PipStory

Forex market has emerged as a promising business ground in the past few decades. The market exploits the fluctuations in the currency standings to make profit. The shares traded in this arena are the currencies themselves and no fixed lot size is fixed. The dealers in this market are quite experienced and can be categorized in a number of types.

Types Of Brokers

The forex market is managed by the brokers. These brokers are divided into two main types depending upon the type of their work. Selecting a correct kind of broker helps make smooth business transactions in forex market.

1.  Dealing Desk Broker

A dealing desk broker is also called a market maker. They are called this because they control the market and they make the market. They are the ones that offer competition to the dealers and common clients.

A dealing desk broker works by making use of the spread sheets. He is not concerned by the inter bank rate of the currency. He simply gives his own quote for both buying and selling of the currency. In this way, he influences the money market. There is very little risk involved in their dealing.

2. No Dealing Desk Brokers

These are opposed to the dealing desk brokers because they do not involve themselves into trading. They just pass the details of one interested buyer to the interested sellers. They merely act as a bridge in the forex market.

Read the full story

Various options for trading are available to individuals. The choice depends on their interest and trading concern. Two popular stages of trading are New York Stock Exchange and NASDAQ. Both have a huge number of stocks listed. 4,500 stocks are listed on the New York Stock exchange. 3,500 stocks are listed on the NASDAQ.

Spot Currency Trading

Many currencies are traded in the spot currency trading. There are four major pairs winch are traded by players. Four pairs are easy to watch than thousands of stocks. This is the main advantage a Forex market has over other stock markets. Forex market is the largest market of the world.

Offer services 24/7

Most of the brokers are usually available 24/7 and offer customer services. Individuals can customize their own trading schedules to trade during European, Asian and U.S market hours.

Charging Fees Or Commission

Currencies are traded on the phone or online. No commission or additional transaction fees is charged by brokers. Forex trading costs are lowers for consistent, combined and transparent spreads than other markets.  Bid and ask prices compensate the most brokers.

Executing Trade With Normal Market Conditions

Normal market conditions can be used to execute the trade. Investors get the same price for market order, which was executed by them.

Read the full story

Dollar strengthens when the economy is booming or tough. It wonders everybody. This phenomenon is explained by a theory named Dollar Smile Theory. It was presented by former economist and currency strategist Stephen Jen. This theory illustrated three important scenarios, which explain the behavior of the U.S Dollar.

First scenario:

It illustrates the first part of dollar smile theory and says that dollar gets appreciation because of risk aversion. Risk aversion provides benefits to U.S Dollar. Investors perceive the changing global economic conditions. They avoid pursuing risky assets and buy less risky U.S dollar. They invest in U.S dollar without considering the economic conditions of the U.S. U.S dollar is considered safe because they are less risky, less volatile and high yielding currency.

Second Scenario:

The dollar depreciates and reached to a new low. The U.S economy grapples with weak fundamentals. The bottom part of the smile dollar theory reflects the uninspiring performance of the greenback. U.S dollar weighs down with possible interest rate cuts. Dollars are sold when market shy away from the dollar.

Third Scenario:

Economic growth causes appreciation in the value of the dollar. A smile builds us when the U.S economy perceives light at the end of the tunnel.

Read the full story

The business of forex trading has flourished during last decade. It has attracted a lot of investors who want to make money by trading money. The effect of globalization can be clearly seen in the forex market where more and more base pairs of currencies have emerged. This gives an indication of the potential of forex market.

Benefits Of Forex Trading

A large number of investors have joined forex market due to greater money making options. A few of the benefits of trading forex are discussed below:-

No Charges

The forex trading has the advantage that a trader does not have to pay any commission to the agent. In addition, no government fees are levied on traders. He does not have to pay any brokerage fee or exchange fee. All business transactions are done by using ‘bid asked spread’

No Lot Size

In trading forex, you do not have to worry about the lot size. In stock market or commodity markets you have to follow the size of the lot but it is not applicable to forex. You sell or buy what you have and as much as you want.

No Intermediaries

One of the biggest advantages of sealing in forex is the non inclusion of a middle man.

Read the full story

There are many factors which determine how currency prices shift over periods of time. One important indicator is the bond yield, or the interest rate. In any economy, the higher the bond yield or interest rate, the more the currency value. The value of currencies then determines if an investor will decide to invest in a currency or not.

Increasing amounts of investments affect the demand and supply schedules of an economiy. The varying interest rates help investors decide and foresee the current and future value of currencies to help them take lucrative decisions.

Fixed Income Securities

Fixed Income securities provide fixed payment to investors at regular time intervals.  The higher the return on any fixed income security, the more profitable the corresponding investment. As a result, the local currency of that economy will look more promising and attractive compared to ones with lower returns.

Long and Short Term Securities

The maturity period of time for bonds in different countries varies. Some bonds may be short term and mature in one year.  The rate of return for the yields of bonds in different countries signifies if an economy is facing good or bad times ahead.

Euribos and Gilts

To comprehend how currencies appreciate or depreciate, we can take an example of the of the U.K bonds known as gilts and the European securities, known as Euribos. The central factor to understand is that higher interest rates yield greater returns for investors.

Read the full story

The world has become a global village. The nations are trading amongst each other and the old practice of barter trades has largely been eliminated. Now the countries trade in their own respective currencies. However, the correct value of any currency can only be ascertained once it is compared with other major currencies.

This aspect is called the cross currency triangulation and this forms the back bone of the modern economy.

Cross Currency Triangulation

To triangulate means comparing an object from three directions. In terms of the Forex market, the cross currency triangulation means the comparison of currencies. It is a common observation at inter bank forex trade that the base pairs of currencies vary a lot and they must therefore be evaluated against some standard currencies.

Need For Cross Currency Triangulation

The adoption of Euro has given rise to the use of cross currency triangulation. Now all the countries that have adopted the Euro as a currency use it as a means to assess the status of their respective currency in interstate trade.

Read the full story

There are many ways through which a person can make money. One can do a job, open up a business or he could become a Forex trader. Now the question remains, “What is a Forex trader, and how does he earn?” Well you will find the answer to that question very soon.

What is Forex Trading?

If you have been to any another country, let’s say Japan, before you carry on with your visit you change the currency that you have, into the Japanese Yen. And then carry on with your visit. When you are done with the visit you will change the leftover Yen back into your homeland currency. It is then that you notice that the last time you bought the yen, its price was a little lower than its present value and you instantly make some money.  This type of money making is known as Forex trading. People buy different currencies and when their value gets a little higher they sell it to make a profit. Usually this profit is very large.

How large is Forex Trading?

Forex exchange market which is commonly known as Forex or FX is the largest market in the world. In this market about $4 Trillion worth of money is traded about every day. This is the largest market in the world. Read the full story

Forex is not a new word these days. It is quite similar to other businesses like equity market, commodity market, etc. The ultimate goal of Forex is also to make money by utilizing knowledge and skills. In fact it has roots to some old times.  Now the question arises that what Forex is?

It is a business of foreign currency trading through different brokerage houses which are similar to equity market brokerages. In present Era, computers and internet has made it very easy for Forex Trading.

Methodology

The very first but challenging job is to find a reputable and good market standing brokerage house. Then in the second step a person is required to open an account with them. The account holder is required to maintain a stipulated balance in his account. The brokerage house will execute the transactions on behalf of account holder and will credit the profits made out of transactions to the respective account. Anyhow the brokerage house will charge a small amount of commission against each completed transaction.

Choice of Currencies

It should be noted that currencies are traded in pairs. For example there are four main pairs used in forex trade. They are British Pound and US Dollar (GBP/USD), Euro and USD (EUR/USD), US Dollar and Japanese Yen (USD/JPY), US Dollar and Swiss Frank (USD/CHF).

In any choice of currency pair the first currency works as commodity while the second one serves as money. In simple words e.g., when one selects GBP/USD, it means in a buy trade, he will buy British Pound against USD payment and at in selling, he will sell British Pound against USD. But there is nothing to worry about its complexity because all this is done through intelligent software.

Art of Making Money

Everyone has the understanding of making money i.e. buy at low price and sell at a higher price. It is the most ancient, common principal and applies to Forex as well.  Read the full story