14‏/12‏/2008

Currency Pairs: Introduction

What is currency pairs?

Foreign exchange is the trading of different currencies existing in the world. It is the world’s least regulated and largest market which provides maximum liquidity to the investors. Trading in the Forex market is always carried out in the form of pairs known as Currency Pairs. In this, a trader buys one currency and sells the other one. Together, these two currencies make up the ‘exchange rate’.

For example, one may choose to buy Euros in exchange for Dollars with a view that the value of Euros would increase at a higher rate in comparison to Dollar. So if the value of Euro does rise, one can earn the position and thus earn profit. Some of the most widely traded currencies in the world Forex market include:

 US Dollar (USD)
 Euro (EUR)
 British Pound (GBP)
 Japanese Yen (JPY)
 Swiss Franc (CHF)
 Australian Dollar (AUD)
 Canadian Dollar (CAD)

Most popular and frequently traded currency pairs include

 U.S. Dollar and Japanese Yen (USD / JPY)
 Euro and U.S. Dollar (EUR / USD)
 British Pound and U.S. Dollar (GBP / USD)
 U.S. Dollar and Swiss franc (USD / CHF)

In any currency pair, the first currency of the pair is known as base currency whereas the second currency is known as the quote currency or counter currency. The value of the base currency is always taken as 1 that is 1 Pounds, 1 Dollar or 1 Euro.

Trading Currency Pairs for Gaining Maximum Profit

Accounting currency or domestic currency refers to the primary currency of any currency pair. Its price signifies the amount of the quote currency that is required for obtaining one unit of base currency. The rate of currency quote against U.S. Dollars is called direct rate. On the contrary, currencies which are not traded against U.S. Dollars, they are known as cross rate.

When being traded, the quote currency is converted into the appropriate amounts of base currency. For instance, if suppose you observe the quote of USD / JPY to be 1.20, it means that for 1 unit of U.S. Dollar, you will get 1.20 Units of Japanese Yen. Usually, the currency pairs are traded at 100,000 units of base currency. For instance, to buy EUR / USD at 0.96, one will have to pay 96,000 Dollars to get 100,000 Euros.

When the quote goes up, it signifies that value of base currency is increasing or becoming stronger. However, when the quote goes down, it signifies weakening of base currency. The ‘bid and ask price’ is the basis for trade of currency pairs. Bid price is the rate at which one wants to buy whereas the ask price is the rate at which one wants to sell.

The secret behind successful trading is selection of one or two currency pairs for trading when one is a beginner. Once you get the hang of it, you can add more pairs in your portfolio for trading. But when one is new, it is advisable to stick to limited pairs to ensure simplicity.

Forex Pairs: Introduction

What is forex pairs?

Two different currencies having different exchange rates are traded together in the forex retail market. Basically, all trades in forex retail market involve buying the currency of one kind and selling the currency of another simultaneously. The currency pair can be considered as one unit.

In a currency pair, the currency that you buy is called the base currency and the one that you sell is called the quote currency. The bid or in other words, the buying price is said to represent the amount of quote currency needed to have one unit of the base currency. The method of calculating the exchange rates between the forex pairs is done by multiplying the base currency to the factor which is equivalent to the value or purchasing power of foreign currency. These exchange rates of the currency are floating, which means they keep on changing in a continuous fashion according to various multitudes of factors.

One can choose from various forex pairs that are available. These forex pair currencies are subdivided into minor and major currencies. USD, GBP, JPY, CHF, AUD and CAD fall under the category of Major foreign currencies. All other currencies except these seven major ones fall under the category of minor currencies. Some examples of Minor currencies are NZD and ZAR i.e. the South African Rand and many more. Here is an example to show how to find out the value of a forex pair. If it is written that CHF/JYP is worth 84.50, it means that one Swiss franc is equivalent to 84.50 Japanese Yen.

Availability of forex pair is also an important factor. Availability of these pairs could also be found from the website for Trading of foreign currencies. Various websites and internet are common sources for people to participate in forex trading and infact learn about it. Various tutorials are also available on the internet for this. Infact using internet for forex trading is easy and fast over the conventional ways of forex trading.

One must have a keen interest and knowledge about changing economies of the world if he or she wants to have a good hand in forex trading. Markets around the world are actually the driving force behind rise and fall in values of Forex pairs.

If one is a starter in forex pairs trading, one can seek help of PIPs. PIPs are indicators for the market where forex pairs are traded. PIP stands for Price Interest Point. It helps one by representing the smallest fluctuation in the price of a currency pair. As a starter if one wants to make profit, he or she should start with popular pairs. One can try a hand at those currencies which a generally strong. There is no fool proof strategy that one can use as template. Technical traders generally rely on trend lines, resistance levels, support and a variety of mathematical analysis and charts to identify trading opportunities in forex markets.

Forex Options

Most people relate ‘Options’ with Stock Markets. However, the Foreign Exchange Market, also known as Forex Market, also provides the opportunity to trade Options. The Forex Options give the traders and investors a large number of opportunities to increase their profit while limiting the risk.

Types of Options
Forex Options are basically of two types: Traditional Options & Single Payment Options Trading
Traditional Options

The traditional options provide the buyers with the right to purchase anything at a pre-decided time and price from an option seller. For instance, one can purchase an option for buying two groups of EUR / USD at 1.2000 in a month. In this case, if the price of this currency pair remains below the pre-decided rate, the option expires without any trade. However, if the price increases even beyond the set rate, suppose to 1.4000, the buyer can still make use of their option and obtain the currency at the pre-decided rate, which was 1.2000. Thus, it allows the buyer to earn profit by selling the currency at higher rates.

SPOT or Single Payment Options Trading

In a SPOT option, the trader determines a scenario such as the rate of EUR / USD will go beyond 1.2000 in 10 days, obtains a quote for it and gets paid for it when this scenario takes place. SPOT converts options in cash automatically when the option trade is successful, thus resulting in a payout.

Most traders like the choices that one gets due to SPOT. SPOT option is comparatively easier to trade and is all about entering the right scenario. If your estimation is right, you will gain cash. On the other hand, if you aren’t able to form the right estimate, you lose an amount from the premium. SPOT Options also have an added advantage that they offer you one with the choice of varied scenarios, thus giving traders the chance to choose exactly what they want or predict.

On the flip side, SPOT offers demand high premium and cost more than the standard options.

Why Should One Trade Options?

There are a number of reasons behind why one should go for Trade Options. These include:

The risk of losing money is limited only to the premium of the option.
The profit potential is vast and unlimited.
One has to pay lesser money up front.
One is free to choose the date of expiry as well as the price.
Options can be used to trade on market movement predictions with risking a large sum of money.

The Single Payment Options Trading provides a large number of choices to the traders. These include:

Standard option

No-Touch SPOT which means that one will receive the payout when the price does not reach a pre-defined level.

One-Touch SPOT which means that one will gain profit when the price reaches a particular level.

Double no-touch which implies that one will be eligible for a payout when the price does not touch either of the two predefined levels.

Double one-touch implies that one receives a payout when the price touches any one of the two defined levels.

Digit Spot means that one will receive payout when the price is either above or below a particular level.

Automated Currency Trading Systems

Automated systems are a completely revolutionary approach to trading in the forex world. This approach has completely turned the way forex trading used to happen.

The question is how can automated systems in forex produce better returns?

Using an automated forex system means using an automated computer program, emitting physical presence of person. In other words a forex trading robot is used as a trading program that works just as a human being and performs the work of foreign exchange trading. This is not a very old technology that has come into being.

Two basic categories of automated systems in forex trading are explained below:

The first one is automated trading using managed forex. In this system, not all, but some forex managed accounts are used for trading via automated forex. In both the cases the trading is said to be passive that is you do not have to do it.

The second one is Automated trading using WealthLab. In this case one requires programming skills, such as knowledge of programming languages like Pascal etc. One has to select its own parameters and then test your system performance.

There are innumerable numbers of advantages of automated systems in forex trading field.

They are:

One doesn’t have to be physically present for trading all the time.

Automated systems that are used for forex trading are not time bound. That means like human beings, the automated programs does not require sleep. So the trading can take place day and night. Thus there will be much more profit than what usually use to happen.

One can trade on multiple systems using automated systems, such as those systems which rely on various types of indicators, or the systems that trade longer or shorter time frames. This is done in order to diversify risk. One reason could also be to smooth out the equity curve and similarly reduce drawdown.

One big advantage that an automated system has over conventional methods is that it is unaffected by a human’s or the trader’s psychology, which is a very important factor to have good trade and profit. As a result the performance of trading increases.

Some of the automated systems available are so good that that you just need to install it to your compute platform and it starts working according to the live market conditions.

In order to avail all these benefits you must make sure that you choose your automated system for forex trading very wisely. Knowledge of programming language will be an added advantage. It will be beneficial if you check the performance of the automated system by taking a free trial before purchasing it. In case free trail is not available you can have a set of reviews over it.
It is very much likely that in near future more and more programs will come up which will offer special programming skills for these automated systems. Various examples of automated systems are FXTradeStream, HyperOrder, MetaTrader 4, Neoticker, NinjaTrader, Robotic Forex, SnapDragon, Thinking Stuff, Trade Bolt, TradeBullet, TradeCompanion, TradeItself and TWS Link.

Automating forex trading

Most of us haven’t traded with any automated forex system in our lives. We have arrived the closest to the concept by placing a limit order. Metatrading experts are enough to carry us through the trading grinds, we believe. It is quite obvious that automated trading can help pull a player’s profile to a different league altogether. It can help a player remain firmly grounded in the market and make the best out of the moolah raking scene at a given point in time.

It is not that we are not pleasantly awed by the concept of automated forex trading but the issue is that of apprehension towards the brokers. Further we hardly trust the live account platform under expert supervision.

Testimonies from those who have traded with Metatrader are significant. Have they ever found success with the brokers? Have they ever traded with automated software prior? There is software which uses FXCM API but it is important to pre-comprehend if it is anywhere close to being ideal.

Oanda offers API but it comes at an exorbitant cost of $600/month. Developing our system through API’s and brokers who are well-versed with automation is still our best bet though. There can be active hindrances but nothing can eventually work better.

Interactive brokers ideally have C (plus plus), Java and .NET API. Interactive brokers can turn out to be a smart automated trading choice. The reason is simple; the brokers work over a huge platform and thus ask for lesser commission. There repertoire is far more spread and they do not deny trading any aspect of forex for us. This makes them an effective tool for saving money.

Interbank Fx with Metatrader has hit bull’s eye with those newly juggling with the idea of forex automation. It is duly presented with the tag “EA friendly”

MB traders offer new wave automated trading and lets us test on their demo servers. Free testing and development is also permitted by Ninja traders. It offers multi brokerage support and is deemed tidy for Interactive, MB, and Gain Capital.

It is generally recommended to trade in a system which allows a player to form their own designed forex systems. It is fairly correct abstaining from those systems which force us to rigidly play on their designed systems. We can also align to systems which can help us receive signals from portfolio of signal providers.

Weekly FX Market Outlook: Eyes on FOMC Rate Decision

Federal Open Market Committee is to set interest rate on Tuesday Dec. 16. Estimates show the possibility of a 50 basis points reduction when any reduction will bring the federal funds rate below 1.00 percent. With interest rate close to zero, speculations rise about using unconventional measures for supporting the economy.

Deflation Looms

Fear of a widespread deflation continues to dominate markets by darkening outlook for corporate’ profits. Central banks around the world have cut their benchmark interest rates in recent months in response to the sharp slowdown in global economic activities.

In the U.S. and some other major economies like the Britain, interest rates are headed to zero and policymakers’ fear is that they may run out of ammunition, especially if the downturn lasts more than expected. Fed’s Chairman Ben S. Bernanke already announced that he may use unconventional measures to inject money into the system.

As another sign of falling prices, CPI report from the U.S. Department of Labor on Tuesday may show that the cost of living fell sharply in November after a 1.0 percent decline in the previous month. The same day, the FOMC will decide on interest rate.

U.S. Industrial / Housing Sectors

Reports from the Federal Reserve on Monday are expected to show continuing weakness in industrial sector. Industrial Production probably fell in November when the Capacity Utilization, a measure of the extent of capital used in the production, is also expected to stay at low levels.

Housing Starts and Building Permits remain at historical low levels, a Tuesday’s report from the Commerce Department may show. While recent data from the U.S. housing market show no sign of improvement, some analysts believe that it may be near to the bottom.

ECB’s Smaghi in Washington

Early estimates for the Purchasing Manages Indexes on Tuesday probably show that the manufacturing and service sectors in Euro-zone continued to shrink in December.

On Thursday, the IFO survey may show that German businesses are still pessimistic about the future; though a similar survey from the ZEW came better than expected last week.

The recession worsen but the European Central Bank members seems to have different views about how to response. ECB has been more aggressive than ever, but some members want to keep the flexibility for the future. ECB’s Bini Smaghi speaks in Washington late on Monday and the Euro could react to any data that show the direction that the ECB is headed.

Bank of England Minutes

Minutes from the Bank of England on Wednesday may show a consensus among policymakers when they decided to cut the bank rate by 100 basis points on Dec 4. Economic data this week could also confirm their concerns.

Monthly jobless claims probably increased by 45,000 in November and unemployment rate reached to 6.0 percent.

Another report on Thursday is expected to show a 0.4 percent decline in retail sales at the same period, showing consumers become more cautious about spending on anticipation of economic difficulties ahead.

Forex Trading with eToro

Who is a novice? A man who is daunted by techniques involved in a certain discipline. He would always want things to be taught in a very easy manner. What would a trading novice understand about Fibonacci retrenchments, multi-level customizing and so on? Keeping this in mind, an online Forex trading service has launched an intuitive trading platform for all its traders. In the third of a series of broker reviews we talk about the Cypriotic brokerage eToro.

“Innovation at its best”

If you are an absolute novice, eToro’s innovative cash program helps you hone your skills and also offers various cash winning programs to help you with monetizing. Sometimes the program helps you compensate for the trading brokerage. There are traders all across the globe who can add something to your experience and eToro helps in meeting those trader in a real-time, secure environment. Now, if you wish to trade for free or for real money in an absolute real-time environment, here is your chance to go the eToro way.

Traders trade one currency against another. For all such trade, technical know-how is required. eToro compiles all the technicalities in a fun format. This is truly inspirational. Yes, there’re the techniques alright but the presentation makes it easily gullible.

“Long ignored Forex trading”

In fact eToro has an aim in mind. It understands the giant leap that stock trading has taken over the years. In the same span, Forex has played less of a credible part. eToro wants to change all that. It wants to give an easy access to all the novices and amateurs who will add on to the volumes. Today, Forex trading is largely within the domains of professional traders. Actually there are quite a few daunting concepts which beat an amateur so he shies away towards average stock trading.

“Simple screenshots”

To boost its point further, eToro actually practices what it preaches. eToro’s screenshots are a complete revelation. They are so simply made that it needs one simple look for even a teen to understand it. Instead of daunting graphs flying at all kinds of trajectories and making hyperbolas and parabolas, it deals with a sumo, or may be a samurai running against an American athlete; the aim here is to show the resurgence of Yen against US dollar or otherwise.

eToro’s designers, internet panelists and web developers have joined hands to make an intuitive working platform that has been lapped up by people across the globe in something over 1 year. When we deposit money for a real account, it combines us to Retail FX or IFX markets. These are two top of the line forex exchange brokers.

It has invented four games for tackling all the concepts of forex trading:

Forex Marathon- a user can pick two currencies and race them against each other.
Dollar trader- users evaluate and assess future value of dollar.
Globe trader- users can choose a particular currency pair and the amount they want to trade in.
Dollar match-it is a tug-of-war between the currency selected by the user and a different currency.

Forex Trading with Forex cm

Forex Capital Markets (FXCM) is one of the leading desks of online Forex trading in the world. It gives a free Forex trading course and provides micro lots (which enable a trader to open an account for as less as $ 25). It also exploits daily FX, which is a world level news site. Additionally FXCM has a no dealing desk platform and lets you go for fractional pip pricing. Interesting indeed.

“Trade as you might, but trade you will”

Live clients playing in a real-time environment get free Forex trading signals. The clients can look to play from the charts, they can even trade through Meta trader 4 if they so like; though most of the clients go for the third option. This means trading through their proprietary software FX trading station.

Depending on the currency pair you are trading in and also the market liquidity at the given time, spreads can very well vary. Spreads can be as low as 1 pip and obviously taut fractional pip pricing is always there.

Its customer support is by far the best you can align to. They are pro-active and often initiate you on things you thought you needed to know.

“No dealing desk”

FXCM’s no dealing desk platform is a revelation. It passes orders to nine well-established banks. The NDD platforms leverage a trader to trade during period of high volatility and news without having to offer requotes. They can also look to place entry orders while being in the spread. A trader dealing with FXCM does not need to talk through a dealer. He can continue with his trading without any interference from the side of the dealer. Trade restrictions do not apply. The entire ambit of online Forex trading stretches ahead of a trader.

“Forex not well received yet”

In the past, stock trading got all the plaudits, few professional traders dealt in Forex but truly they were few and far between. Today, handsome opportunity being thrown by the major companies has changed all this. Imagine, they are trustworthy as they have a brand name to carry, at the same time they open a Diaspora of options for a trader.

FXCM gives a lot of stress to internal matching of trades. This means, that if a spread is 3 pips and FXCM is able to correlate a buyer and a seller then each would stand to gain three pips. The market scope charting package is another new wave technique that helps with trading pips on a nominal timeframe. So now you can choose to be present for a very short while and still trade Wall Street and Nikkei.

“Dangers pertaining to it”

There are few statutory warnings for Forex trading though. Off-exchange Forex Trading is considered to be a little dangerous anyways. It is more of a speculation and people are asked to adhere to it at their own risk. In fact, it is believed that a 15 percent profit rate for an active day trader is more than sound. Having said this, if a trader believes he can make his mark in Forex, FXCM can prove to be quite a foil.

Forex in Your Investment Mix

It’s an exciting time for Forex trading—volatile, fast-paced, with historic shifts in the international currency markets happening weekly or daily and fortunes being made every hour. And, of course, with fortunes being lost every hour. In these challenging times, what is the place of Forex in your investment mix?

The most important consideration is the risk. Forex investments are extremely risky, with all that implies, both the good and the bad: While you can make a substantial profit in Forex trading, you can also have a substantial loss. Anyone who plans to invest in the Forex market should first build a sound foundation of mid-risk and low-risk investments to cushion themselves against loss.

The second most important consideration is the time and effort it takes to do well in the Forex market. There are brokers and automated traders galore, but real success takes research, trendwatching, a sensitivity to world affairs, and occasionally the willingness to stay up at odd hours to take advantage of fluctuations. Unlike most investment types, Forex trading doesn’t reward buying low and sitting on an investment for the next year or ten—investors buy low and sell fast, making most of their profits in short-term trading. Because of the research and constant attention Forex investments require, the best Forex traders are the ones who can spend the most time on their portfolios. If this sounds like you, then Forex may be your game. On the other hand, if you prefer not to make investment into your hobby or a second job, you should invest in Forex more cautiously and experiment, looking for the ideal balance between effort and profit.

In short, Forex trading can be an excellent addition to your portfolio, especially if you relish high risk. As with any high-risk investment, it’s important not to overextend yourself, but it’s also important not to be so timid that you make only a fraction of the gains more daring investors see. On the other hand, people whose portfolios cannot bear much risk, or who prefer more passive investment types, should give Forex investments a smaller place in their portfolios while they explore what trading in the Forex market can do for them.

Weekly FX Market Outlook: Sales Drop as Confidence Falls

Retail sales in the U.S. probably fell sharply in November, a report from the Commerce Department may show on Dec. 12. Economists lower their forecasts for GDP numbers in response to more signs of a deep and prolonged recession. Recent estimates show that the U.S. economy may contract at an annualized rate of 5 percent in the forth quarter and it would be the second quarter in row that consumer spending negatively contribute to growth.

Broad Spending Fall
friday’s report on retail sales may also show that cutting back in spending has not been limited to big ticket items but a broad range of products have been affected. Excluding autos, sales are expected to fall as much as 1.7 percent. At the same day, the University of Michigan’s index of consumer sentiment for December may remain close to 55.0, the lowest in nearly three decades.

Global Slowdown
Indexes of industrial and manufacturing production continue to fall in the U.K., Euro-Zone, and Japan; separate reports are expected to show this week. Economic activities increasingly slow around the world, reducing demand for manufactured products both at home and abroad.

U.K. PPI
As global recession deepens producers response by cutting output and price as well. A report on Monday is expected to show that Producer Price Index in Britain fell again in November after a 1.0 percent decline in the previous month.

While easing inflation could be a support for consumers, it is now the fear of deflation by continuing slowdown in economic activities that affect negatively the market sentiment.

The Bank of England cut the bank rate by 100 basis points last week to 2.00 percent, the lowest since 1951. Asked earlier about the possibility of zero interest rate, Mervyn King said that he is ready to do everything to make it sure that inflation will not remain below the 2 percent target in the medium term.

Politics and Canadian Dollar
Battered by falling oil price and a deep recession in the U.S., the Canadian economy now faces also a political uncertainty. Conservative government led by Prime Minister Stephen Harper struggles to avoid toppling by allied opposition parties and any progress could affect the Canadian dollar. Considering a sizable fiscal package in the rivals’ agenda, this uncertainty may not have those negative effects which are usually associated with instability and uncertain situations

The Forex Market and Recession

Unavoidable economic recessions are causing a turmoil in stock markets and large corporations all over the world. It is truly a devastating period in our world’s financial history. Stock markets are crashing, leading companies are bankrupt, and average people are barely hanging on. However, the foreign exchange market, or forex, is seemingly immune to the difficulties of these recessions. Let’s take a look at how this is possible.

Forex is based on the buying of one currency while selling another, and the value of one currency is only considered down when being compared directly to another one. Forex is a smart way to invest your money during a recession because all currencies are affected. When the worth of one currency has fallen there is always another currency that has gone up. It is all relative and there is always a profit to be made.

It is becoming increasingly popular for large corporations and individuals to invest in forex rather than the stock markets. There are seven commonly exchanged currencies that are the most sought after and the most commonly traded. These currencies are referred to as “The Majors” and include the US dollar, Australian dollar, Canadian dollar, Japanese Yen, Swiss Franc, British pound, and the Euro. When being compared to the thousands of investment possibilities in the stock market, a $3.2 trillion turnover makes up for lack of investing options. This is a smart way to invest, as a fall in the amount of trade will not make a big impact on the potential for profit. Forex is also open 24 hours a day, therefore increasing earning potential and allowing you to view market statistics anytime it is convenient for you.

However, before you start investing it is essential that you educate yourself on the ins and outs of forex. This is a proven way that you can make money, but like all wealth building practices you must do it right and be patient. You must have a thorough understanding of how the system works; otherwise you will undoubtedly lose money. There are companies that will educate you on how to trade in forex, and a simple internet search will give you several places to start. Generally, by following the steps of your training and executing patience, you will be able to make profits.

We are living in hard times, where there are many who struggle to put food on the table and too many don’t even have a table. Jobs are being lost at a mind-blowing speed and people are being forced into taking welfare and unemployment insurance. It is very encouraging for these people to know they can invest very little in the forex market and actually earn some extra money. Forex is essentially unaffected by recession, therefore it is a great way to help invest in the future of your dreams.

Weekly Forex Market Outlook

Tired of bad news and boring calendars? You may find something different in the Britain. The Treasury will announce the U.K. pre-budget on Nov 24 when analysts expect to see tax cuts and spending plans. Interest rates are headed to zero around the world making the effectiveness of monetary policies more and more limited. It is when the prospect of economies, and certainly their currencies, has been increasingly related to stimulus packages and other forms of fiscal policies.
Alistair Darling in FocusOn Monday, the Chancellor of Exchequer Alistair Darling unveils the Pre-Budget Report (PBR). In a speech at the House of Commons he will explain how the combination of tax cuts and increase in spending could help the Britain to overcome the economic downturn or at least limit the consequences.
Almost all major economies have already announced similar measures but some analysts believe that the Britain may be better positioned to benefit from such policies.
Although the one side of any expansionary plan is the increase in money supply that tends to weaken a currency in the short term but it is important to remember that speculations about the details of the PBR, specifically new tax relief which encourage companies to bring back their profits to the U.K., worked as a support for the sterling in the last week.
New Economic TeamIn the U.S., Timothy Geithner, President of the Federal Reserve Bank of New York, is to be the next Treasury Secretary according to aids who are close to the President-elect Barack Obama. In another move, Lawrence Summers, Bill Clinton’s last Treasury chief, may succeed Bernanke as the Fed chairman in 2010 when his term expires.
Obama may announce the decisions as soon as Monday. Equity indexes rose and yen weakened against major currencies last Friday in response to that news and it is possible to see some effects in Asian markets.
GDP RevisionsU.S. GDP shrunk in the third quarter but the first revised figures on Tuesday may show that the economic slump had been even deeper. A day after, monthly consumption data may also show that the most important driving part of the economy is still far from recovery. There will be GDP revisions in Germany and the U.K. but any surprise is more likely to be on the downside than the upside.
Euro-Zone CPI EstimateNovember’s estimate of the Consumer Price Index in the euro-area will be released on Friday. It is expected to show a sharp decline reflecting the economic slowdown and the danger of deflation. It may be more important than ever when everything points to the possibility of a significant rate cut by the ECB in December.

Scalping in Forex trading

When trading in Forex, one needs to adapt various strategies based on the expected profits and the involved risks. Traders, for quick profits, adapt Forex day trading. Yet, we have another trading strategy, the Forex scalping strategy, through which more money can be earned than day trading. It is based on the short-term changes in the rates of the currency pairs often traded by scalpers.

Scalping strategy means buy and sell within just few seconds or at the most couple of minutes. The positions are not maintained for long and have to be closed in not more than 1-2 minutes. The strategy uses a lot of market leverage and more leverage can reap more profits. The leverage risk involved is high, yet the scalper can benefit out of the low exposure risk. The position is not held for long. Hence, the market exposure risk is lower as compared to the other strategies. If a scalper knows to properly scalp trades, he can reap benefits those are not present in the “day trading” too.

In scalping, scalpers usually benefit from the small pip movements. Scalpers generally make around 1-5 pips behind each trade. And in a business day, a scalper can do 100-200 such trades. For a standard lot of trade, each pip is valued at $10. So if trade gives scalper 5 pips, he can easily get $50 behind one trade! And imagine he does 100 such trades; his per day earning can be $5000! Each trade doesn’t take more a minute or two. So isn’t $50 great money for a work of 1-2 minutes?

Scalper’s way of trading doesn’t go down too well with the dealers or brokers. The main trigger for the hatred is the time behind each trade a scalper takes to exit. Scalpers exit the trade even before the dealing desk captures and executes the same. The issue arises in the case of brokerage the scalper needs to pay. The solution is the ECN brokerage system where the scalpers evade the dealing desk and trade directly with each other. Scalpers benefit because the brokerage costs are less in ECN than dealing desk. But in turn, the pips spread is also constricted.

Hence, a scalper should plan his strategies focusing on the risk management behind the short trades. The losses matter more than the profits. Hence scalpers should implicate stop loss orders, whenever required. It is an accepted fact that scalpers mint more dollars than day traders, though they attract higher degree of risk too. It also is stressful considering the time behind each trade that a scalper stays in.
Forex scalping is considered as an effective and quick way to earn money in short time span. This strategy has gained the likes of many, yet turns out to be a controversial one. Many get into this because it demands lesser initial investment. Many factors have made scalping popular as day trading. Concerns really are sidelined, when one thinks of the profits that scalping can give anyone

14‏/12‏/2008

Currency Pairs: Introduction

Forex Pairs: Introduction

Forex Options

Automated Currency Trading Systems

Automating forex trading

Weekly FX Market Outlook: Eyes on FOMC Rate Decision

Forex Trading with eToro

Forex Trading with Forex cm

Forex in Your Investment Mix

Weekly FX Market Outlook: Sales Drop as Confidence Falls

The Forex Market and Recession

Weekly Forex Market Outlook

Scalping in Forex trading

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