Sunday, December 10, 2006

Currency Trading Pros And Cons - What Every Forex Investor Should Know

If you're considering investing on the Forex market get the real scope with these currency trading pros and cons.

Trading currencies on forex has become a popular choice for many investors. As with every type of investment, there are risks and there are benefits. Some profit and some don't.

Before you begin to invest, careful evaluation of currency trading pros and cons can help you make sure you're on the most profitable path.

By knowing both sides of the equation, the good and the bad, you're in a much safer position to profit and enjoy currency trading for years to come.

Almost every investor has a busy schedule. Carving out time for learning, analyzing, and placing trades can be difficult. One of the benefits of the currency market it the very flexible trading schedule. The Forex market is open on a 24 hour, 6 day a week schedule.

Unlike the stock market where events can occur after the market is closed and you can take no action, the 24 hour open Forex allows you to trade whenever and reduce the potential for loss.

Bull or Bear Forex is Stable

A second benefit of currency trading is that fluctuations in the other markets don't.affect the currency market. A bull or a bear market does not affect the Forex market. Whenever there is a major purchase of stocks by many the share cost can rise as the market shares. With the Forex market, this does not happen.

A third benefit of the Forex market is that it is controlled by the entire market and not by big corporations. In stocks information is received directly from the companies within the stock exchange. There is no way to know whether a company is being totally honest with their filings. This presents unforeseen risks. Since big corporations don't.control the currency trading the chance of unforeseen risks is greatly reduced.

While there are many pros to trading currencies, there are also few risks involved. First off as with any investment, the value of your investment may fluctuate. You can't always rely on past results to predict future trends.

These fluctuations and other factors make trading foreign exchanges on margin very risky. This risk can be reduces by carefully considering your investment objectives, your level of experience, and the level of risk within your comfort zone.

There's a high degree of leverage involved that can work for you or against you. Make sure you don't.invest any money that you can't afford to lose.

Using Internet-based trading system can present some risks. While these are usually minimal, you should still take them into account before you make the decision to trade.

Things like software failure, Internet connection problems, and hardware problems can all happen at unforeseen times.

Failures, disruptions, or delays from these types of problems can happen. The foreign exchange market cannot control any of these issues.

For most investors the pros far outweigh the cons of currency trading. Only you can make the decision of whether Forex trading suits your investment personality.

Using the availability of practice accounts can help you determine if this type of investment is a good fit for you.

It will help you learn the market and make an educated decision about future investments.

Saturday, April 01, 2006

Dollar Wakes as Big Ben Rings

Fed Chairman Bernanke’s speech this evening was not one from which the market was ready to glean the Chairman’s assessment on the state of the US economy as it was scheduled 1 week before the FOMC decision.

Instead, the Fed Chairman stuck to explaining the cause of the generally low levels of long-term interest rates and of the flat and recently inverted shape of the yield curve. Bernanke sounded off the oft-mentioned reasons for low long term rates, namely: stable inflation; pension funds’ demand
for long-term securities in light of demographic changes; increased demand for US Treasuries relative to the issuance of new supply and; to a lesser extent foreign accumulation of dollar reserves.

He also said rising demand for long term securities was due to falling risk premium, which is more likely to be the result of falling interest rate risk than falling inflation risk.

Bernanke challenged the notion that inverted yield curves signaled a significant economic slowing as was in the past episodes because current interest rates “are relatively low by historical standards”.

More Read Forex trading directory

Sunday, March 19, 2006

Forex vs. Futures

The global foreign exchange market is the largest, most active market in the world. Trading in the forex markets takes place nearly round the clock with $1.9 trillion changing hands every day. It is the main event.

The benefits of forex over currency futures trading are considerable. The dissimilarities between the two instruments range from philosophical realities such as the history of each, their target audience, and their relevance in the modern forex markets, to more tangible issues such as transactions fees, margin requirements, access to liquidity, ease of use and the technical and educational support offered by providers of each service. These differences are outlined below:

* More Volume = Better Liquidity. Daily currency futures volume on the CME is just over 2% of the volume seen every day in the forex markets. Incomparable liquidity is one of many advantages that forex markets hold over currency futures. Truth be told, this is old news. Any currency professional can tell you that cash has been king since the dawn of the modern currency markets in the early 1970's. The real news is that individual traders from every risk profile now have full access to the opportunities available in the forex markets.

* Forex markets offer tighter bid to offer spreads than currency futures markets. By inverting the futures price to compare it to cash, you can readily see that in the USD/CHF example above, inverting the futures dealing price of .5894 - .5897 results in a cash price of 1.6958 - 1.6966, 8 pips vs. the 5-pip spread available in the cash markets.

* Forex markets offer higher leverage and lower margin rates than those found in currency futures trading. When trading currency futures, traders have one margin rate for "day" trades and another for "overnight" positions. These margin rates can vary depending on transaction size. When trading cash markets, you have access to the same margin rates day and night.

* Forex markets utilize easily understood and universally used terms and price quotes. Currency futures quotes are inversions of the cash price. For example, if the cash price for USD/CHF is 1.7100/1.7105, the futures equivalent is .5894/ .5897; a methodology followed only in the confines of futures trading.

More Read Here
USD Mired in Soft Tone by Korman Tam

At 5:00 AM Eurozone January Industrial Production (exp 0.4%, prev 0.1%) At 9:15 AM US February Industrial Production (exp 0.7%, prev -0.2%) US February Capacity Utilization (exp 81.3, prev 80.9) At 9:45 AM US March University of Michigan Consumer Sentiment final (exp 88.0, prev 86.7)

The dollar continued to trade on a softer tone versus the majors in the early Friday session, revisiting its lows from yesterday against the euro. The selling in the dollar on Thursday was prompted by tame US inflation data, which is expected to further ease pressure for additional Fed rate hikes. The focus will continue to remain on US economic data, with recent foreign exchange moves predominantly driven by interest rate expectations. FOMC board members have highlighted the uncertainty that lies ahead for Fed rate policy and will be highly dependent on upcoming economic reports.
Forex market directory

In the session ahead, US data will include February industrial production, capacity utilization and the final reading of the March University of Michigan consumer sentiment survey. Industrial production is forecasted to improve to 0.7%, reversing January’s 0.2% decline. February capacity utilization is seen rising to 81.3, up from 80.9 a month earlier. Lastly, the final reading of the March University of Michigan consumer sentiment survey is expected to edge up to 88.0, compared with 86.7 in the previous report.
Dollar Extends Sell-off by Ashraf Laidi

The dollar damage took a turn to the worse as the currency broke below the 116 yen mark while hitting the 1.22 figure against the euro amid revisions in markets’ expectations for the Fed rate decision. Conflicting speeches from the presidents of the Atlanta and San Franciso Fed left traders mulling the outcome of the May Fed meeting after yesterday’s core CPI reduced expectations of a may hike from Interest 90% to about 75%.

The 0.7% rise in February US industrial production following January’s 0.3% drop had no market impact. Capacity utilization rose 0.4% to 81.2%, matching the highest level since September 2000. The 81.2% cap rate exceeded its 1972-2005 average, which reflects the Fed’s concerns that rising “resource utilization could spark inflation”. Nonetheless, capacity utilization rate in utilities failed to sustain a sufficient rebound from its Jan low and was down 0.2% from February of last year.