trader’s option

Buying and Selling Currencies

Traders can generate profits (or losses) whether a currency is rising or falling by buying one currency, which is anticipated to gain value against another currency or selling one currency, which is anticipated to lose value against another currency. Taking a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. Alternatively, a short position is one in which the trader sells a currency that he anticipates to depreciate and aims to buy the currency back later at a lower price.

Buying or selling currencies in response to economic or political events which occur are reactive, whereas buying or selling currencies on anticipated events is speculative. The bulk of currency activity is generated by market participants anticipating the direction of currency prices. In general, the value of a currency versus other currencies is a reflection of the condition of that country’s economy with respect to the other major economies.

Trading Forex

Trading FX
Forex Overviewarrow-online
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1. What is Forex?arrow-online
2. Trading Forexarrow-online
3. Forex vs. Stocksarrow-online 4. Fundamental Analysisarrow-online
5. Technical Analysisarrow-online 6. VT Trader - CMS's Trading Softwarearrow-online
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Trading Forex Using fundamental and technical analysis, the individual trader attempts to determine trends in the price movements of currencies, and by buying or selling currency pairs, attempts to gain profits. The most often traded currencies, the major currencies, are those of countries with stable governments and respected central banks that target low inflation. Currencies that often trade along with the U.S. Dollar include the European Euro, the Japanese Yen, and the British Pound as they are the most liquid. A trader can trade these currencies in any combination. CMS Forex also offers the Swiss Franc, and the Canadian, Australia and New Zealand Dollars making for 19 total trading instruments when accounting for all the cross pairs. More "Exotic" currencies are not offered as they are often tightly regulated and simply too illiquid.

How Does Forex Trading Work?

Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you feel is going to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to close your trade at that point, you would have made $100.

Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.

Foreign Exchange (FOREX)

Foreign Exchange (FOREX)
is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

Foreign Exchange (FOREX)

Swing Trading - The Best Way to Trade Forex

Ideal Trading

Swing trading can mean a lot of things. So, a definition is a good place to start. I call anything swing trading that doesn't require you to look at your trades more that several times a day at most.

That's the whole point. Check the market. Put on trades if the market warrants it. Shut off the computer and get on with your life. Sounds good to me.

Timeframes

Usually you wouldn't try to swing trade on anything less than a 1 hour chart. I prefer the 4 hour chart myself. If I had more patience, I would trade the daily chart. However, anything smaller than the hourly charts, and you are starting to get into the market "noise." Trends and breakouts are much clearly the slower the timeframe. Why not take advantage of that?

Does It Fit You?

The thing about swing trading is that it can definitely get boring. You see, you might come upon a stretch where for a week or more, no trades present themselves. Do you have the patience to watch and wait? Or will you jump into the market? Don't answer the question. You really don't know until you've been there and done that.

However, don't go running to day trading if you're having trouble swing trading. First, day trading is harder. Second, just like swing trading, you will have dry spells in day trading too.

Your System

Of course, you need to have a system or methodology. I'm not going to discuss it here as I've already got a page devoted to it. For a very important bird's eye view of the process, have a look at my forex trading system page.



More articles on non-day trading.

Want a forcast of where the rates will be in a 1 1/2 years?
18 Month Forecast of Exchange Rates

Want to where where the best places are to get the inside story on the forex market?
Best Forex Commentary

Can you be totally hedged and still make money?
Forex Trading. Full Hedging, Is It Possible?

Your choices if you choose to enter this market
Forex (fx) Trading Options - What Choices Do You Have?

What makes the best wealth hedge against uncertain times?
The Best Hedge Against Uncertainty - Gold or Foreign Currency?