FOREX

Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all of the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. It is considered optimally efficient.

A microeconomic model of foreign exchange transactions:

Determination of exchange rates using supply and demand diagram

foreign exchange

In this example, a rise in demand for Pound Sterling has led to an increase in the value
of the £ to $
from £1 = $1.50 to £1 = $1.70

The Foreign Exchange market is one of the most efficient markets globally where currencies clearing prices or exchange rates are determined and traded optimally. The theoretical representation of optimal efficiency is the “Pareto Optimal” efficiency condition in market exchange as follows:

"Pareto optimality" is a formally defined concept used to determine when an allocation is optimal. An allocation is not Pareto optimal if there is an alternative allocation where improvements can be made to at least one participant's well-being without reducing any other participant's well-being.

The point at which the Marginal Rates of Substitution by countries A and B for currency X and currency Y are equal (MRSA = MRSB) which therefore equals the currency exchange rate (Px / Py ).

Formally: MRSAxy = (MUiX / MUiY) = MRSBxy = (Px / Py )   for   i = A,B

Also see: The Edgeworth Box and Exchange: http://www.digitaleconomist.org/ex_4010.html

Factors influencing exchange rates

  • Interest rates  – higher interest rates encourage hot money flows and demand for currency. This causes an appreciation.
  • Economic growth – higher economic growth will tend to cause an appreciation in the currency, this is because markets expect higher interest rates – when growth is rapid.
  • Inflation – higher inflation makes exports less competitive and reduces demand for the currency. This causes a depreciation
  • Confidence in the economy/currency.
  • Current account deficit/surplus. A large current account deficit is more likely to cause depreciation in the value of the currency because money is leaving the economy to buy imports.

Appreciation of exchange rate

If the Pound Sterling appreciates in value, the effects will include:

  • UK exports more expensive abroad – leading to lower demand.
  • Imports into the UK will be cheaper, increasing demand for imports
  • An appreciation will tend to reduce inflation,
  • Lower economic growth – due to reduced demand for exports.
  • Worsening of the current account deficit (because imports are cheaper and quantity of imports rises, but exports are more expensive and quantity falls)
  • Strong Pound = Imports Cheaper, Exports Dearer. SPICED

 

Depreciation / Devaluation

If the Pound devalues then we will see:

  • UK exports become more competitive, increasing demand for exports
  • Imports become more expensive, leading to lower demand for imports
  • A depreciation of the currency will tend to increase economic growth but also cause inflation.
Evaluation of exchange rates

Elasticity of demand. If there is a depreciation in the exchange rate, exports are cheaper, but the amount quantity increases depend on the elasticity of demand. If demand is price inelastic, then a depreciation will have a limited impact in increasing demand and improving economic growth. If demand for exports is elastic, then there will be a big boost to exports.

Time Lag. In the short term, demand for exports is often inelastic but becomes more price elastic over time.

Reasons for depreciation/appreciation. Often it is most successful economies who see appreciation. The currency appreciates because there is more demand for their exports. Therefore, in this case, a depreciation won’t cause a fall in economic growth – only limit the growth rate. If the currency appreciates due to speculation, during a period of weak economic growth, then the negative effect on growth may be more pronounced.

Currency pairs traded

foreign exchange

A currency pair is the quotation and pricing structure of the currencies traded in the forex market; the value of a currency is a rate and is determined by its comparison to another currency. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. The currency pair indicates how much of the  quote currency  is needed to purchase one unit of the base currency.

BREAKING DOWN 'Currency Pair'

All forex trades involve the simultaneous purchase of one currency and sale of another, but the currency pair itself can be thought of as a single unit, an instrument that is bought or sold. If you buy a currency pair, you buy the base currency and implicitly sell the quoted currency. The bid (buy price) represents how much of the quote currency you need to get one unit of the base currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. The ask (sell price) for the currency pair represents how much you will get in the quote currency for selling one unit of base currency.

For example, if the USD/EUR currency pair is quoted as being USD/EUR = 1.5 and you purchase the pair, this means that for every 1.5 euros that you sell, you purchase (receive) $1 in U.S. currency. If you sold the currency pair, you would receive 1.5 euros for every $1 you sell. The inverse of the currency quote is EUR/USD, and the corresponding price would be EUR/USD = 0.667, meaning that 66.7 cents in U.S. currency would buy 1 euro.

Major Currency Pairs

There are as many currency pairs as there are currencies in the world. The total number of currency pairs change as currencies come and go. All currency pairs are categorized according to the amount of volume that is traded on a daily basis for a pair. The currencies that trade the most volume against the U.S. dollar are referred to as the major currencies. These include the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD. All of the major currency pairs have very liquid markets that trade 24 hours a day every business day, and they have very narrow spreads.

Minors and Exotics (cross trades or “crosses”)

Currency pairs that are not associated with the U.S. dollar are referred to as minor currencies or crosses. These pairs have slightly wider spreads and are not as liquid as the majors, but they are sufficiently liquid markets nonetheless. The crosses that trade the most volume are among the currency pairs in which the individual currencies are also majors. Some examples of crosses include the EUR/GBP, GBP/JPY and EUR/CHF.

Exotic currencies pairs include currencies of emerging markets. These pairs are not as liquid, and the spreads are much wider. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar).

WHAT ARE THE BENEFITS OF TRADING FOREX?

If you are an insider who has great knowledge of this industry, then you can play well and make a huge profit. But if you lack knowledge or expertise, then the chances of failures are higher in this industry. There are many benefits of trading forex that you can get from trading. Below we have listed some benefits of trading forex, so have a look at them.

7 BENEFITS OF TRADING FOREX

foreign exchange

1. HIGH LIQUIDITY

Forex is a huge market because of which it is exceptionally liquid. It is the most sought-after ability that can convert an asset into cash speedily. Through the forex trading, you can move a large amount of money in less available time at minimum cost into and out of foreign currency. You can take benefit of it with a single click through which you can trade the currency. The best thing is you never feel like stuck while trading. You can even set up  trading platform  online through which it can be managed automatically whether you are building a profit or want to stop when you are losing.

2. LEVERAGE

Leverage is most important features of  forex trading . That means you have to raise only a minimum amount as an opening deposit to make an entry in the trade world. It gives you the ability to make a profit and as well as keep risk at minimum capital level. You can also increase your potential to making a profit if market favors you and control if it goes against you through the margined trading.

Keep in mind that an increased leverage boost profits as well as losses too. Also, market change can go against you, and your losses can surpass opening amount because of quick movement in the prices.

3. FOREX MARKET OPENS FOR 24 HOURS

Forex market never sleeps, so it is so amazing for those traders who like to trade casually while having their job. You can choose the most convenient time according to your need. Some traders like to trade in the morning, at noon and night. Enjoy  24-hour  duration at any time anywhere in the world.

4. LESS-TO-NO BARRIERS TO MAKE AN ENTRY

If you are thinking that you require a million or two for making an entry as a currency trader, and then correct it yourself as this is not true. Remember that online brokers offer micro and mini trading accounts, with a minimal cost of opening like $25. Try to keep an initial amount with the lowest because it is beneficial for those people who do not have lots of trading capital at the start. They can enjoy and get the outcome of forex trading.

5. PROFIT POTENTIAL FROM INCREASING AND DECREASING PRICES

The forex market has no limitations for steer trading. It means that if you know currency is going to increase in its value, you can buy it quickly. Likewise, if the currency rate is going to be decreased in its value, you can sell it immediately.

6. NO ONE CAN CONTROL THE FOREX MARKET

The best thing about forex trading and its industry is that nobody can control it for quite long. It is a huge market and has many members, so controlling or influencing the market price by a single entity is difficult.

7. NO MIDDLEMEN

Currency exchange allows you to trade directly with the market that is liable for setting prices of your chosen currency pair. You do not have to worry about with the middleman in this industry.

MAXIMIZE YOUR PROFITS IN FOREX TRADING

Forex trading is the most popular way to earn extra income, but people rarely know how to maximize the profits and limit risks effectively enough to achieve success.

One of the major reasons for failure in the currency markets is to be in profit at a time when you trade you see those benefits disappear. Not greed is the cause of this, but just not handling the stop loss in a way to maximize your profits and limit losses.

Forex trading is considered to be one of the best ways to earn money online. Providing a ton of flexibility concerning time and investment, this field can pay dividends if you know how to play the trading game. The ultimate goal is to earn maximum profits as you can while minimizing your losses.

In the long run, some traders tend to have a difficult time staying profitable because their winning trades aren’t much higher than their losing trades. Sometimes, their average winning trade will even be smaller than the average losing trade

There are a number of reasons why forex traders are facing difficulty in maximizing their profit. Here are the three of the most common are reasons:

THREE COMMON REASONs WHY FOREX TRADERS ARE FACING DIFFICULTY IN MAXIMIZING THEIR PROFIT

1. NO PROFIT TARGET IN MIND

It’s hard to get wherever if you don’t know where you are going. This couldn’t be truer for trading. If you don’t have a goal of maximize your profits or profit target in mind, you can easily get distracted or carried away by market noise, which can cause you to close your trade early. First, learn to set your profit targets, and you will see how much easier it can be to hold on to winning trades.

2. YOU DON’T FEEL CONFIDENT ABOUT THE TRADE IDEA

New traders are often guilty of entering trades based on another Trader’s analysis and/or system. Heck, there are times when they copy trades outright, without studying the reason behind the trade idea. In such cases, a trader may be struck with a lack of confidence, which in turn may lead a trader to exit the trade at an inappropriate time.

3. YOU ARE TOO RISK-AVERSE

While knowing how to manage risk is an important trading skill, there is such a thing as being too risk-averse. Remember, you cannot totally avoid your trading risk, but you can manage it to maximize your profits. The trick is to know when a risk is worth taking.

To become successful as a forex trader and maximize your profits, it is important that you have the right mental setup. It will take some training, but you are better off sticking to a trading strategy at all times, especially if it has proven to be successful.

DAY TRADING STRATEGIES

Day trading  is an excellent option who is seeking quick returns in the forex market. The market position is held for a limited amount of time, making it possible to open and close within one day for a  trader . When trying out day trading strategies, your main goal should be making the most of the volatility that can take place within a trading day. Also, they are protecting themselves from the risk that can occur overnight when markets are not open.

Day trading is excellent trading and can give good returns, but can also result in huge losses if one does not have a solid strategy. Day  trading strategies  are necessary when you are looking to capitalize on frequent, small price movements. Below are some day trading strategies.

THREE DAY TRADING STRATEGIES

1. FIND OUT THE RIGHT ENTRY POINT

You will need to understand of supply and demand to get the most out of day trading. When there is minimal supply, there is fixed to be more demand so that the price will go up. If the supply is extreme, then the demand may be low, meaning the price will drop. By looking the way the markets have moved historically, you could make a trade that leads to profit.

2. SET YOUR LIMIT

You may be intrigued to trade a large amount of your trading account if you are experiencing what looks like a streak of a good chance. However, you need to have a good budget and then set a percentage of your total budget to trade for any position for the day that you want to take up.

This position may be 10%, and you would need to assure that you do not exceed it. Even if it appears like you are missing an opportunity, it is better to stay disciplined.

3. KNOW WHEN TO TRADE

The most volatile trading time during the day is within the first opening two hours of the trade when market sessions overlap, and the last hour before trading closes. At this time when you trade you are more likely to make a profit as price movements are at their largest.

To ensure that these day trading strategies work for you, here are some tips on day trading for beginners.

  1. Start with small by trading a maximum of two pairs when you start out. It will make it simpler for you to track your trades.
  2. Do Research – Having the latest forex market news at your fingertips help you to create the entire list of currencies that you should trade.
  3. Have the right tools which include a computer or laptop, an excellent, a broker, reliable internet connection and the right trading platform.
  4. Manage your expectations for both  profit and loss, and ensure that the methods you are using for entry & exit of trade are well outlined.

Day trading helps you make some money with ease; using your mind and a strategy to get profits. As long as you remain disciplined, follow through with your trading plan and practice patience, you are taking leaps and bounds to high returns.


FOREX RISK MANAGEMENT

Risk management is a combination of various ideas for controlling your  trading risk . It can be limiting your trade lot size, hedging, trading only during some hours or days, or knowing when to take losses.

WHY IS FOREX RISK MANAGEMENT IMPORTANT?

Risk Management is the essential ideas to surviving as a forex trader. It is an easy concept to understand for traders, but more difficult to apply it. Brokers in the market like to talk about the benefits of using leverage and keep the focus off on the disadvantages.

It helps traders to come in the trading platform with their proper mindset that they should be taking a large risk and aim for the big profit. It seems all too easy for those that have done it with a demo account, but once real money and emotions come in, then the things change. It is where the actual risk management is essential.

CONTROL YOUR LOSSES (the stop loss order)

The best way of forex risk management is to control your losses. First, know when to cut your losses on a trade. You can use a mental stop or hard stop. A mental stop is when you place a limit to how much pressure or drawdown you will take for the trade. A hard stop is when you place your stop loss at a specific level as you initiate your trade.

Find it out where to set your stop loss is a science all to itself, but the main thing is, it has to be in a way that limits your risk and makes good sense to you. Once your stop loss is placed on your trading platform, stick with it.

It is easy to fall into the trick of moving your stop loss farther and farther out.

If you follow this, you are not cutting your losses effectively, and it will ruin you in the end.

USE CORRECT LOTS SIZE

Every trader will have their tolerance level for risk. Not everyone has $5,000-$10,000 to open an account with, but it is necessary to understand the risk of using the large lots with a small account balance. Keeping a smaller lot size allows you to stay flexible and manage your trades with logic rather than emotions.

TRACKING OVERALL EXPOSURE

While using reduced lot size is a good thing, it will not help you very much if you open too many lots. It is necessary to understand correlations between currency pairs.

Example: If you go short on USD/CHF and long on EUR/USD, you are exposed two times to the USD and in the same direction. It relates to being long two lots of USD.

Risk management is all about keeping your risk in control. The more you control your risk, than the more flexible you can be when you need to be. Forex Trading is all about the opportunity. Traders need to act when those opportunities come to you.

By limiting your risk, you ensure that you will be able to continue to trade when things do not go as per planned and you will always be ready.

The Trading Platform

What is a 'Trading Platform?'

A trading platform is software through which investors and traders can open, close, and manage market positions through a financial intermediary. Online trading platforms are frequently offered by brokers either for free or at a discount rate in exchange for maintaining a funded account and/or making a specified number of trades per month.

BREAKING DOWN the 'Trading Platform'

A trading platform is the software that allows investors and traders to place trades and monitor accounts through financial intermediaries. Often times, trading platforms will come bundled with other features, such as real-time quotes, charting tools, news feeds, and even premium research. Platforms may also be specifically tailored to specific markets, such as stocks, currencies, options, or futures markets.

When deciding between trading platforms, traders and investors should consider both the fees involved and features available. Day traders and other short-term traders may require features like Level 2 quotes and market maker depth charts to assist in decision-making, while options traders may need tools that are specifically designed to visualize options strategies. Lower fees are always preferable, but there may be a trade off to consider.

Some trading platforms may be agnostic to a specific intermediary or broker, while other trading platforms are only available when working with a particular intermediary or broker. As a result, investors should also consider the reputation of the intermediary or broker before committing to a specific trading platform to execute trades and manage their accounts.

Finally, trading platforms may have specific requirements to qualify to use them. For example, day trading platforms may require that traders have at least $25,000 in equity in their accounts and be approved for margin trading, while options platforms may require approval to trade various types of options before being able to use the trading platform.

The most popular platform for many foreign exchange (forex) market participants is MetaTrader, which is a trading platform that interfaces with many different brokers. Its MQL scripting language has become a popular tool for those looking to automate trading in currencies.

 

MetaTrader 4

The best Forex trading platform

MetaTrader 4 offers the leading trading and analytical technologies, as well as additional services. It has everything you need for Forex trading.

  • Analyze quotes of financial instruments using interactive charts and technical indicators
  • Flexible trading system and support for all order types allow you to implement any strategy
  • Examine currency quotes from various perspectives with more than 65 built-in technical indicators and analytical objects
  • Copy deals of successful traders directly in the platform using the Trading Signals service (social trading)
  • Trading alerts will notify you of favorable market conditions
  • Visit the Market — the biggest online store of trading robots and technical indicators
  • Test any trading robot in the Market before purchasing.

Your MetaTrader 4 desktop platform is integrated with the MetaTrader 4 mobile application for Android and iOS. Specify your MetaQuotes ID to receive push notifications from launched trading robots and scripts directly to your smartphone.

The powerful MetaTrader 4 trading system allows you to implement strategies of any complexity. The Market and pending orders, Instant Execution and trading from a chart, stop orders and trailing stop, a tick chart and trading history — all these tools are at your disposal.

With MetaTrader 4, trading becomes flexible and convenient.

  • 3 execution modes
  • 2 market orders
  • 4 pending orders
  • 2 stop orders and a trailing stop

The MetaTrader 4 analytics

Analytical functions are one of the MetaTrader 4 platform's strongest points.

Online quotes and interactive charts with 9 periods allow you to examine quotes in all the details quickly responding to any price changes.

23 analytical objects and 30 built-in technical indicators greatly simplify this task. However, they are only the tip of the iceberg.

The free Code Base and built-in Market provide thousands of additional indicators raising the amount of analytical options open to traders. If there is a movement in the market, you have the analytical tools to detect it and react in a timely manner.

  • Interactive charts
  • 9 timeframes
  • 23 analytical objects
  • 30 technical indicators

Trading signals and copy trading

No time for trading? That is not a problem, since MetaTrader 4 can automatically copy deals of other traders. Select your provider, subscribe to a signal and let your terminal copy the provider's trades.

Thousands of free and paid signals with various profitability and risk levels working on demo and real accounts are at your fingertips.

The MetaTrader Market

The built-in Market is the best place to find an Expert Advisor or a newest technical indicator.

Buy any of the hundreds of trading robots or indicators and launch them without leaving the platform. The purchase is simple, transparent and secure.

  • the widest selection of trading applications in the world
  • 1 700+ trading robots and 2 100+ technical indicators 
  • free and commercial products

Algorithmic trading

Almost any trading strategy can be formalized and implemented as an Expert Advisor, so that it automatically does all the work for you. A trading robot can control both trading and analytics freeing you from the routine market analysis.

MetaTrader 4 provides the full-fledged environment for the development, testing and optimizing algorithmic/automated trading programs.

You can use your own application in trading, post it in the free code library or sell in the Market.

  • The MQL4 language of trading strategies
  • MetaEditor
  • Strategy tester
  • Library of free trading robots
Mobile trading

Smartphones and tablets are indispensable in trading when you are away from your computer.

Use the mobile versions of MetaTrader 4 on your iPhone/iPad and Android devices to trade in the financial markets.

You will certainly appreciate the functionality of the mobile trading platforms that include the full support for the trading functions, broad analytical capabilities with technical indicators and other graphical objects. Of course, all these features are available from anywhere in the world 24 hours a day.

  • Support for iOS and Android OS
  • Full set of trading orders
  • Analytics and technical indicators
Alerts and financial news

The latest financial news allows you to prepare for unexpected price movements and make the right trading decisions.

Alerts inform you about certain events, so that you can take appropriate measures.

  • Current financial information
  • Timely notification
  • Different market conditions

A Day in the life of FOREX trading

FOREX-Dollar trades in narrow range as investors await Fed rate decision

November 07, 2018

* Dollar bulls eye FOMC decision due later on Thursday 11/08

SINGAPORE, Nov 8 (Reuters) - The dollar traded in a narrow range versus major peers on Thursday as investors took in the U.S. midterm election results, and turned their focus to the Federal Reserve's monetary tightening path.

The US election results were as the market expected; a split Congress with Democrats winning control of the House of Representatives and Republicans cementing their majority in the Senate.

Traders initially reacted to this result by selling the dollar on Wednesday as the likelihood of further fiscal stimulus faded.

However, the dollar recouped most of its losses versus the euro and yen by the U.S. close as focus shifted away from politics to the Fed's monetary policy.

The central bank's Federal Open Market Committee (FOMC) is due to release its latest policy decision on Thursday.

The Fed has raised rates three times this year as the U.S. economy boomed and inflation started to pick up. It has signaled a rate rise in December, with two more hikes by mid-2019.

"The dollar is likely to benefit as we still expect the Fed to maintain its hawkish stance. The U.S. economy needs rising rates as wage pressures are building and there is a risk of an overheating of the economy," said Sim Moh Siong, currency strategist at Bank of Singapore.

The dollar index .DXY, a gauge of its value versus six major peers traded at 96.19 on Thursday, gaining 0.21 percent.

The Japanese yen: The dollar strengthened 0.1 versus the yen to trade at113.61 on Wednesday. The dollar has gained around 1.9 percent over the Japanese currency over the last nine trading sessions due to the diverging monetary policies of the U.S. Fed and the Bank of Japan (BoJ).

While the Fed is on track to raise interest rates the Bank of Japan will press on with ultra loose monetary policy because of low growth and inflation.

Reacting to widening interest rate differential between U.S. and Japanese bonds has made the dollar a more attractive bet than the yen, which is often a funding currency for carry trades.

The euro EUR= traded at $1.1429 on Thursday. The single currency had touched an intra-day high of $1.15 on Wednesday due to dollar weakness rather than any substantial improvements in the euro zone's economic fundamentals.

The standoff between the EU and Rome over Italy's budget deficit and concerns over Europe's slowing economic growth have dragged the euro which has fallen 4 percent versus the dollar over the last six months.

The pound traded flat at $1.3124 in early Asian trade after gaining 3.36 percent versus the dollar in the last six trading sessions, as traders bet a Brexit agreement was close.

The New Zealand dollar NZD= traded 0.15 percent lowerversus the greenback at $0.6776. The central bank kept rates on hold at 1.75 percent on Thursday. urn:newsml:reuters.com:*:nL4N1XI0VS

The Australian dollar AUD= traded marginally lower at$0.7272 on Thursday after gaining on the greenback over the previous three trading sessions.

However, traders expect upside in the Aussie dollar will be limited by rising trade tensions between the United States and China, Australia's major trading partner

Bradley Needham & Company provides fast and seamless execution for a range of foreign exchange products.

Bradley Needham is a liquidity provider in the global foreign exchange markets, bringing together buyers and sellers for a broad range of currencies. Our Company delivers superior access to a range of products and trading opportunities in the foreign exchange markets worldwide.

Bradley Needham delivers an array of foreign exchange products to a diverse range of clients, including hedge funds, money managers, corporations, investors and professional traders. Clients can deal directly with our dedicated teams or via our state-of-the-art FX platforms. Bradley Needham can facilitate transactions for spot, forward, options, and NDF instruments in a broad assortment of currency pairs.

Our wide-ranging network of counterparty relationships does more than give us access to the liquidity needed to find attractive prices and timely executions for a wide array of currencies.  It also makes Bradley Needham a unique source for the market information and insights that are needed to tap the FX markets effectively. This network of relationships is underpinned by a solid technological foundation that provides access to the increasing number of Electronic Forex Platforms while delivering highly efficient back office processing.

Specialists in Asian currency pairs

Benefits of working with Bradley Needham

  • Broad and deep liquidity pool: Our large and diverse client base, combined with our high volume of trading, creates a particularly sizable liquidity pool.  This enables us to execute our clients’ transactions quickly and efficiently at attractive prices while maintaining complete anonymity.
  • In-depth market knowledge: Bradley Needham sizable FX team is composed of professionals with extensive experience in every aspect of foreign exchange trading and portfolio management, from research and analysis to trading and transaction processing.
  • Global presence: Our global network of trading desks provides our clients with the local market insights and knowledge that come from being present in a market, as well as having experts to talk to in the same locations and time zones.
  • State-of-the-art electronic solutions: Bradley Needham FX trading platforms integrate the latest electronic trading technology and merge seamlessly with our highly efficient clearing and credit support capabilities.
Currency Management in a World of Uncertainty

Our Forex Trading Desk professionals here at Bradley Needham have in-depth knowledge of the fundamental drivers of exchange rates and track the forces influencing opportunities in today’s currency markets bring to our customers many years of practical trading and commercial hedging experience.

Why Trade Forex

There are approximately 2,800 stocks listed on the New York Stock exchange. Another 3,100 are listed on the NASDAQ.

Which one will you trade? Got the time to stay on top of so many companies?

In spot currency trading, there are dozens of currencies traded, but the majority of market players trade the four major pairs. It is easier to keep an eye on FX than thousands of stocks.

24-Hour Market

The forex market is a seamless 24-hour market. Most brokers are open from Sunday at 4:00 pm EST until Friday at 4:00 pm EST, with customer service usually available 24/7.

With the ability to trade during the U.S., Asian, and European market hours, you can customize your own trading schedule.

Minimal Commission

Combined with the tight, consistent, and fully transparent spreads, Forex trading costs are lower than those of any other market.

Most brokers are compensated for their services through the bid/ask spread.

Instant Execution of Market Orders

Your trades are instantly executed under normal market conditions. Under these conditions, usually the price shown when you execute your market order is the price you get. You’re able to execute directly off real-time streaming prices.

Keep in mind that many brokers only guarantee stop, limit, and entry orders under normal market conditions. Fills are instantaneous most of the time, but only under extraordinarily volatile market conditions, order execution may experience some delays.

Short-Selling without an Uptick

Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long or short, or whichever way the market is moving.

Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. So you always have equal access to trade in a rising or falling market.

There are No Middlemen in Forex Trading

Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees

Spot currency trading is decentralized, which means quotes can vary from different currency dealers.

Competition between them is so fierce that you are almost always assured that you get the best deals. Forex traders get quicker access and cheaper costs.

Buy/Sell computer programs do not control the Forex market.

The stock market is very susceptible to large fund buying and selling. In spot Forex trading, the massive size of the market makes the likelihood of any one fund or bank controlling a particular currency very small. Banks, hedge funds, governments, retail currency conversion houses, and large net worth individuals are just some of the participants in the spot currency markets where the liquidity is unprecedented.

Analysts and brokerage firms are less likely to influence the forex market as they might do with the equity markets market. Analysts in foreign exchange have very little effect on exchange rates; they just analyze the Forex market.

Foreign exchange, as the prime market, generates billions in revenue for the world’s banks and is a necessity of the global markets.

What is a 'Currency Pair?'

A currency pair is the quotation and pricing structure of the currencies traded in the forex market; the value of a currency is a rate and is determined by its comparison to another currency. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. The currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency.

BREAKING DOWN 'Currency Pair'

All forex trades involve the simultaneous purchase of one currency and sale of another, but the currency pair itself can be thought of as a single unit, an instrument that is bought or sold. If you buy a currency pair, you buy the base currency and implicitly sell the quoted currency. The bid (buy price) represents how much of the quote currency you need to get one unit of the base currency. Conversely, when you sell the currency pair, you sell the base currency and receive the quote currency. The ask (sell price) for the currency pair represents how much you will get in the quote currency for selling one unit of base currency.

For example, if the USD/EUR currency pair is quoted as being USD/EUR = 1.5 and you purchase the pair, this means that for every 1.5 Euros that you sell, you purchase (receive) $1 in U.S. currency. If you sold the currency pair, you would receive 1.5 Euros for every $1 you sell. The inverse of the currency quote is EUR/USD, and the corresponding price would be EUR/USD = 0.667, meaning that 66.7 cents in U.S. currency would buy 1 euro.

Major Currency Pairs

There are as many currency pairs as there are currencies in the world. The total number of currency pairs that exist changes as currencies come and go. All currency pairs are categorized according to the amount of volume that is traded on a daily basis for a pair. The currencies that trade the most volume against the U.S. dollar are referred to as the major currencies. These include the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD. All of the major currency pairs have very liquid markets that trade 24 hours a day every business day, and they have very narrow spreads.

Minors and Exotics

Currency pairs that are not associated with the U.S. dollar are referred to as minor currencies or crosses. These pairs have slightly wider spreads and are not as liquid as the majors, but they are sufficiently liquid markets nonetheless. The crosses that trade the most volume are among the currency pairs in which the individual currencies are also majors. Some examples of crosses include the EUR/GBP, GBP/JPY and EUR/CHF.

Exotic currencies pairs include currencies of emerging markets. These pairs are not as liquid, and the spreads are much wider. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar).

FOREX-Dollar rebounds as election jitters settle; focus turns to Fed

November 07, 2018

Singapore - The dollar rose on Wednesday afternoon as investors further digested the results of the U.S. midterm congressional elections, after an initial sell-off on expectations that the election outcome would make further fiscal stimulus measures unlikely.

"There was this expectation that if we didn't get a divided Congress, we might see risk sentiment becoming a little shaky, but since that didn't happen we have a risk-on move," said Tray Scott, senior foreign exchange strategist at Bradley Needham

Market watchers believe the divided Congress will make further tax cuts and deregulation unlikely for now, which contributed to the dollar's early fall.

The greenback has been the surprise winner in the global currency markets this year after Republicans pushed through President Donald Trump's significant tax cuts, and strong economic growth prompted the Federal Reserve to steadily raise interest rates.

By Wednesday afternoon, the focus was turning to the Fed, with the U.S. central bank's Federal Open Market Committee (FOMC) due to release its policy decision on Thursday at the end of a two-day meeting

“Traders are squaring positions ahead of tomorrow's FOMC decision," said Albert Royal, vice president of dealing and trading at Bradley Needham.

The Fed is expected to hold rates steady on Thursday; but the language in the policy statement will be watched closely. Fed Chair Jerome Powell is widely expected to raise interest rates in December, which would be the fourth rate hike this year, as U.S. economic fundamentals remain strong.

“The Fed will likely raise rates next month, but that is already priced in so will not likely  add any additional support to the dollar," explained the Bradley Needham trading desk.

Against a basket of six other currencies .DXY the dollar was up 3.9 basis points on the day, last at 96.031.

Equity markets rallied as investors pushed funds into riskier assets, with the Dow .DJI up 1 percent and the S&P 500index .SPX up 0.9 percent.

The euro EUR= was last up 24 basis points at $1.145.Earlier, the single currency was up more than 1 percent above this year's trough of $1.1301, reached on Aug. 15.

It was our belief at Bradley Needham that the U.S. dollar move last month was overdone and the greenback is now searching for a new, slightly weaker range against the euro and a handful of other European currencies.

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