indiTraders - Forum for the Active Indian Trader  

Go Back   indiTraders - Forum for the Active Indian Trader > Markets > Forex

Forex Currencies

Reply
 
Bookmark and Share LinkBack Thread Tools Display Modes
  #1 (permalink)  
Old 16-08-2009, 06:28 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default Learning Basics of Forex

Hello Everybody...


I am starting this thread with an intent to put up some basics of Forex here. The trading aspect of Fx can follow it a little later. Fx is a completely different asset class and a different market all together.The fundamental basics of trading almost remains the same, but there is still a difference. It is like those Tennis Tournaments....Wimbeldon is played on the Grass while US Open on Clay....Inevitably we have different champions for both(well many a times)...

Thus, what fits in equity markets, may or may not fit in Forex and Vice Versa. I am gonna try to put up some basic fundamentals on the FX market and hope members can benefit from it.

Please note, this thread will be for sharing the knowledge amongst us. Lets keep the discussion of "Legality of Trading Fx from India" out of this thread. There is already a thread for this by Amarnath and anyone can refer to it. I can only say, I am an Indian and I trade FX.

Someone can come and ask me that why such a thread in a territory where there are not many FX traders? I can very well go to 100s of FX forums available out there and do whatever I want..Than why am I posting here?

My reason is simple: I want to know and share info+knowledge with fellow Indian traders trading forex or who wish to do so in future.

Lastly,I would say I am not a Pro trader...i am a very small trader who is trying to hit consistency with profits in Fx markets. Thats all of my introduction i would like to give here.

Any questions are welcomed on this thread.

There is already a thread for feedback here:

Feedback

All your suggestions and feedback are welcomed there. Lets try and keep this thread as clean as possible of unneccessary stuff. Questions and Discussions welcomed.


Besties

Kittu

Last edited by Kittu; 16-08-2009 at 06:39 PM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 22 Users Say Thank You to Kittu For This Useful Post:
  #2 (permalink)  
Old 16-08-2009, 07:07 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default

Index


1. Forex Market Introduction

2. How to Read a Currency Quote

3. Why trade Forex?

4(a). Market Participants(1)

4(b). Market Participants(2)

5. Fundamentals and Data Affecting Forex

6. What Units are traded

7(a). BROKERS:The great debate: ECN vs Market Makers

7(b). The debate continues

8. FX Trading Resources: Free MT4
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."

Last edited by Kittu; 04-09-2009 at 12:09 AM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 4 Users Say Thank You to Kittu For This Useful Post:
  #3 (permalink)  
Old 16-08-2009, 07:07 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default

Reserved Post 2
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 2 Users Say Thank You to Kittu For This Useful Post:
JJ, SK
  #4 (permalink)  
Old 17-08-2009, 12:28 AM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default Forex Market Introduction

Forex Market Introduction

Forex is the short form of Foreign Exchange. It involves nothing else but the most basic and fundamental commodity of the world : Money. Whenever a transaction takes place in Forex market, it is nothing but an exchange of one form of money for another. It is like a barter system where you give one currency and get another one in return. Every time a company or government buys or sells products and services in a foreign country, they are subject to a foreign currency trade; the exchanging of one currency for another.


Many individuals and organizations also trade currencies for speculative purposes. With all of these currency transactions going on daily, it is no wonder that the foreign currency exchange market, also known as "forex" or "fx" market, has such a huge global reach and has become extremely popular among traders.

Trillions of dollars of foreign exchange activity takes place every day. From 1997 to the end of 2000, daily forex trading volume surged from US$5 billion to US$1.5 trillion. The current (2008) volume stands at US $3.8 trillion everyday. If you compare its trading volume to that of the New York Stock Exchange, it is about 80 times bigger.The forex market continues to grow at a phenomenal rate.

Untill 1990s, before the internet came along, only corporations and wealthy individuals could trade currencies in the forex market through the use of the proprietary trading systems of banks. These systems required as much as US$1 million to open an account. Thanks to advancements in online technology, today investors with only a few hundred dollars can have access to the forex market 24 hours a day. Infact these days you can open a FX account with as low as USD $25 deposit.

For traders, forex trading provides an alternative to stock market trading. While there are thousands of stocks to choose from, there are only a few major currencies to trade (the Dollar, Yen, British Pound, Swiss Franc, and the Euro are the most popular). Forex trading also provides a lot more leverage than stock trading, and the minimum investment to get started is a lot lower. Add to that the ability to choose flexible trading hours (forex trading goes on 24 hours a day) and you have the reason why so many stock traders have flocked to day trade currencies
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."

Last edited by Kittu; 17-08-2009 at 12:55 AM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 11 Users Say Thank You to Kittu For This Useful Post:
  #5 (permalink)  
Old 18-08-2009, 08:14 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default

How to Read a Currency Quote

Before trading currencies an investor has to understand the basic terminology of the forex market, including how to interpret forex quotes. In every foreign exchange transaction an investor is simultaneously buying one currency and selling another. These two currencies make up a currency pair. This is an example of a foreign currency exchange rate of the dollar versus the yen:

USD/JPY = 119.72


The currency to the left of the slash ("/") is called the base currency (in this example, the US dollar) and the one on the right is called the quote currency or counter currency (in this example, the Japanese Yen). This notation means that 1 unit of the base currency (that is, 1 dollar) is equal to 119.72 Japanese Yen. If buying, the exchange rate specifies how much you have to pay in units of the quote currency to buy one unit of the base currency; in the above example, you have to pay 119.72 yen to buy 1 US dollar. If selling, the foreign currency exchange rate specifies how much units of the quote currency you get for selling one unit of the base currency; in the above example, you will receive 119.72 Japanese Yen when you sell 1 US dollar.
As with stocks, a forex quote includes a bid price (or bid) and an ask price (or ask). This can be easily illustrated with an example of a currency quote taken from the forex trading software:




In the above example, the bid price is 119.68 yen and the ask price is 119.75 yen [notice that when the ask price is displayed, only the last two decimal places are displayed to the right of the slash (75 instead of 119.75)]. The bid price is the price at which dealers are willing to buy the base currency (in units of the quote currency) and users of the software can sell. Thus, if a trader presses the button "Sell USD," he/she would sell dollars at 119.68 yen. The ask price, on the other hand, is the price at which dealers are willing to sell the base currency and users of the system could buy it. By clicking "Buy USD," an investor would be buying dollars at 119.75 yen.

Even though there are many currencies all over the world, 85% of all daily transactions involve trading a group of currencies known as the "Majors." These currencies include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. The four most actively traded currency pairs are the US Dollar / Japanese Yen (USD/JPY), Euro / US Dollar (EUR/USD), British Pound / US Dollar (GBP/USD), and the US Dollar / Swiss Franc (USD/CHF). The US Dollar / Canadian Dollar (USD/CAD) and the Australian Dollar / US Dollar (AUD/USD) are also actively traded pairs. For traders, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies; i.e., the "Majors."

The examples below were taken from the currency dealing system which provides forex real time quotes. From left to right are the euro-dollar exchange rate, the british pound-dollar exchange rate, and the dollar-swiss franc exchange rate. All of these currency quotes are of major currency pairs.



Taking the example of the euro forex quote (first pair above), buying one euro would cost 1.0099 US dollars and selling would provide 1.0093 US dollars.

I would like to point here that current rates of currencies are much different from the ones quoted above. Since, I could get the above pics easily, i used them to give examples here.
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."

Last edited by Kittu; 18-08-2009 at 10:15 PM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 13 Users Say Thank You to Kittu For This Useful Post:
  #6 (permalink)  
Old 18-08-2009, 09:52 PM
columbus columbus is offline
Regulars
 
Join Date: Aug 2009
Location: Hyderabad
Posts: 829
Thanks: 387
Thanked 2,002 Times in 699 Posts
columbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud ofcolumbus has much to be proud of
Default

Understanding Pips In The Forex Market

To forex traders, everything revolves around pips.

"I'm up 35 pips for the day."

"I made a 127 pip profit on my last trade."

That's great, but what's a pip?

Pip is short for "percentage in point" and you may sometimes hear people refer to pips as points.

Put simply, a pip is the smallest unit of price for a currency. It's the last decimal point in exchange rates or currency pairs.

For most currencies its 0.0001. So if you bought USD/CHF 1.2475 and sold at 1.2489 you made 14 pips.

One common exception is USD/JPY. In this currency pair there are only two decimal places so a pip is equal to 0.01.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 11 Users Say Thank You to columbus For This Useful Post:
  #7 (permalink)  
Old 19-08-2009, 09:34 PM
lazytrader's Avatar
lazytrader lazytrader is offline
Regulars
 
Join Date: Aug 2009
Location: Blore
Posts: 485
Thanks: 2,893
Thanked 708 Times in 339 Posts
lazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of light
Default

Helooo,

anyone wants to try out demo trading can downloaded Alparis MT4 terminal from:
http://www.alpari.co.uk/en/new_to_ma...de/mt4_pc.html
__________________
Whoever said picking tops and bottoms is not possible was lying, I always buy at the top and sell at the bottom.

Last edited by lazytrader; 06-09-2009 at 06:37 PM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 2 Users Say Thank You to lazytrader For This Useful Post:
  #8 (permalink)  
Old 21-08-2009, 09:16 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default

Why trade Forex?


Forex market offers several advantages over stock and futures trading. The advantages of forex trading are as follow:

24-hour forex trading
Forex is a true 24-hour market. Whether it's 6 PM or 6 AM, somewhere in the world there are buyers and sellers actively trading foreign currencies. Traders involved in forex trading can always respond to breaking news immediately, and profit and loss is not affected by after hours earning reports, analyst conference calls, nor trading stoppages due to "pending news" or announcements.

After hours trading for U.S. stocks and futures brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread.



Superior liquidity
With a daily trading volume that is 50 times larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the forex markets. The liquidity of the forex market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price. This is a huge advantage of forex trading.
Because of the lower trade volume, investors in the stock market and other exchange-traded markets are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction.


Leverage in forex trading
100 to 1 leverage is commonly available from online forex dealers, which substantially exceeds the common 2:1 margin offered by equity brokers, and 15:1 in the futures market. At 100:1, traders post $1000 margin for a $100,000 position, or 1%. Increasing leverage increases risk.

While certainly not for everyone, the substantial leverage available from online forex trading firms can multiply both gains and losses. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the forex market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.

The most effective way to manage the risk associated with margined forex trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a forex trading system where your controls kick in when emotion might otherwise take over.


Lower transaction costs
It is much more cost-efficient to trade forex in terms of both commissions and transaction fees .
Commissions for stock trades in the online discount brokerage world typically range from $7.95-$29.95 per trade, with full service brokers typically charging $100 or more per trade. An average commission on a futures trade is $15 a round turn. Forex brokers offer much lower commission structures. Thus, investors involved in forex trading could limit their cost.


Equal profit potential in both rising and falling markets
In every open forex position, an investor is long in one currency and short the other. A short position is one in which the trader sells the base currency in anticipation that it will depreciate. This means that, in forex trading, potential exists in a rising as well as a falling market.

The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale. This limitation does not exist in forex trading.
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."

Last edited by Kittu; 21-08-2009 at 09:18 PM.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 8 Users Say Thank You to Kittu For This Useful Post:
  #9 (permalink)  
Old 22-08-2009, 04:15 PM
lazytrader's Avatar
lazytrader lazytrader is offline
Regulars
 
Join Date: Aug 2009
Location: Blore
Posts: 485
Thanks: 2,893
Thanked 708 Times in 339 Posts
lazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of lightlazytrader is a glorious beacon of light
Default

Hi Kittu,

No updates on the thread. I was thinking maybe you need some ideas to write about so here's one:



It would be great if you could explain how margin in calculated (in pic) and what the "swap" means (column name). Is that the interest?
__________________
Whoever said picking tops and bottoms is not possible was lying, I always buy at the top and sell at the bottom.
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following User Says Thank You to lazytrader For This Useful Post:
  #10 (permalink)  
Old 22-08-2009, 06:36 PM
Kittu's Avatar
Kittu Kittu is offline
~~ Super Mod ~~
 
Join Date: Jul 2009
Posts: 305
Thanks: 201
Thanked 951 Times in 267 Posts
Kittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to allKittu is a name known to all
Default

Originally Posted by lazytrader View Post
Hi Kittu,

No updates on the thread. I was thinking maybe you need some ideas to write about so here's one:

It would be great if you could explain how margin in calculated (in pic) and what the "swap" means (column name). Is that the interest?

LT...Step by step is my mantra....What i have posted here is class 1st-2nd sessions and your question comes from a college level....i will answer it for sure...but when the time and flow comes for it. I hope you as a trader would be good on "Patience".

Kittu
__________________
Learning Basics of Forex
"It was never my thinking that that made the big money for me. It always was my sitting."
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote
The Following 3 Users Say Thank You to Kittu For This Useful Post:
Reply

indiTraders - Forum for the Active Indian Trader > Markets > Forex


Tags
forex, forex india, learn forex, trade forex

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are On



All times are GMT +5.5. The time now is 04:21 PM.


vBulletin Copyright by vBulletin

Content Relevant URLs by vBSEO 3.3.2