perform your trade transaction to buy one and sell other one to one.
Before you actually commence trading it is however very crucial that you learn and understand the concepts of foreign currency trading clearly. You can make use of a number of online services available to assist you. Understanding Forex trading systems, the market psychology and managing risk will go a long way in determining your success in this market.
Currency trading is the buying and selling of currencies from around the world. It is the largest and most active trade happening, making trillions of dollars daily. Unlike other trade like stock exchange, currency trading has no specific time of trading. It happens 24 hours a day, 7 days a week.
In currency trading, there are currency pairs. A currency pair consists of two currencies, one of which is being bought and the other is the currency used to buy the other currency.
Take a look at this example: GBP/USD where GBP is the British Pound. The GBP is what we call the ‘base currency’ which has the initial value of 1. This is the currency being bought. Next is the USD or the US dollar. This is what we call the ‘quote-currency’ and has the value of how much one of the base currency is worth. For example: EUR/USD 1.2436, one Euro is worth 1.2436 US dollars. If you need 1000 Euro, you’d have to exchange it for 1243.6 US dollars. Other major currencies traded are Canadian dollar (CAD), Japanese Yen (JPY), Australian dollar (AUD, and the Swiss Franc (CHF).
In currency trading, a currency pair has a corresponding ‘bid’ and ‘ask’ price. The ‘bid’ price is how much the base currency is being sold by the currency broker while the ‘ask’ price is how much the currency is being bought by the trader. The bid price is usually lower than the ask price and this is where sales are made by the brokers. The difference between the ‘bid’ and ‘ask’ price is called the ‘spread’.
Changes in the Currency Values
Knowing how currency values changes is important in currency trading. In a nutshell, buy a currency when its value is low and sell it when its value is high. The changes in currency values depend on political and economic events. Foreigners going in a country triggers currency exchange as well as large purchases of commodity from one country to another. Also, we should not forget the influence of speculators in currency trading. They speculate on the increase or decrease of value of a currency therefore will make decisions in advance. It is important to be updated in these influences to the trade to be able to keep up with the fast-paced volatility of the currency trade.
Why Venture on the Currency Trade?
As mentioned, currency trading occurs 24 hours on a daily basis. Traders can decide when to trade their currencies. As changes could happen any time, the trader should always keep watch on the best time to trade. Currency trade does not need a big capital to start. Beginners can start with small amounts and eventually increase their trading resources. There is also no need to play on all currencies on the market. A novice can focus on two currencies at first while getting the hang of it and then expand later on for bigger profits.
Risks in Trading
Naturally, like all trading, there are risks. A trader should keep in mind that the risk in currency trade is high and wrong decisions could lead to losses. Playing safe is okay but the higher the risks, the higher the profit. Decisions are vital so it is best to ask advice from the expertise of brokers whenever necessary.
There are lot of business in the world from which one can make his good fortune. Currency trading is one of these businesses. You can earn a good income from this business. You need to be much conscious in the business and should know the basic characteristics of the currency trading.
In the past, only the financial giants and big multinational companies were allowed to trade currency. Now the technology innovations have made currency trading easy for all. You just need to be online and may start to trade currency.
Forex is the name given to this currency trade market in which powerful currencies of the selected developed countries are exchanged. These currencies include USD, GBP, EURO and a few others. You need not to stock any of these currencies for currency business.
The currency trade depends on the credit agreements. All the transactions in the trading market are regulated by the words of honor. All traders in the market honestly abide by these words of honor.
You should be well versed with the usual terms of this market before you start online currency trading. Sometimes you may face loss on your capital investment in this currency market due to lack of enough knowledge.
There are always ups and downs in the currency trade market. This fluctuation in the forex market is the basis of profits and is motivated by several factors. You will sell a currency with a lower rate of interest. This fund is to be used for buying another currency with higher interest rates. This difference in the rates of the interest fetches you the profits for which you are in the currency trading market.
The monetary value of a certain currency depends on its supply and demand. The foreigners visiting to your country will need the currencies of your country to buy goods and for other expenses.
Similarly the local residents of your country planning foreign tours will require the currencies of their destination countries. So the values of currencies fluctuate with the invasion of the foreign currencies in a certain country.
The market position of a currency is also responsible for the fluctuations in the currency’s value. People buy and sell the certain currencies based on the speculation in the currency trading market.
The market value of a certain currency also indicates about the health of economy of the country to which that currency belongs. The high value of the currency is an indication of sound economy of belonging country.
Let us sum up the benefits of trading currency. You need not to have a huge capital amount to start currency trading business, although the market was restricted to corporate investors in the past. You may earn huge gains even in a single deal when the market is in your favor.
If you have enough knowledge about currency trading then there is a minimal risk for you in trading currencies.
Have you ever found yourself overwhelmed by the pile of credit card bills sitting in front of you? For those of us that have experienced an overwhelming amount of credit card debt know that this type of stress can be the most traumatic experience that an individual can go through. Getting in credit card debt is a slippery slope, it usually starts with one card and one purchase but it can quickly turn into a sandtrap where the minimum payments are similar to putting a Band-Aid on a hemorrhaging wound.
When we find ourselves at the helm of a ship drowning in a sea of credit card debt there are organizations that we can turn to, and with a little due diligence and articles such as the one your reading right now can help yo navigate you to safe waters, and get you on the path to financial freedom. Credit counseling is one of those organizations that fall under the “debt solutions” category and out of all the different solutions and organizations that could assist you in time of financial crisis credit counseling will probably give you the most bang for your buck.
It was first established in the 1950′s when creditors created the National Foundation for Credit Counseling or NFCC for the purpose of, according to the W. Patrick Boisclair, Chairman of the NFCC, “the NFCC initially monitored legislative and regulatory activity for its retail credit members” and “also conducted public awareness campaigns on credit.” Their mission statement reflected an objective to help the American consumer avoid bankruptcy and keep them educated on fiscal responsibility. In 1993 another organization was established called the “Independent Consumer Credit Counseling Agencies,” or AICCCA, stating that there was a need for, “industry…standards of excellence and ethical conduct.” In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made counseling a requirement 180 days prior to filing bankruptcy.
So now credit counseling has been such an integral part of financial health when facing the prospect of bankruptcy that now there are approximately 300 organizations that offer credit counseling in the US. Previous to choosing one of these organizations to assist you, let’s get a better grasp on what credit counseling is and how we can benefit from this breakthrough methodologies.
The main goal of credit counseling, if you walk away with anything, would be to educate you on credit card debt, and how you can avoid being swamped underneath a mountain of credit card debt. Another big part of the process is the credit counselor is involved with the negotiation of better terms across your unsecured credit card debt, which translates to lower rates and lower overall debt. Most likely, you will find yourself enrolled in a debt management plan (or DMP).
The debt management plan is another huge benefit of enrolling into counseling. A DMP is fairly simple, after your enroll in the DMP, and the credit counselor negotiates lower interest rates you close your accounts, and stop making your monthly payments directly to your creditors and begin paying the agency one payment who will disburse the funds according to the terms of the DMP.
Many counseling agencies tout some significant savings and advertise that they cut your debt by 50%-60% and you will be “debt free’ in little as two years. Realistically the industry average is you will be able to cut your debt by 20% and the DMP usually has a turnaround of about 4 years to be completely free of your debt.
Another benefit of enrolling in a DMP is the lowering of interest rates. The interst rate on a credit card that has been defaulted on is usually in the range of 30% to 50%, after enrolling in a DMP, a seasoned credit counselor can negotiate a lower interest rate where your payments will be a more manageable dollar amount reflecting your income.
Credit Counseling Scams
Unfortunately there are some fly by night credit counseling agencies that are seriously lacking in the ethics department. There are some red flags, or signals, that you should be cognizant of on your search for an agency.
Some of the more obvious red flags are:
They refuse to give any references or contact information to testimonials.
They promise that they can lower your debt in by a ridiculous amount in a ridiculous amount of time.
Poor rating on the BBB or several poor reviews on the internet.
You received an unsolicited email or phone call from them.
Ultimately, your financial future and freedom sits in the palm of your hand, you have to make the right decisions at the right time and if credit counseling is an alternative to bankruptcy or financial ruin it wouldn’t hurt to give a non-profit credit counseling agency a buzz.