Currency forex Exchange

Currency forex Exchange

Currency Forex

Let us begin with the instruments that are traded in the forex markets. The reason for this is simple; the basis of currency forex trading is to exchange one currency for another.

The most widely traded pairs are the england Pound and the US Dollar (indicated as GBP/USD), the euros rate and the US Dollar (the EUR/USD pair), the Aussie Dollar and the US Dollar (AUD/USD pair), the USD and the Japanese Yen (USD/JPY pair), and the canadian currency Dollar and the USD (USD/CAD pair). These pairs account for well over 80% of the total volume of the trading in the forex market.

First currency is called the base currency, over which the second one is countered to imply the price of the pair, or commonly referred to as the "cross currency".

Second is therefore called the quote currency and the pair price is recorded in terms of the units of the quote currencyrequired to buy one unit of the base currency.

The bid price is the exchange currency rate at which yourforex broker bids to buy the currency at, while the ask price is the rate the forex broker is asking to sell the currency tothe forex trader. The bid price will always be less than the ask price and the forex trader will buy at the ask price and sell at the bid price.

Forex Market News: U.S. Dollar Showing A Little Strength

United States currency boosted a little bit next to other big currencies in Syndey during morning trade today after its overnight drop. Not to mention, this rise occurred despite the Dow dropping almost two percent due to some uneasy issues regarding financial markets &credit.

However, the dollar is still weak next to the euro, yen and sterling while the Industrial Average for the Dow Jones decreased by 237.44 points. Unfortunately, this is a result of some not-so-good news coming from Citigroup and HSBC Holdings. Citigroup Inc. is apparently looking at some major losses in regards to credit in the fourth quarter of this fiscal year and as a result there might be a handful of lay-off's that could follow.

If you wish to look at things in a more positive light, then keep in mind that early this morning one greenback was buying 107.43 yen, in contrast to last night's New York trade value of 107.32 yen.

"A drop in U.S. equity markets late in the afternoon prompted a mass liquidation of yen carry trades, knocking all primary crosses lower, and taking US dollar/yen down to fresh session lows into the close," mentioned Peter Whitley. Whitley is an analyst at Thomson International Financial Review.

Plenty of tourists are coming across the Atlantic and spending their much-valued Euros around New York City and other surrounding metropolitan areas. This can be great for business-owners and retailers in the United States, but what kind of effect do you think this will have on the forex market in the long run?

Great Forex Blog For News Updates

I know it seems strange that I am telling you about a different forex blog that you should visit, but it is smart to have several different references. This market is rapidly changing and in order to stay on top of it you must get information from multiple places.

This particular blog, which is rather easy to find, is located at www.forexblog.org. They are constantly updating their front page with forex news and they even have a nice little forex newsletter that you can sign up for. Another great thing about this blog is that they have a separate menu where you can choose which type of currency you want to read about.

I suggest that you not only look at the recent news that this blog has to offer, but also dig through some of their archives. It is good to look at historical trends and data in order to fully understand how this market works. It is also a good way to stay on your toes so that you can begin to foreshadow what may or may not happen in the future. Once again, the website you should check it out when you have a chance.

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Most of you may know or have heard of Bill Poulos, a thirty+ year ‘veteran’ of the financial markets. Bill Poulos has been trading the markets since 1974. What separates Bill Poulos from other ‘to-be gurus’ is that he began as a trader and has learned the hard lessons himself and developed the discipline that’s necessary to be profitable on a sustained basis.

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Forex Technical Analysis

The difference between forex technical and is that forex technical analysis ignores fundamental factors and is applied only to the price action of the market. Forex technical analysis primarily consists of a variety of forex technical studies, each of which can be interpreted to predict market direction or to generate buy and sell signals. The technical analysis works by correlating the results and moves of current markets to create a short-term outlook for currencies. The rolling data that is produced throughout the trading day creates the interest in the markets and informs traders of the strong markets to back.

The Trend is Your Friend

Forex technical analysis is largely based around forex market movement trends, thus creating the widely used phrase ’the trend is your friend’ amongst traders. Buying and selling at the right time is the key in maintaining good levels of profits, following a trend is also about knowing where to entry a trade and more importantly where to exit.

Support and Resistance

Support and resistance is the basic of forex technical analysis. Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. Buying and selling at the support and resistance points makes a greater profit margin as long as they remain unbroken.

History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Forex technical analysis uses chart patterns to analyze forex market movements and understand trends. Although many of these charts have been used for more than 30 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

Shorting Stocks Strategy

Shorting Stocks Strategy

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Shorting a stock is the exact opposite of buying a stock. When you short a stock you are hedging your bets that the stock will go down in price unlike when you buy a stock and believe the price will go up. In order to short a stock you must have a margin account with your brokerage firm. In addition you also have to short individual stocks on an up tick but can short the Exchange Traded Funds (ETF’s) on a down tick. Thus as an investor you have more of an advantage shorting the ETF’s than individual stocks.

Many investors try and short a stock way to early as they believe the stock price is way overvalued. However many times a stock that is overvalued in price may become even more overvalued especially when the stock market is in an extended upward move. The proper time to short a stock is after it has encountered its first strong downward thrust and bounced for a short period of time which sets the stage for a second move to the downside.

Lets look at an example. NTES which made a huge move in 2003 eventually peaked in October of 2003 and then made its first strong downward thrust (points A to B). Notice how NTES then found support near its 200 Day EMA (purple line) and 50% Retracement Level near the $40 level. After finding support near the $40 level NTES then rallied on below normal volume but encountered resistance at its 100 Day EMA (green line) and 38.2% Retracement Level near $48 (point C). This set the stage for a second short opportunity as NTES began to stall out near the $48 level. In this example NTES could have been shorted around the $48 level with a Stop Loss Order placed just above the $50 level just in case NTES broke to the upside instead. During the month of December NTES fell from $48 to $35 a share but did find support just above its 61.8% Retracement Level which was near $34 (point D). Thus investors could have covered their short positions at one of two prices with the first at the 200 Day EMA near $40 and the second near the 61.8% Retracement around the $34.

Thus I believe the best time to short a stock is to wait for it to bounce after it makes its first major thrust downward, after going through an extended upward move, and then try and catch the second move downward. When looking for stocks to short make sure they are exhibiting these three characteristics.

1. The stock has already undergone one significant move downward after making a top.
2. The stock then finds support at a certain Fibonacci Retracement Level or Moving Average and rallies on poor volume.
3. The stock then stalls out near its 38.2%, 50% or 61.8% Fibonacci Retracement Level or Moving Average after rallying.