Things to Know

Currencies have been on a roller coaster ride with record breaking highs and lows. The world of foreign exchange is dominating news headlines, but what does it mean, and more importantly, what do you need to know before you get on board? First of all, it is important to understand that trading in the Foreign Exchange market involves a high degree of risk and traders should know to stop losses.

Forex in nutshell

Forex, also known as foreign exchange or FX, is a global market where the world’s currencies are traded. Essentially, it’s the exchange of one currency to another. Forex is the largest, most liquid financial market in the world with turnover in excess of $5 trillion every single day.

Points to remember:

• There are many firms that don't charge commissions – you pay only the bid or ask spreads.
• There is 24 hour trading – you dictate when to trade and how to trade.
• You can trade on leverage, but this can enlarge potential gains and losses.
• You can focus on picking from a few resources rather than from infinite stocks.
• Forex is easily accessible – you don’t need huge investments to get started.
• Currency values are constantly changing, with a number of factors affecting how much eachone is worth.
• Forex Traders will buy a currency that they think will rise in price and sell a currency they feel will depreciate in value.

For example, if they have Euros but feel the price is weakening, they might exchange these for GBP, which they have forecasted will rise in value. Then, when they go to buy Euros back, they will be able to buy more than they started with – meaning they’ve made a profit. Although the fluctuations will often be quite small, these can become incredibly significant when large values are exchanged.

Who can trade in Forex?

Forex traders and investors are a diverse group, coming from a broad spectrum of backgrounds, ages and disciplines. From the individual who is brand-new to the market, to the most seasoned currency trader, engaging in forex is one of the most common methods of participating in the world’s financial markets. Considering the low entry barriers, seemingly all one needs to begin trading forex is a computer, internet connection and brokerage account. While each person enters the marketplace with a unique set of goals and objectives, forex traders are typically divided into two major categories: institutional and retail.

Institutional Forex Participants

The largest players in the forex market are institutions, or institutional traders, and investors. Institutional money accounts for the majority of forex trading, estimated to be approximately 94.5% of the market volume.

Retail Forex Participants

The second classification of forex market participants is known as “retail.” In contrast to the institutional traders, retail traders and investors trade for their own private account, risking their own capital.

Pick your broker wisely - An efficient broker should enable you with

• Supply their clients with a forex trading platform
• Provide real-time market quotes
• Execute buy and sell orders
• Allow their clients to trade on margin
• Carry out market analysis and provide recommendations
• Ensure their clients’ security and anonymity

How to make profit from Forex?

One of the most difficult things for forex beginners to understand is how you make profits trading currencies. At the same time, since we don’t charge commissions, many people don’t understand how we make money either. Here are the answers!

How do you make money?

Let’s take an example based on the graph below:

• You open an Classic Account with €2,000
• You think the Euro will go down against the US dollar
• You decide to sell 200,000 Euros once the bid price reaches 1.2850 US dollars
• Because you are on 1:100 margin, this costs €2,000 – we provide the other €198.000
• There is no margin left in your account at this point
• The Euros you sold are worth $257.000 US dollars
• You decide to buy Euros once they go down to an ask price of 1.2750 US dollars
• The Euro ask price reaches 1.2750 US dollars and you buy
• This costs $255,000 US dollars
• You have now sold 200.000 Euros for $257.000 and bought them for $255,000
• The difference is $2,000 US dollars or €1568 Euros
• Your profit for a €2,000 investment is €1568 Euros – a 74.43% return!

Here’s another example:

• This time you think the Euro will go up
• You open a Cent Account with 20 US dollars
• You decide to buy 1500 Euros when the Euro ask price goes down to $1.2750
• It does and the cost is $1912.50
• Because you have 1:100 margin this only costs you $19.12 – we provide the rest
• The Euro then goes up to 1.2850 US dollars
• You sell your 1500 Euros for $1927.50
• Your profit is $15.00 – a 75% return on your $20 investment!

How do we make money?

You’ve made money trading Euros and dollars. We don’t charge any commission, so how do we make money? Notice in the example above that we talked about bid prices and ask prices. These aren’t the same:

You’ve made money trading Euros and dollars. We don’t charge any commission, so how do we make money? Notice in the example above that we talked about bid prices and ask prices. These aren’t the same:

• The bid price is what you pay when you’re buying currency
• The ask price is what you get when you’re selling – and is less than the bid price

The difference between the two is known as the spread. This is where we make our profit. In the first example above, the spread is 0.0002 or two points, and so our profit is about $30 on $200,000

Managing your risk

In the examples above, the dollar moved in the direction you expected. However, it could move in the opposite direction, and you could lose money. There are a number of things you can do to manage this risk:

• Change the default 1:100 margin for your account – 1:10 for low risk or 1:500 for high risk
• Manage your money by spreading it over several investments

Use a number of otherrisk management methods

How to choose forex broker?

Forex brokers:

• Supply their clients with a forex trading platform
• Provide real-time market quotes
• Execute buy and sell orders
• Allow their clients to trade on margin
• Carry out market analysis and provide recommendations
• Ensure their clients’ security and anonymity

Unless you’re a major financial institution trading directly in the forex market, you need a broker. How do you evaluate brokers and choose the right one for you?

Reviews

Forex broker reviews are published regularly in the media, and these are a good starting point. They will tell you what services the broker provides and how much they charge. For example, here are some of the services provided by eDeal , all of which are free:

• Industry-leading MetaTrader 4 forex trading platform
• Real-time quotes and order processing
• Trading bonuses up to 25% of the spread
• Dow Jones news feeds
• Daily market data, analysis and tips
• Forex training, seminars and consultation

• Online tutorials and guides
• Analysis of your trading performance
• Android and iPhone applications
• Free deposits and withdrawals
• Fast withdrawal processing
• Partner rebates from 50% to 65%
• 24×5 customer support

Selection criteria

Aside from services and cost, there are a number of other factors you should consider. Your broker must meet the following criteria:

• Have a license
• Execute orders quickly and accurately
• Know the forex market inside-out

Why eDeal ?

We believe in building long-term relationships with our clients. We’re committed to your success and embrace the following values:

• Honesty – we always act in your best interests
• Partnership – we provide the tools and information you need to succeed
• Competence – our forex experts know the market and share their knowledge

We encourage you to compare. When you’re finished, open a Cent Account or Classic Account.

Forex strategies

Each beginner on the international currency market approaches their operations with utter seriousness. The very first day poses a very justified question: what is the way to play in order to at least avoid loss in the long term? Forex trading strategies will help.

Forex strategies: programmes for functioning on the market

By applying a specific algorithm applicable to a specific market situation, the Forex strategy determines a trader’s action on the market. On the internet, you will find a number of various Forex strategies invented by traders that will guarantee profit given a specific market state. Successful traders have their own Forex strategies which they will obviously never share with the public because this is their own income mechanism, honed over the course of months if not years.

Newbies and Forex strategies: is success guaranteed?

There is another obvious fact as well: not even the most loss-proof play methodology will bring a new user millions straight away. The market always changes, and newcomers simply cannot adjust to the new situation here in time. Forex strategies are based on success and failure, on chasing profits along a road that is known for its pitfalls.

What Forex strategies to use

There are a number of universal Forex trading strategies that allow you to stay afloat for a long time without going in the red. Overall, using some Forex strategy on the market is required, because random bets will not bring a positive result. This has been proven time and time again. Of course, sometimes this may turn into a very successful deal or two, but stable profit becomes impossibility over time.

The experience of professional traders shows that a personal Forex trading strategy is the most efficient and comfortable solution for a trader. You will no doubt agree that an active, risk-taking person and their more cautious, risk-aware colleague who scrutinises the situation before making a move are unlikely to use the same methods. Only by trying out new things will you be able to select a path that suits you the most. You will see that rules that clash with your own values are hard to follow.

Economic indicators

Macroeconomic performance characterises economic development, indicating economic growth or decline. Based on these measures, price shift trends may be predicted. Thus, it may be said with certainty that publishing of favourable data may lead to considerable and long-term shift in exchange rates. These performance indicators include Nonfarm Payrolls, GDP, Industrial Production, CPI, PPI and a number of other macroeconomic performance indicators.

The date and time of a specific indicator being published are known in advance. There are so-called calendars of economic indicators and major events in the functioning of some countries (noting specific dates or approximate release time). The market prepares for such events. There are expectations and forecasts on the value of a given indicator and its interpretation.

The release of data may lead to sharp exchange rate fluctuations. Depending on how market participants interpret a given indicator, an exchange rate may swing either way. This swing may either reinforce or adjust an existing trend, or even start a new one. A given outcome depends on several factors: the market situation, the economic situation of countries hosting the currencies, prior expectations and attitudes, and, finally, the value of a given indicator.