Complete Guide to Online Forex Trading Systems - Part 1 | Foreign Exchange Forex

Complete Guide to Online Forex Trading Systems - Part 1

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This is Part 1 of a 5 Part Series.

Part 1 - Introduction
Part 2 - Market Mechanics
Part 3 - Leverage and Rollovers
Part 4 - Accounts and Statements
Part 5 - The Main Players

Forex Trading: An Introduction

The purpose of this article is to introduce the forex market to you. As with many markets there are many derivative of the central market such as futures, options and forwards. For the purpose of this book we will only be discussing the main market sometime referred to as the Spot or Cash market.

The word FOREX is derived from Foreign Exchange and is the largest financial market in the world. Unlike many markets the FX market is open 24 hours per day and has an estimated $1.2 Trillion in turnover every day. This tremendous turnover is more than the combined turnover of all the wordls’ stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade.

Unlike many other securities (any financial instrument that can be traded) the FX market does not have a fixed exchange. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals. Trades are executed through phone and increasingly through the Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily in the reach of most investors.

You will often hear the term INTERBANK discussed in FX terminology. This originally, as the name implies was simply banks and large institutions exchanging information about the current rate at which their clients or themselves were prepared to buy or sell a currency. INTER meaning between and Bank meaning deposit taking institutions normally made up of banks, large institution, brokers or even the government. The market has moved on to such a degree now that the term interbank now means anybody who is prepared to buy or sell a currency. It could be two individuals or your local travel agent offering to exchange Euros for US Dollars. You will however find that most of the brokers and banks use centralized feeds to insure reliability of quote. The quotes for Bid (buy) and Offer (sell) will all be from reliable sources. These quotes are normally made up of the top 300 or so large institutions. This insures that if they place an order on your behalf that the institutions they have placed the order with is capable of fulfilling the order.

Now although we have spoken about orders being fulfilled, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words the person or institution that bought or sold the currency has no intention of actually taking delivery of the currency. Instead they were solely speculating on the movement of that particular currency.

Source: Bank For International Settlements www.bis.org Extract From The Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity.

Currency	1989	1992	1995	1998	2001
US Dollar	90.0	82.0	83.3	87.3	90.4
Euro	-	-	-	-	37.6
Japanese Yen	27	23.4	24.1	20.2	22.7
Pound Sterling	15	13.6	9.4	11.0	13.2
Swiss Franc	10	8.4	7.3	7.1	6.1

For an updated version, go to page 11 from the report on Triennial Central Bank Survey, December 2007, Foreign exchange and derivatives market activity in 2007

As you can see from the above table over 90% of all currencies are traded against the US Dollar. The four next most traded currencies are the Euro (EUR), Japanese Yen (JPY), Pound Sterling (GBP) and Swiss Franc(CHF). As currencies are traded in pairs and exchanged one for the other when traded, the rate at which they are exchanged is called the exchange rate. These four currencies traded against the US Dollar make up the majority of the market and are called major currencies or the majors.

Futures Technical & Fundamental Analysis Recap - FXStreet.com

3 Jul 2009 at 12:00am
Futures Technical & Fundamental Analysis Recap Fri, Jul 3 2009, 07:05 GMT by Forex Hound Analysis Team ForexHound.com The June U.S. Non Farm Payrolls Report showed that employers cut more jobs last month than estimated, curtailing demand for higher ...

Futures Market Technical and Fundamental Recap - FXStreet.com

1 Jul 2009 at 11:33pm
Futures Market Technical and Fundamental Recap Thu, Jul 2 2009, 06:37 GMT by Forex Hound Analysis Team ForexHound.com Today's Futures Analysis summary Tomorrow is U.S. Unemployment Report day. Traders are guessing that 365,000 jobs were lost in June ...

FOREX-Dollar up vs euro, down vs yen after payrolls data - Reuters

2 Jul 2009 at 6:28am
NEW YORK, July 2 (Reuters) - The dollar extended gains versus the euro and fell against the yen on Thursday after a report showed a larger-than-expected drop in U.S. non-farm payrolls in June, raising concerns about the pace of the economic recovery ...

FOREX-Dollar up as jobs data raises doubts about recovery - ninemsn

2 Jul 2009 at 1:23pm
NEW YORK, July 2 (Reuters) - The dollar rose against major currencies on Thursday after bleak U.S. jobs data renewed concerns about the economy and enhanced the greenback's safe-haven appeal. U.S. Treasury bonds rose and stocks fell more than 2 ...

Only One More Week to Cash In On $100 Sign Up Bonus - Transworld News

27 Jun 2009 at 7:24am
Ideal World Forex, a full service foreign exchange broker, announces that there is only one more week in June for traders to take advantage of a US$100 cash bonus for opening and funding a new trading account. This promotion will last until the end ...

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May 18 2008 04:45 pm | Foreign Exchange Forex

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