Get Clear Information About Forex Trading And Its Uses
Forex market is similar to the trade market where the people trade company shares. But in the forex market they trade the foreign currencies instead of shares or commodities. No doubt that this is the biggest financial market with over $5 trillion in daily transactions which is much bigger than futures and equity markets made up together.
Normally, the forex market opens with Monday morning in Asia and works till Friday afternoon in New York where as trade markets generally close by end of the day of the country. Top three currencies in the forex market are Dollar, Euro and Yen of Japan. Normally there are three different strategies used by the traders in the market namely scalping, day trading and swing trading. Scalping is the strategy in which they trade for very short period of time from seconds to few hours. They will cash in with the sudden change of the value and make profit in that.
Day trading strategy in Forex
Forex strategy is the technique used by the trader to determine whether to sell or buy the currency at any given point of time. The daytrade strategiak is revolving as the right strategy which is being used by the traders in the topmost forex market. Normally, these strategies are based on the charts, technical data and some time based on political events. Here is software that helps the forex traders to arrive at the decision. Normally, day strategy does not require the traders to take the instant decision. Normally, instant decisions are taken by those who involved in the scalping which is one more strategy used in the trading.
Since, Forex is more volatile market than both futures and commodity, the decision taken by the traders will have long term affect on their income. They need to analyze the data which is available and act accordingly. Even that won’t be enough sometime as events which are not in the total control of their hands may influence increase or decrease value of the currency. But any effect in the value of dollar which is the most traded currency in the forex market will have effect on all the currencies throughout the world.
Automated and Manual strategy
Manual strategy requires the trader to be in front of the computer throughout the time they trade and the emotional part of the trader may have some influence on the decisions taken by the trader either to buy or sell. But when the trader chooses the automated strategy it removes the emotional part and trade as per the built in script. Either the trader if he is technically sound can write his own script or get it from those who has already developed. But has to be careful with the off the shelves script as it may not contain all the new strategies as per the market emerging in newer conditions.
If someone wants to enter the forex market as a brand new investor, it will be better if he can spend time studying about the forex markets and how the trade is evolved and how it is being traded around the world. It is highly volatile and high risk market. One has to be careful while doing the trading and for this reason trade is normally consists of wealthy investment management firms, central banks and investors who have large amount of money backing. First thing to do is to select the currency pair in which they want to trade for example Dollar and Indian rupee. Also, they should develop rules governing when to enter the long or short position for the given currency pair and also when to exit the same. This is the must to write the script for the trading. They should keep developing the system so that it is for them to let the automate rule following trading happen with minimal manual intervention.
Learning about forex
There are lots of study materials which are free available in the internet written or directed by the best financial experts in the forex market. They are the best to watch and learn when it comes to the novices. Novices should exercise caution while doing the trading in the initial period. In over enthusiasm, people tend to spend a lot when they are new in both share market and in forex market. Forex market work in a different way compared to the share market and the risks are high in the currency market.
Foreign exchange fixing is the important terminology in this market. This is done by the central banks of the individual countries. Central bank us the fixing time and rate to evaluate the behavior of the currency. Market traders use the fixing rate as the market trend indicator. Some time central bank intervenes several times in a year to make sure their currency remains stabilized and the value do not go below certain level. Fluctuations in the exchange rates are mainly due to actual monetary flows and expectations of changes in monetary flows. These are affected by GDP, inflation and the interest rates also during the annual budget session of the country. AS the trading continues nonstop almost throughout the day when the Asian market closes, European market opens up and when European market ends American market opens up. They close only for the weekends and there will be fluctuation throughout the day.
Supply and demand of any single currency and their value depends on not a single factor but normally influenced by the multiple factors like economical, political and market psychology. Market psychology is the one which cannot be controlled by any one. Some time fear of the value going down is enough for some people to start selling their currency and vice versa. Also, government can control the other two factors. Their fiscal policy and monetary policy will have direct effect on both share and forex markets. Also, growth in the GDP and reduction in inflation level will increase the value of their currency.