What is Forex ?

Forex is the world's largest market having a transaction of more than 5 trillion every day also known as foreign excahnge.Forex is a trading platform for people interested in trading different currency pairs against each other and also commodities and stocks and indices and various other instruments.Forex provides immense opportunity to earn through strategical analysis done and has a poetential for the investment to grow from $100 to $10000 as well in a short period of time..

Forex very soon may become every household name because of its potential and freedom to operate 24/5 Forex has raised the standard of living of people involved in trading across the globe by a huge margin and promises to make it much bigger. Considering its accesibility with its decentralised global market, every person once get into the business of forex would find ample of options to get the income not only through trading but various such sources with forex segment. People across the globe earn in referrals up to $1000 monthly as its not just referral but till the time your referral trades, you keep earning. One major benefit of forex to an individual is that the person is always updated with the happening around the world on daily basis and is aware of the major events that may occur which includes political, natural or business that may affect the market. Knowledge is available everywhere however what we do with the knowledge is what matters. So test your knowledge or learn through it, Forex is a journey that will certainly become a part of you forever once you walk on its path. though people have also lost their money, there still remains a curiosity in people's mind to learn forex n keep trading because of its huge potential to recover the loss in no time..

Best time to invest in forex :

NOW is always the best time to invest as the only possibility for you to know the market is to enter into it. Its like a person who would like to learn how to swim will have to get into the water. So if you have knowledge of the world and if you are interested in turning that knowledge into money then forex is the best option for you. Edeal markets is the platform where people have managed to make their side income into a full time forex business management.


Overview

Post world war all major currencies of the world were fixed against the value of gold and under international deal at a conference held at Bretton Woods. This system stabilized the exchange rates at the beginning but later became unsustainable when economies developed and gold prices soared. This gold standard system was discontinued in 1971 which enabled the exchange rates to float freely. In the late 90’s when there was a breakthrough in the internet adoption, banks created online networks to create quotes which are automated in nature to provide instant trading experience. Advanced technology paved the pathway for individuals to trade in foreign exchange for the first time.

Detailed study

Trading has been around for a while. Way before there was a modern economy and civilization existed, thus therefore the concept of money evolved. The evolution of concept of money finally settled in a commodity called gold. Almost all the trades in the early centuries happened only through exchange of gold and therefore the gold became the global currency, it is recognized and used worldwide and also can be compared with US dollar which is also recognized everywhere around the world. In the later centuries when the volume and frequency of the trades expanded it became difficult to carry around so much gold. Thus paper currencies came into existence. The paper money is not recognized as money back then; it was just a representation of money as receipt for the gold. This monetary system wherein the prices of everything in the economy were fixed by gold is known as the gold standard, it is probably the best way to manage an economy. Gold functioned as an efficient medium of exchange on the individual level as it did on the national level as well. The prices of all the currencies were fixed in terms of their weight in gold.

Gold Exchange Rates

The gold standard was very efficient in multiple ways. One of the ways it promoted efficiency is, it did not allow for imbalances to grow in the market. For instance, if there was foreign trade between two currencies and one was importing a lot from the other, then the importing country would have to pay out a lot of gold to the other. The falling amount of gold in the importing country would create a situation of deflation and the prices would automatically fall making its internal prices lower and therefore making the imports look expensive. Similarly, the exporting country will witness a huge inflow of gold. Increased gold in the money supply will lead to inflation and therefore the prices of goods will increase making the exports expensive. The gold standard would therefore automatically prohibit an unhealthy trade imbalance between two countries..

The Nixon Shock

The gold standard was prevalent in the world in one form or the other till 1970. It had been replaced and renewed many times. However, it was still present till the 1970’s. In 1971, President Richard Nixon of the United States closed what is called the gold window. Thus, he effectively took the world off the gold standard. This meant that currency notes which were earlier redeemable for a fixed weight of gold now could not be redeemed. This event is known as the Nixon shock since such a bold move had not been anticipated by the entire world and sent shockwaves in the global economic system.


Things to Know

Currencies have been on a roller coaster ride with record breaking highs and lows. The world of foreign exchange is dominating news headlines, but what does it mean, and more importantly, what do you need to know before you get on board? First of all, it is important to understand that trading in the Foreign Exchange market involves a high degree of risk and traders should know to stop losses.


Forex in nutshell

Forex, also known as foreign exchange or FX, is a global market where the world’s currencies are traded. Essentially, it’s the exchange of one currency to another. Forex is the largest, most liquid financial market in the world with turnover in excess of $5 trillion every single day.

Points to remember:

  • There are many firms that don't charge commissions – you pay only the bid or ask spreads.
  • There is 24 hour trading – you dictate when to trade and how to trade.
  • You can trade on leverage, but this can enlarge potential gains and losses.
  • You can focus on picking from a few resources rather than from infinite stocks.
  • Forex is easily accessible – you don’t need huge investments to get started.
  • Currency values are constantly changing, with a number of factors affecting how much eachone is worth.
  • Forex Traders will buy a currency that they think will rise in price and sell a currency they feel will depreciate in value.

For example, if they have Euros but feel the price is weakening, they might exchange these for GBP, which they have forecasted will rise in value. Then, when they go to buy Euros back, they will be able to buy more than they started with – meaning they’ve made a profit. Although the fluctuations will often be quite small, these can become incredibly significant when large values are exchanged.

Who can trade in Forex?

Forex traders and investors are a diverse group, coming from a broad spectrum of backgrounds, ages and disciplines. From the individual who is brand-new to the market, to the most seasoned currency trader, engaging in forex is one of the most common methods of participating in the world’s financial markets. Considering the low entry barriers, seemingly all one needs to begin trading forex is a computer, internet connection and brokerage account. While each person enters the marketplace with a unique set of goals and objectives, forex traders are typically divided into two major categories: institutional and retail.

Institutional Forex Participants

The largest players in the forex market are institutions, or institutional traders, and investors. Institutional money accounts for the majority of forex trading, estimated to be approximately 94.5% of the market volume.

Retail Forex Participants

The second classification of forex market participants is known as “retail.” In contrast to the institutional traders, retail traders and investors trade for their own private account, risking their own capital.

Pick your broker wisely - An efficient broker should enable you with

  • Supply their clients with a forex trading platform
  • Provide real-time market quotes
  • Execute buy and sell orders
  • Allow their clients to trade on margin
  • Carry out market analysis and provide recommendations
  • Ensure their clients’ security and anonymity

How to make profit from Forex?

One of the most difficult things for forex beginners to understand is how you make profits trading currencies. At the same time, since we don’t charge commissions, many people don’t understand how we make money either. Here are the answers!

How do you make money?

Let’s take an example based on the graph below:

  • You open an Classic Account with €2,000
  • You think the Euro will go down against the US dollar
  • You decide to sell 200,000 Euros once the bid price reaches 1.2850 US dollars
  • Because you are on 1:100 margin, this costs €2,000 – we provide the other €198.000
  • There is no margin left in your account at this point
  • The Euros you sold are worth $257.000 US dollars
  • You decide to buy Euros once they go down to an ask price of 1.2750 US dollars
  • The Euro ask price reaches 1.2750 US dollars and you buy
  • This costs $255,000 US dollars
  • You have now sold 200.000 Euros for $257.000 and bought them for $255,000
  • The difference is $2,000 US dollars or €1568 Euros
  • Your profit for a €2,000 investment is €1568 Euros – a 74.43% return!

Here’s another example:

  • This time you think the Euro will go up
  • You open a Cent Account with 20 US dollars
  • You decide to buy 1500 Euros when the Euro ask price goes down to $1.2750
  • It does and the cost is $1912.50
  • Because you have 1:100 margin this only costs you $19.12 – we provide the rest
  • The Euro then goes up to 1.2850 US dollars
  • You sell your 1500 Euros for $1927.50
  • Your profit is $15.00 – a 75% return on your $20 investment!

How do we make money?

You’ve made money trading Euros and dollars. We don’t charge any commission, so how do we make money? Notice in the example above that we talked about bid prices and ask prices. These aren’t the same:

You’ve made money trading Euros and dollars. We don’t charge any commission, so how do we make money? Notice in the example above that we talked about bid prices and ask prices. These aren’t the same:

  • The bid price is what you pay when you’re buying currency
  • The ask price is what you get when you’re selling – and is less than the bid price

The difference between the two is known as the spread. This is where we make our profit. In the first example above, the spread is 0.0002 or two points, and so our profit is about $30 on $200,000

Managing your risk

In the examples above, the dollar moved in the direction you expected. However, it could move in the opposite direction, and you could lose money. There are a number of things you can do to manage this risk:

  • Change the default 1:100 margin for your account – 1:10 for low risk or 1:500 for high risk
  • Manage your money by spreading it over several investments

Use a number of otherrisk management methods


How to choose forex broker?

Forex brokers:

  • Supply their clients with a forex trading platform
  • Provide real-time market quotes
  • Execute buy and sell orders
  • Allow their clients to trade on margin
  • Carry out market analysis and provide recommendations
  • Ensure their clients’ security and anonymity
  • Online tutorials and guides
  • Analysis of your trading performance
  • Android and iPhone applications
  • Free deposits and withdrawals
  • Fast withdrawal processing
  • Partner rebates from 50% to 65%
  • 24×5 customer support

Unless you’re a major financial institution trading directly in the forex market, you need a broker. How do you evaluate brokers and choose the right one for you?

Selection criteria

Aside from services and cost, there are a number of other factors you should consider. Your broker must meet the following criteria:

  • Have a license
  • Execute orders quickly and accurately
  • Know the forex market inside-out

Why eDeal ?

We believe in building long-term relationships with our clients. We’re committed to your success and embrace the following values:

  • Honesty – we always act in your best interests
  • Partnership – we provide the tools and information you need to succeed
  • Competence – our forex experts know the market and share their knowledge

We encourage you to compare. When you’re finished, open a Cent Account or Classic Account.


Reviews

Forex broker reviews are published regularly in the media, and these are a good starting point. They will tell you what services the broker provides and how much they charge. For example, here are some of the services provided by eDeal , all of which are free:

  • Industry-leading MetaTrader 4 forex trading platform
  • Real-time quotes and order processing
  • Trading bonuses up to 25% of the spread
  • Dow Jones news feeds
  • Daily market data, analysis and tips
  • Forex training, seminars and consultation

Forex strategies

Each beginner on the international currency market approaches their operations with utter seriousness. The very first day poses a very justified question: what is the way to play in order to at least avoid loss in the long term? Forex trading strategies will help.

Forex strategies: programmes for functioning on the market

By applying a specific algorithm applicable to a specific market situation, the Forex strategy determines a trader’s action on the market. On the internet, you will find a number of various Forex strategies invented by traders that will guarantee profit given a specific market state. Successful traders have their own Forex strategies which they will obviously never share with the public because this is their own income mechanism, honed over the course of months if not years.

Newbies and Forex strategies: Is success guaranteed?

There is another obvious fact as well: not even the most loss-proof play methodology will bring a new user millions straight away. The market always changes, and newcomers simply cannot adjust to the new situation here in time. Forex strategies are based on success and failure, on chasing profits along a road that is known for its pitfalls.

What Forex strategies to use

There are a number of universal Forex trading strategies that allow you to stay afloat for a long time without going in the red. Overall, using some Forex strategy on the market is required, because random bets will not bring a positive result. This has been proven time and time again. Of course, sometimes this may turn into a very successful deal or two, but stable profit becomes impossibility over time.

The experience of professional traders shows that a personal Forex trading strategy is the most efficient and comfortable solution for a trader. You will no doubt agree that an active, risk-taking person and their more cautious, risk-aware colleague who scrutinises the situation before making a move are unlikely to use the same methods. Only by trying out new things will you be able to select a path that suits you the most. You will see that rules that clash with your own values are hard to follow.

Economic indicators

Macroeconomic performance characterises economic development, indicating economic growth or decline. Based on these measures, price shift trends may be predicted. Thus, it may be said with certainty that publishing of favourable data may lead to considerable and long-term shift in exchange rates. These performance indicators include Nonfarm Payrolls, GDP, Industrial Production, CPI, PPI and a number of other macroeconomic performance indicators.

The date and time of a specific indicator being published are known in advance. There are so-called calendars of economic indicators and major events in the functioning of some countries (noting specific dates or approximate release time). The market prepares for such events. There are expectations and forecasts on the value of a given indicator and its interpretation.

The release of data may lead to sharp exchange rate fluctuations. Depending on how market participants interpret a given indicator, an exchange rate may swing either way. This swing may either reinforce or adjust an existing trend, or even start a new one. A given outcome depends on several factors: the market situation, the economic situation of countries hosting the currencies, prior expectations and attitudes, and, finally, the value of a given indicator.

Maintaining a Trading Journal

The trading journal should contain is a summary of your trading plan or approach, in a statement of intent, listing the type of trades you are intending to pursue. For example, you might note your intention to pursue swing trades in equity indices or FX majors. You should also note your minimum risk-reward ratio and money management rules, such as the percentage of your overall capital you will commit to a trade and the number of concurrent open trades you will allow yourself. Having these guidelines and rules at the top of the journal will act as both a reference and reminder to you going forward and allow you to look back after a period of trading to determine how well you have followed your trading plan.


Relative Values

This is where FX trading began. Ancient merchants needed a common medium of exchange or a basis to value one currency versus another. The simplest way was to compare the cost of a commodity considered valuable in different economies. Various commodities were used, but the one that stood the test of time was gold. If you knew the cost of a fixed amount of gold in economy A as well as within economy B, then you’d have had a very plausible basis from which to decide what the exchange rate between the currencies of A and B should be.

For example, if gold was twice as expensive in currency B versus currency A, then the rate of exchange between the two currencies should have, in theory, been two to one, all other things being equal. Modern markets have become considerably more sophisticated since ancient times, but concepts such as Purchasing Power Parity (a measure of the ongoing spending power of a currency) are still fundamental when it comes to calculating relative FX valuations.

Macro Data,Central Bank Policy,Changes & Deviations

As markets evolved, so did the need to know more about the instruments people traded, and the drivers of the price behind them. At the same time, governments wanted to know as much as they could about the countries they managed and their economies, so they set about gathering as much data as they could. The advent of computers and the emergence of internet technology aided this information-gathering process even further. Market participants were able to gain access to this macro data through the network as it became widely distributed and available in near real time. A standardized economic calendar was formulated with regular release dates for data, and these dates were known in advance.

Questions to ask yourself before you start trading

  • How I am going to trade
  • When I am going to trade
  • What I am going to trade
  • How much money I should put up
  • Money Management
  • Trade Diary

Supply And Demand

As with all markets, FX is subject to the flow of supply and demand. Even in instruments that turnover hundreds of billions of dollars per day, we can see these forces at work. Consider the following scenario:

As demand for an instrument rises, the price that market participants are prepared to pay to own that instrument rises in tandem. Sellers of that instrument, at current price levels, are taken out (traded with), or withdraw their orders, and the price rises to a new threshold, which is sufficiently attractive to tempt fresh sellers into the market. Buyers now have the opportunity to trade with sellers at the higher price. If the buyer’s demand outweighs the seller’s supply at this new price level, then the instrument’s price will rise once more. However, if the sellers outweigh the buyers, then the price will fall until it finds a point at which buyers are tempted back into the market.

Build your Trading Plan

Trading is a discipline as much as it is a skill. To succeed in trading, we need to create a system or routine that encourages the good habits and discourages the bad. By building a trading plan, you’ll define a set of rules or guidelines that you can always refer back to, allowing you to keep your trading disciplined, systematic and on track.

Ground Rules

When we create our trading plan we start with the overarching goal or objective. It’s critical to ask yourself what you want to get out of trading. If your targets or objectives are financial, make sure they are realistic and attainable based on your experience with trading and the time, effort and resources you can commit to it. For example, if one of those goals is to make a million dollars in a year, spending just one hour a week on trading, then, that is not a realistic goal.


Risk Management

The first thing to decide is why you want to take on risk in the first place, and what you want to achieve by doing so. In the context of the financial markets, the answer will most likely be around making money or increasing your capital, and to do so you’re willing to risk some of the money you currently have. That brings us to our first rule which is: you should never speculate with anything other than risk capital, or if you prefer money that you can afford to lose.

Speculation is not the same as investing, particularly when that speculation is undertaken through the use of leveraged products that don’t grant the ownership of the underlying instrument to the speculator or trader.


Correlation

Correlation describes the mathematical relationship between two or more variables, for example, two financial instruments. Correlations can be positive, where a change in the price of instrument A results in a change in the same direction of the price of instrument B; negative, in which a change in the price of instrument C results in a change in the opposite direction in the price of instrument D; or uncorrelated where the two instruments move independently of each other. Our fourth rule, therefore, is: don’t open multiple positions in different instruments without knowing how they are related.


Money Management Rules and Stop Losses

One of the biggest and most frequent mistakes new traders make is to ignore their own money management and stop loss rules that are designed to protect their capital and keep them in the ‘game’ for the longest possible time. Traders tend to convince themselves acting rationally in doing so, when in fact they’re not. There is a well-documented bias known as loss aversion, whereby traders won’t acknowledge a trade is wrong but rather than closing the position or letting a stop loss take effect as they should, they allow losing positions to remain open, perhaps moving stop losses further out or disregarding them altogether.


Freely Floating Currencies

When President Nixon took the world of the gold standard, all the currencies of the world suddenly had no backing in gold. This meant that the exchange rate between them could not simply be calculated using arithmetic, rather the value of a currency now depended on a variety of factors. A lot of these factors were under the control of governments. Hence, there was the need of a market where the exchange rates will be determined on a real time basis based on the information flowing through the markets. Since the Forex market was where currencies have always been exchanged, it was well positioned to take up this role. The Forex market therefore came into prominence when the world went off the gold standard. This is because during the gold standard, there were no exchange rates to determine. It is only after gold was removed as the common denominator between currencies that all of them became freely floating and there was a need to value them against one another.

Bretton Woods Agreement

The European countries were fighting World War II. As such the economies of the world had been destroyed. Many countries had resorted to printing money to be able to finance the humungous war expenses. Therefore, there was an alarming threat that as soon as the war got over, many economies in Europe would simply implode because of the natural instability in their currency markets. As such to prevent such an outcome from happening, all the countries in the world, with all the prominent political leaders and economists held a conference at Bretton Woods in the United States. This came to be known as the Bretton Woods conference and had huge implications on the future monetary system and evolution of the Forex market.

Objective:

The objective of the conference was to create a new monetary system that could withstand the possible shocks that it would receive once the war ended.

This meant that the conference was meant to create a system that would enable the nations to avoid rapid depreciation and complete fallout of their currency systems.

Arrangement:

The arrangement decided at the Bretton Woods system was slightly complex as compared to the gold standard that was already in place.

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