FOREX - FAQ

"What is FOREX?

FOREX stands for the FOReign EXchange market, which is an international financial market where currencies are traded. The foreign exchange market began in the 1970s and is now the largest financial market in the world, with an average daily turnover of US$1.9 trillion. That's thirty times the amount of daily activity on all of the US stock exchanges.

Each Forex trade involves simultaneously buying one currency and selling another. For example, if you think that the Euro will rise relative to the dollar, you would place a Euro/Dollar trade. The forex system would then buy the Euro and sell an equivalent amount of the Dollar. Then, when you want to close your position, you would place a Dollar/Euro trade. This would buy the Dollar and sell the Euro. If the Euro had risen against the Dollar, you would make a profit, but if it had fallen relative to the Dollar you would make a loss.

What currencies are traded?

Most of the world's currencies are available to trade, but the majority of market action involves a group of major currencies, including the US Dollar, the Euro, the Yen, the Swiss Franc and Sterling.

Where is the Forex market located?

Unlike most financial markets around the world, Forex is not centralized on an exchange. Instead it operates on a basis known as the interbank market or Over the Counter (OTC). As each Forex trade involves two reciprocal trades (buy one currency and sell another), these are conducted electronically with any broker who is willing to accept the trade.

Who can trade in the Forex market?

Traditionally, access to currency trading was restricted to banking organisations, including central banks, commercial banks and investment banks. That's the reason it operates on a system known as the interbank market.

However, the number of non bank participants in the Forex market, which includes multinational companies, money managers, money brokers and private speculators, is growing rapidly. And thanks to the relatively small amount of capital required to open a trading account (often $500) Forex is opening up to more and more people all the time. If you're over 18, have internet access the enough money to open a trading account, the world of Forex is open to you.

When is the Forex market open for trading?

As Forex doesn't exist within a traditional exchange, it's the only 24 hour financial market in the world. Forex trading begins every day in Sydney and then moves around the globe as the major international financial markets in Tokyo, London and New York open.

In other words, there are always traders somewhere in the world who are actively trading foreign currencies. This means you can make trades and respond to major social, economic and political events day or night. However, there is a short rest period from close of trading on the American financial market on Friday until trading begins in Australia on Monday morning. However, due to the time differences around the globe, this period only lasts for approximately 48 hours.

What is a trading margin?

Forex trades are made in lots of $100,000. If you had to provide that amount of money to cover your position before you could trade, the market would once again be restricted to banks and other institutional investors. So brokers have established the principle of margin trading. In effect they allow people to trade $100,000 blocks of currency if they can provide an element of security against potential losses.

For example, they may allow people to trade on a margin of 1% (in comparison, traditional stock brokers often require a 50% margin). This means that they can trade $100,000 blocks, provided their account contains at least $100,000 x 1% = $1000. One thousand dollars will protect the broker against any potential losses that their client makes (currency values rarely fluctuate by more than 1% in a single day). If a client's account is reduced by losses (i.e. reducing the broker's security below acceptable levels), the broker will close all trades and require an additional deposit before further trades can be made.

Trading margin allows people to control vast amounts of currency wiith relatively small amounts of capital (often 50, 100 or even 200 times the amount of capital that they have invested). This can lead to massive gains, but increases the risk of losing most or all of your investment capital.

How much does it cost?

Thanks to the trading margin offered by most Forex brokers, it's possible to open an account and get started trading with a relatively small amount of capital.

Forex trades are made in lots of $100,000. However, most Forexs brokes will provide you with a leverage ratio of up to 100:1, which means that you have the ability to control a $100,000 trade with as little as $1000 in your account. Some brokers will provide leverage of 200:1 or even 400:1, which allows you to start with as little as $500 or $250 in your account.

However, please remember that although greater leverage allows you to maximize your profit potential, it also increases the risk factor. The higher the leverage ratio, the smaller trading fluctuation that will be required to wipe out your trading capital. So choose the amount of leverage that you use wisely.
For new traders, it may be safer to begin with leverage of 20:1 or 50:1. This will increase the amount that you need to open an account, but it will reduce the risk of seeing all your trading capital disappear due to a small shift in the value of a currency."

Future Trading

A friend of mine shared this article with me, I don´t know who the author is and the website at the end is no longer up but I believe its really good information so I share it with you...

"The following article includes pertinent information that may cause you to reconsider what you thought you understood. The most important thing is to study with an open mind and be willing to revise your understanding if necessary.

How a strategic money management plan works is discipline, not magic. In the market place it’s possible to be right, and to still lose money. In fact, it’s pretty common. Traders who win on a high percentage of their trades often end up with their capital eroded away, and left with nothing to show for their work. They lose their gains because they don’t know how to manage their money.

Being a good manager of your own money is one of the most difficult of skills to learn. But if you do not use good money management to bank profits, learn to take small losses when you are wrong and control your use of margin, you will lose it all. No matter how good of a trader you think you are, your first priority needs to be protecting your capital if you want to be successful.

As a trader, your capital is the most valuable asset you have. It is your only asset in the eyes of the market. Without it, you can’t work at all. For this reason, bringing in no profits on a trade is better than losing any part of your margined account. If your account is intact, you are alive and live to trade another day. If your capital has suffered a loss your efforts for making gains will wasted playing catch-up. The more you’ve lost, the longer it will take to get back to where you started from, because now you have a smaller pile of capital to work from. A smaller capital base means smaller percentage returns on profits. Making 10% on a $5,000 account earns you $500, but if you’ve lost half of that account and have only $2,500 left, making 10% on your money will earn you only $250. You’d have to do that twice to make the same $500.

Sound money management has two main goals: to avoid losing money, and to avoid missing profit opportunities. The first goal is straightforward. You want to preserve your money and whatever profits you’ve accumulated. But you don’t just want to keep your capital and let it go stagnant. You want to trade with it, to continue to grow it and make your returns larger and larger. Not keeping your money tied up in bad or problem trades for long periods of time will allow you to not miss new profit opportunities when they come along. Failing to avoid either of these will cost you.

It's really a good idea to probe a little deeper into the subject of Futures. What you learn may give you the confidence you need to venture into new areas. Working to avoid losing those profit making opportunities isn’t quite as obvious a goal. With the second goal in mind let’s compare the outcomes of two money-management decisions. Trader X buys a futures position, expecting it to go up, and finds that it doesn’t. However, he’s certain it will go up eventually, and he’s incurred a small loss, so he decides to wait it out. He ends up holding the position for two months before finally selling it. Trader Y buys the same futures at the same time as Trader X, but once he sees that it isn’t going up, he sells it at a small loss. He buys another futures position and makes a 10% profit on it. His next trade loses 2%, but after that he makes 7 %, and then loses 1%, and then gains 25% on a series of trades. Because the account is growing and he makes gains on an ever larger base of capital each time, at the end of two months, his account has grown quite handsomely, even though Trader Y was WRONG 50% of the time.

Which money management decision turned out to be the best? While Trader Y made a nice profit, Trader X not only lost time but also never made his money back. Even if he had made his money back on that position, it’s hard to see how this was a good use of his operating funds over the course of two months.

Clearly the goal of not tying up your capital in bad trades has an important impact on your profits. Using sound money management will keep your trading funds and your profits safe. Though it is a difficult skill to learn, once you know how to practice good money management techniques, you can almost guarantee that you will be a successful trader.

If you've picked up some pointers about Futures that you can put into action, then by all means, do so. You won't really be able to gain any benefits from your new knowledge if you don't use it."

More information can be found at http://www.futurestradingsite.com

Forex trading tips

Last year I started a practice account to trade Forex, I must say at first I was lost, it required a lot of studying and learning, and trust me, the practice account is just to practice using the system, the real account is another story... I believe every day many people get the idea they are gonna get rich with Forex, and you probably can if you have the money to invest, but you have to be willing to take loses, remember that in Forex if you make money it only means that somebody else lost money, and you can be on the side that helped someone else to make money…

I share with you this 5 tip to Foreign Exchange currency market:

1.       Know your Fx trading market.

Always educate yourself about the currencies that you trade and everything related to Forex, you need to know everything before jumping to the water. The more you learn about the country (from economics to social situations) of the country´s currency you’re trading in the forex market, the more likely  you’ll be to make predictions about which way the money will move.

2.       Pick a forex trading system and stick with it.

Most experienced Forex traders will recommend you use a system, trading in the Forex market by system allows you to automate your trades based previous trading. Get a system set up and stick to it in order to make the most of your forex trading.

3.       Practice makes perfect, but remember that the real world gives you the experience

Practice forex trading accounts are great for learning and getting you familiar with Forex trading systems but they do differ from the reality of trading (in the sense that the world changes by the second). The recommendation is to start off with a mini forex account to bring you losses to a minimum while you get the hang of it.

4.       Avoid  the margin until you´re a Pro

Margin trading is an easy way to lose your money quickly. Avoid Forex margin trading until  you have no doubt about what you’re doing.

5.       The bottom line is counting Dollars

The bottom line is how much money you made with your trade, stay away from counting won or lost trades, count your dollars.

Forex has the Advantage by The creator of "The 4x Express"

I have many doubts about Forex, and also a great curiosity about it, my fingers itch everytime I read about Forex and people making money (I mean real money and not the outrageous amounts most website offer), investing is a science and so is Forex... or is it? Take a look at this article I now share with you from the creator of The 4x Express.

"Greetings Fellow Forex Traders,

"When it comes to trading in any market, Forex currency trading has a huge advantage over other players in trading business. Firstly, the Forex market has the advantage of time freedom. You see in the 4x market one can trade around the clock from Monday through Friday. In the stock market that is simply not possible since the market closes at 4:00. This advantage of time freedom allows those who have not yet earned enough money trading in the 4x market to maintain their day jobs while trading at night. It is also quite plausible to trade in the morning before a person goes to work. Trading the Forex can become an excellent second job for you.

Unlike the stock market, the currency trading market does not require a trader to pay a commission to place a trade. This will come as a welcome sign of relief to those who have grown accustomed to the vast amount of money they must fork over to their brokers which go towards clearing, exchange and government fees. In the 4x market you also do not have to worry about having a large sum of money in your account to sell your currency pairs. This concept of selling as you may already know is commonly called shorting in the equities world. You can buy or sell at will in the currency trading arena.

It is so amazing to be able to participate in this market right now. You can do so from the comfort of your very own home. As long as you have a computer that is connected to the Internet you are in business. You can begin trading with as little as 300 dollars. I will show you how to turn this 300 dollars into some serious money in no time at all. This should be a lot easier to do given the advantages that you know the 4x market has over its competitors.

The Forex market is traded by some of the world's richest individuals including Bill Gates and Warren Buffett. You now have access to the same opportunities as they do. What is stopping you from getting on the road to financial freedom. You can start now. You do not have to wait. You have already begun the journey by choosing to educate yourself on the pros of the Forex market.

I personally love the fact that you can trade whenever you want to with the Forex. You see, in the stock trading world you are flagged if you are deemed to be a daytrader. In other words if a trader of stocks chooses to trade every day, he or she must have an account balance of 50,000 dollars to do so. There are no such restrictions when it comes to trading the 4x. If you work at night, you may trade in the daytime. If you work during the day, you may trade at night. You simply trade according to the schedule that works best for you.

I want you to think about money for a moment. Who uses it? The whole world does in some form or another. Another advantage that the Forex market has is that there will always be a need for money. You are simply trading one currency for another in the currency market as the 4x is commonly reffered to. The Forex market is not going anywhere. It is here to stay. The only question is then who will be a part of it. We need money to buy the things we use everyday and so do those who live in the other parts of this world.

Another advantage that 4x has over stocks is the advantage of trading focus. Instead of having to choose between over 4,000 stocks you can deal with 4 main currency pairs. Any good business person knows that focusing on too many things is a recipe for financial disaster and this can hold equally true in the stock market. A stock trader also must grapple with the time issue doing research on all those potential stocks presents. It is also much easier to become familiar with 4 things as opposed to 4,000 things. Focus is the name of the game and 4x trading makes it much easier to do so.

The ball is now in your court. Will you take it and make the decision to win with currency trading? 4x is indeed the winner's game and those who win consistently know how to play it well."

Much continued success,

The creator of "The 4x Express"

4 Practical Ways To Deal With Credit Card Debt

As a consumer of course I have a credit card, at one point in my life I even had 5!! It was becoming real issue being in so much debt,  I really didn´t know how to deal with my situation.

You've probably heard that consumer debt is at an all-time high, meanwhile your savings rate is lower than ever before. You realize that the commodity and ease of online shopping is just a click of a button and Its almost impossible to shop online if you don´t have a credit cards, this just adds to the national consumer debt. You are well aware that running a balance on your credit card and paying the interest rates that come with it is one of our most time and effort consuming tasks, becoming itself a real financial problem. But the offers of new “low interest” credit cards just keep filling not only your mailbox but your inbox as well.

Still, credit cards are almost a basic necessity nowadays in our life, and it is extremely important to understand how to use them wisely. It is unpractical not to have a credit card (not that you cannot live without one), but it is more than prudent to limit the number of cards you have (as I mentioned at one point I ended up with 5!!), and the best thing you can do is to pay all balances in full every month so that you don´t get stuck paying interests.

But we are not infallible; from time to time we have ended with credit card debt, so here are some ways to keep your credit in check:

1. Don´t be fooled by the “promotions” , You can easily take advantage of frequent-flier miles programs , but always remember that nothing is free and that interest payments on a high balance can quickly turn “free miles” into miles of debt. Let’s suppose that your card gives you a dollar per mile, carrying a debt of 25,000 may get you a plane ticket and a free trip, but it will also saddle you with $4,500 in yearly payments of interests, that´s assuming an 18% annual rate.

2. Always keep your eyes open and look closely at credit card offers before you sing. It´s obvious that most interest rates will be in effect for only a few months. But there may be (and most likely will be) other catches as well like other fees when making a late payment, even if it arrives only a day after you were due to make it. Also, low initial rates sometimes may only apply to transferred balances, and you may get charged a fee for making the transfer. Always check to see whether there is an annual fee (like membership), or charges for exceeding your credit amount or for closing your account.

3. Avoid amazing grace period, if they will you outstanding grace periods were you won´t have to pay a dime, when this periods end you might have to pay up accumulated dimes that quickly turn into dollars. What you need to look for is a provision that says you will never be charged interest or fees as long as you pay your bill in full by the due date. But be aware that some cards have no grace period, calculating interest from the moment you make a purchase, while others give you only a limited time or grace period after making a charge before interest start accumulating.

4. Always, and I do mean ALWAYS! Cancel cards you no longer use or need. If you forget or don´t, they'll show up on credit reports, and that maybe a problem if say you are applying for a home mortgage since banks or loaners may be reluctant to make a loan to someone who has a cumulative credit card limit of $50,000, $100,000, or even more.

What to ask yourself When Selecting a Home Equity Loan

We all have been in need of some money for unexpected expenses. The roof is leaking, the humidity is intolerable and has rotted through your deck and a new family addition tightened the living space. You just spent  too much for the Holidays and is all on credit, now the bills just keep piling up. Your son just got accepted to that Ivy League school and your daughter is almost out of high school. Tapping into your home equity can help ease your financial burden. But before deciding on taking the loan you should ask yourself a few questions first.

1. Do I need a home equity loan or a home equity line of credit?

If interest rates are low, a loan is a smarter choice. You can ask for the full amount at once ant get a fixed rate on the entire amount.  The advantage allows you to know how much to budget for monthly payments.

On the other hand, a line of credit will let you borrow from a revolving line of credit with variable interest rates. You access the money just like a checking account by writing a check for the purchase. Then the amount used is paid back. If the rates fluctuate, your payments will do the same.

2. Are there restrictions on how I use the borrowed money?

Most loans and lines of credit can be used for a variety of things. Whether you want to consolidate all your debts into one, do some home improvements or pay for college tuition, an equity loan or line of credit can be the answer.

Be sure to ask yourself if you will be able to afford the extra payments. Is your budget flexible enough? Will adding another payment won’t over-extend a tight budget?

3. How do I find the best interest rate?

The best thing to do is to determine the variety of interest rates offered by financial services companies is to look around. Ask as many questions as you can. Try to find a company your comfortable doing business with. Look for ones that don’t charge application fees. Ask about charging a penalty for early payoff.

4. What is the term of the loan? Is it better to get a 5- 10- or 15 year term?

You’ll want to determine what your financial future strategy is when deciding on the term of the loan. If you’re planning to retire soon, you may want to ask for a shorter term. The longer your loan terms, the lower your monthly payments.

5. Are there any tax advantages to borrowing with a home equity loan?

There are many good tax advantages to home equity loans and lines of credit. The interest is tax deductible on your federal income tax. Be sure to consult your tax advisor before applying for a loan to be certain of the deductions. 

6. Is the loan application lengthy and how long before I get an answer?

More and more lenders are allowing consumers to apply for loans over the phone or on the Internet. It can take as little as 10 minutes for the application process. And many pre-approvals can be delivered in a few hours.  Final approval often takes anywhere from 5 – 10 days while evaluating your house is taking place. Often the entire process can be completed without leaving your home with final documents and checks being sent through the mail.

Tapping into your home equity to ease financial burdens can be a good idea., but always remember to do your homework when doing it, shop around and never just go with the first, set up your budget. and ALWAYS use the money for what you really need.

Cash Advances

A lot of finance and loan firms are inclined to provide $1K to people in need, of course the beneficiary needs to provide a provable source of income and is in agreement to repay the amount under the firm´s time schedule. However,  you will always have to keep in mind that you would end up repaying more than you acquire (remember that lending money is a business and the companies that lend money make the profit from charging interests). 

Acquiring a $1000 cash advances won’t be a simple prosedure. It is very important that you carry out a preliminary research of well known and solid firms that provide cash advances willing to lend $1000. Although it is easy to find cash advance that range from $250 to $500, you might have to research a bit in order to get the $1000. It is recommended to keep several options open during your  research for a cash advance. This way, if one cash advance firm holds out on you, you could easily switch to another firm.

Most cash advances are a reliable and fast way to get that much needed cash. But considering that the interest´s rate is on the higher side, it's preferable to take up a loan from a loan firm whenever you can.