What is Forex Trading ?
Foreign Exchange is usually termed as Forex. Foreign exchange is the buying and the selling of foreign exchange in pairs of currencies. For example you may buy US dollars and sell Euros or you buy UK Pounds Sterling and sell Japanese Yen. Currencies are bought and sold because governments and companies need foreign exchange for their purchase of and payments for various commodities and services.
Forex / Currency Trading is trading in currencies of various countries in order to make profits. Currencies are always traded in pairs meaning you can trade in two currencies at a time.
You buy one currency and sell another currency. The most traded currency pairs are USD / JPY, GBP / USD AND EURO / USD. The first currency of the pair is called as the base currency.
Buying GBP / USD means you are buying GBP and selling USD. Similarly selling EURO / USD means you are selling EURO and buying USD.
How to trade in currency / foreign exchange ?
Big money can be made through trading in forex. The reason being the margin money requirement is only 5% of the total trade.
For example – If you have Rs 1000 in your account, you can take positions on Rs 20,000 (1000*100/5). This means a person can take a very large position in the market with a small amount.
Let’s understand this concept by an example – If one wants to trade in pound and have a capital of Rs 75000.
Foreign Exchange is usually termed as Forex. Foreign exchange is the buying and the selling of foreign exchange in pairs of currencies. For example you may buy US dollars and sell Euros or you buy UK Pounds Sterling and sell Japanese Yen. Currencies are bought and sold because governments and companies need foreign exchange for their purchase of and payments for various commodities and services.
Forex / Currency Trading is trading in currencies of various countries in order to make profits. Currencies are always traded in pairs meaning you can trade in two currencies at a time.
You buy one currency and sell another currency. The most traded currency pairs are USD / JPY, GBP / USD AND EURO / USD. The first currency of the pair is called as the base currency.
Buying GBP / USD means you are buying GBP and selling USD. Similarly selling EURO / USD means you are selling EURO and buying USD.
How to trade in currency / foreign exchange ?
Big money can be made through trading in forex. The reason being the margin money requirement is only 5% of the total trade.
For example – If you have Rs 1000 in your account, you can take positions on Rs 20,000 (1000*100/5). This means a person can take a very large position in the market with a small amount.
Let’s understand this concept by an example – If one wants to trade in pound and have a capital of Rs 75000.
If 1 pound = Rs 75
Lot size is 1000
Total exposure = 75000*100 / 5 = Rs 14, 80,000
Case 1 – If the rupee depreciates by Rs 1, 1 Pound = Rs 76
Trader incur a loss of Rs 1000*10 = Rs 10,000
Case 1 – If the rupee appreciates by Rs 1, 1 Pound = Rs 74
Trader incur a profit of Rs 1000*10 = Rs 10,000
With rise or fall in currency one can either make money or lose money. Traders should always note there is huge potential of money to be made and the risk is quite high as well.
Investment in currency futures is based on the risk appetite. Ideally a small investor should not have exposure to this form of instruments.
Forex Trading in India !
At present, derivative products (futures & options) are available only in four major currencies – Dollar, Euro, Pound and Yen. These are offered by National Stock Exchange and Multi– Commodity Stock exchanges.
When someone mentions Foreign Exchange (Forex) market, the usual image that immediately comes to mind is a person waiting behind a counter while a clerk just behind the parting glass counts and changes your local currency into US Dollars.
At some point either when traveling or making an overseas purchase, most people would have in some way participated in the FX market. However, it is more than currency conversion. Increasingly many are now turning to the FX market for the purposes of speculation or dealing at prices formerly only available to financial institutions.
So what is Foregn Exchange all about ?
As defined in The Economist's Guide to Financial Markets, foreign exchange, more popularly referred to as "forex" is a worldwide decentralized over-the-counter financial market for the trading of currencies, wherein financial centers around the globe serves as anchors of trading between a wide range of different types of buyers and sellers 24 hours a day, five days a week.
According to The Economist, foreign exchange market is arguably the world's largest market place. It has an average daily turnover of US$1.9 trillion, with some other sources such as go Market’s Introduction to Foreign Exchange estimating the market to have an average daily turnover in excess of US $ 4 trillion. The Bank for International Settlements says that average daily turnover in global foreign exchange markets is estimated at $3.98 trillion as of April 2010, which is a growth of more or less 20% over the $3.21 trillion daily volume in the same month back in 2007. Bottom-line is foreign exchange has a huge turnover.
One of the prime advantages to trading foreign exchange is the sheer volume of geographically dispersed market participants. This in turn creates liquidity which cannot be matched by any regulated exchange-traded product or instrument.
According to a Wikipedia entry, this liquidity unique to foreign exchange markets along with other characteristics is the reason why it has been referred as the closest ideal of perfect competition.
Now that you know what Foreign Exchange market is all about, you might ask:
How do you trade in Forex ?
In theory the buying and selling of currencies is extremely simple. A trader can buy low, sell high and vice- versa. However, in practice learning the basics is essential before putting your hard earned cash on the line.
This type of trade is thought to constitute about 5% of all currency transactions, with the remaining 95% currency transactions being undertaken for speculation and trade. Companies will also buy and sell foreign currency in order to hedge against exchange rate risks, and to protect their financial investments. The exchange rates in foreign exchange markets also vary continuously and on daily basis, so need to be tracked to make optimal exchange decisions.
Approximately 85% of the trading is done in only US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. This is because they are the most liquid of foreign currencies (i.e. they can be easily bought and sold.) In fact the US Dollar is the most recognizable foreign currency even in countries like Afghanistan, Iraq and Vietnam. Other currencies may not be as liquid, possibly due to exchange controls or political instability, or may be prone to inflation. Then there are others which are pegged to another major currency (usually the US Dollar) and which will therefore track exactly the fortunes of the currency they are pegged to.
The currency trading market is a true 24 hour market with trading being passed from East to West through the trading day. The market opens first in the financial centers of Sydney, moving to Tokyo, London and New York in that sequence through the day.
Investors and speculators can then easily respond to the ever-changing situations and can buy and sell currencies simultaneously if they so wish. In fact many operate in two or more currency markets using arbitrage to gain profits (buying in one market and selling in another market or vice versa to take advantage of the prices and book profits).
There are again various factors which affect the currency markets, and whole areas of scientific analysis have been developed to study the effect of these, such as Technical Analysis and Fundamental Analysis. Both of these tools are used for analyzing a variety of markets such as equity markets, stock markets, mutual funds markets etc.
Technical Analysis refers to reading, summarizing and analyzing data based on the data that is generated by the market. Fundamental Analysis refers to the factors which influence the overall market economy, and in turn how these affect the currency trading markets.
Of course there are other economic and non economic factors which can suddenly affect the trading of the Forex markets such as the 9/11 tragedy, currency devaluations and larger trades placed by national banks, hedge funds etc. Currency markets can therefore be extremely volatile and unpredictable and can also move very fast. This, coupled with the fact that investors typically trade currencies on a highly leveraged basis means that currency trading has the potential for high returns but also for large losses.
Disclaimer
Forex Trading is a very high risk / high reward financial instrument. Trading in Foreign Exchange should be traded only with risk capital. Do remember no assured profits in forex trading.
From the above and much more..,nothing can give profitable gains when compared to Stocks. Above mentioned each and everyone has their own advantages and Disadvantages.
But, Investing in stocks can enhance number of people’s lives. Right from the Fund Manager, maintaining several millions, to the newly entering investor , everyone’s dream is to make profitable gains. Some succeed and many others fail?
What makes the difference? Is it a chance ( Luck ) or knowledge based one?
As said by Richard Templar, in his Book “ THE RULES OF WEALTH “ the most common fact about money is, It doesn’t differentiates people regarding, Your complexion, Your community, Your sub-caste, Your religion, What your parents were doing etc… and all those things.
It also never minds what you are thinking about yourself. Every day like a Blackboard it starts its Day. Likewise how others are having their own rights to earn, the same kind of opportunities are also left to you. The only Blocking fact is you, and your views about money.
Money doesn’t minds who is handling it, their qualities, their Wishes, they belong to which team etc It has no eyes, no ears, no sentiments A mere dead fine paper with no feelings It has been created, to be used by us, Spent by us, to invest, to struggle, to work for it, etc.
Many rich personalities hold certain rules in earning money. But the common character between them is nothing.
As far as human lives are concerned the need for money had created a rapid change in them. Right from Prime minister to peon and Minister to menial it is common to everyone.
MONEY SAVING !
Generally people of Japan, China, and India largely hold the tendency of saving money routinely. Many proverbs are found regarding Savings. Suppose one is able to control their expenses within their Earnings, they may be able to save money.
As told by a Old proverb 1 Rupee saved is equivalent to 1 Rupees earned Still now i can’t understand its meaning. Can you? We everyone are Earning. Many of us doing Business, some engaged in service oriented works, doing jobs, some exerted to self employment etc, suit to their needs , potential and likes If an attractive income gains are there , sufficient to maintain their family needs, then they may be able to save money.
Some may have deficit in Earning. They may not be able to maintain their needs.
IS SAVING ALONE SUFFICIENT ?
Saving money is a good habit! But is it alone sufficient? No, proper returns must also be obtained To achieve proper returns, smart investments may be made. As to how we are doing our job, our investments also need proper growth depending upon the time limit, and the type of Investment.
IS THE GROWTH ASSURED ?
Many people deposit money in Banks, for secured growth in certain years Some in lands as real Estates, Agricultural lands as fixed assets, few people in Ornaments like Gold, Silver, etc suit to their mentality and urgent needs
# According to a journal, in 1992, an ounce of silver costing 4.73 dollars, the least value occurred ever before Warren Buffet, purchased a huge quantity of Silver after a slight increase, and sold at 10 dollars, by the end of 2006, and gained 100 % pure profit.
Similar instances may be found then and there…!
Why to Invest in Stocks ?
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars, Etc?
Quite simply, the reason that savvy investors invest in stocks is that they have historically provided the highest potential returns.
And over the long term, no other type of investment tends to perform better.
WHY TO INVEST IN STOCK MARKET ?
# We can Invest as we Desire.
# Only Investment in India with no Encumbrance.
# Nobody can Encroach.
# Secured.
# Requires only less money, unlike buying property and Mortgages etc
# Requires minimal time to trade or to purchase for Long term
investments
# No Capital gains tax ( If holding more than 12 months )
# More possibilities to gain profits from the Stock market, apart from other sources
# Easy liquidity, can be en-cashed quickly.
Lot size is 1000
Total exposure = 75000*100 / 5 = Rs 14, 80,000
Case 1 – If the rupee depreciates by Rs 1, 1 Pound = Rs 76
Trader incur a loss of Rs 1000*10 = Rs 10,000
Case 1 – If the rupee appreciates by Rs 1, 1 Pound = Rs 74
Trader incur a profit of Rs 1000*10 = Rs 10,000
With rise or fall in currency one can either make money or lose money. Traders should always note there is huge potential of money to be made and the risk is quite high as well.
Investment in currency futures is based on the risk appetite. Ideally a small investor should not have exposure to this form of instruments.
Forex Trading in India !
At present, derivative products (futures & options) are available only in four major currencies – Dollar, Euro, Pound and Yen. These are offered by National Stock Exchange and Multi– Commodity Stock exchanges.
When someone mentions Foreign Exchange (Forex) market, the usual image that immediately comes to mind is a person waiting behind a counter while a clerk just behind the parting glass counts and changes your local currency into US Dollars.
At some point either when traveling or making an overseas purchase, most people would have in some way participated in the FX market. However, it is more than currency conversion. Increasingly many are now turning to the FX market for the purposes of speculation or dealing at prices formerly only available to financial institutions.
So what is Foregn Exchange all about ?
As defined in The Economist's Guide to Financial Markets, foreign exchange, more popularly referred to as "forex" is a worldwide decentralized over-the-counter financial market for the trading of currencies, wherein financial centers around the globe serves as anchors of trading between a wide range of different types of buyers and sellers 24 hours a day, five days a week.
According to The Economist, foreign exchange market is arguably the world's largest market place. It has an average daily turnover of US$1.9 trillion, with some other sources such as go Market’s Introduction to Foreign Exchange estimating the market to have an average daily turnover in excess of US $ 4 trillion. The Bank for International Settlements says that average daily turnover in global foreign exchange markets is estimated at $3.98 trillion as of April 2010, which is a growth of more or less 20% over the $3.21 trillion daily volume in the same month back in 2007. Bottom-line is foreign exchange has a huge turnover.
One of the prime advantages to trading foreign exchange is the sheer volume of geographically dispersed market participants. This in turn creates liquidity which cannot be matched by any regulated exchange-traded product or instrument.
According to a Wikipedia entry, this liquidity unique to foreign exchange markets along with other characteristics is the reason why it has been referred as the closest ideal of perfect competition.
Now that you know what Foreign Exchange market is all about, you might ask:
How do you trade in Forex ?
In theory the buying and selling of currencies is extremely simple. A trader can buy low, sell high and vice- versa. However, in practice learning the basics is essential before putting your hard earned cash on the line.
This type of trade is thought to constitute about 5% of all currency transactions, with the remaining 95% currency transactions being undertaken for speculation and trade. Companies will also buy and sell foreign currency in order to hedge against exchange rate risks, and to protect their financial investments. The exchange rates in foreign exchange markets also vary continuously and on daily basis, so need to be tracked to make optimal exchange decisions.
Approximately 85% of the trading is done in only US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. This is because they are the most liquid of foreign currencies (i.e. they can be easily bought and sold.) In fact the US Dollar is the most recognizable foreign currency even in countries like Afghanistan, Iraq and Vietnam. Other currencies may not be as liquid, possibly due to exchange controls or political instability, or may be prone to inflation. Then there are others which are pegged to another major currency (usually the US Dollar) and which will therefore track exactly the fortunes of the currency they are pegged to.
The currency trading market is a true 24 hour market with trading being passed from East to West through the trading day. The market opens first in the financial centers of Sydney, moving to Tokyo, London and New York in that sequence through the day.
Investors and speculators can then easily respond to the ever-changing situations and can buy and sell currencies simultaneously if they so wish. In fact many operate in two or more currency markets using arbitrage to gain profits (buying in one market and selling in another market or vice versa to take advantage of the prices and book profits).
There are again various factors which affect the currency markets, and whole areas of scientific analysis have been developed to study the effect of these, such as Technical Analysis and Fundamental Analysis. Both of these tools are used for analyzing a variety of markets such as equity markets, stock markets, mutual funds markets etc.
Technical Analysis refers to reading, summarizing and analyzing data based on the data that is generated by the market. Fundamental Analysis refers to the factors which influence the overall market economy, and in turn how these affect the currency trading markets.
Of course there are other economic and non economic factors which can suddenly affect the trading of the Forex markets such as the 9/11 tragedy, currency devaluations and larger trades placed by national banks, hedge funds etc. Currency markets can therefore be extremely volatile and unpredictable and can also move very fast. This, coupled with the fact that investors typically trade currencies on a highly leveraged basis means that currency trading has the potential for high returns but also for large losses.
Disclaimer
Forex Trading is a very high risk / high reward financial instrument. Trading in Foreign Exchange should be traded only with risk capital. Do remember no assured profits in forex trading.
From the above and much more..,nothing can give profitable gains when compared to Stocks. Above mentioned each and everyone has their own advantages and Disadvantages.
But, Investing in stocks can enhance number of people’s lives. Right from the Fund Manager, maintaining several millions, to the newly entering investor , everyone’s dream is to make profitable gains. Some succeed and many others fail?
What makes the difference? Is it a chance ( Luck ) or knowledge based one?
As said by Richard Templar, in his Book “ THE RULES OF WEALTH “ the most common fact about money is, It doesn’t differentiates people regarding, Your complexion, Your community, Your sub-caste, Your religion, What your parents were doing etc… and all those things.
It also never minds what you are thinking about yourself. Every day like a Blackboard it starts its Day. Likewise how others are having their own rights to earn, the same kind of opportunities are also left to you. The only Blocking fact is you, and your views about money.
Money doesn’t minds who is handling it, their qualities, their Wishes, they belong to which team etc It has no eyes, no ears, no sentiments A mere dead fine paper with no feelings It has been created, to be used by us, Spent by us, to invest, to struggle, to work for it, etc.
Many rich personalities hold certain rules in earning money. But the common character between them is nothing.
As far as human lives are concerned the need for money had created a rapid change in them. Right from Prime minister to peon and Minister to menial it is common to everyone.
MONEY SAVING !
Generally people of Japan, China, and India largely hold the tendency of saving money routinely. Many proverbs are found regarding Savings. Suppose one is able to control their expenses within their Earnings, they may be able to save money.
As told by a Old proverb 1 Rupee saved is equivalent to 1 Rupees earned Still now i can’t understand its meaning. Can you? We everyone are Earning. Many of us doing Business, some engaged in service oriented works, doing jobs, some exerted to self employment etc, suit to their needs , potential and likes If an attractive income gains are there , sufficient to maintain their family needs, then they may be able to save money.
Some may have deficit in Earning. They may not be able to maintain their needs.
IS SAVING ALONE SUFFICIENT ?
Saving money is a good habit! But is it alone sufficient? No, proper returns must also be obtained To achieve proper returns, smart investments may be made. As to how we are doing our job, our investments also need proper growth depending upon the time limit, and the type of Investment.
IS THE GROWTH ASSURED ?
Many people deposit money in Banks, for secured growth in certain years Some in lands as real Estates, Agricultural lands as fixed assets, few people in Ornaments like Gold, Silver, etc suit to their mentality and urgent needs
# According to a journal, in 1992, an ounce of silver costing 4.73 dollars, the least value occurred ever before Warren Buffet, purchased a huge quantity of Silver after a slight increase, and sold at 10 dollars, by the end of 2006, and gained 100 % pure profit.
Similar instances may be found then and there…!
Why to Invest in Stocks ?
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars, Etc?
Quite simply, the reason that savvy investors invest in stocks is that they have historically provided the highest potential returns.
And over the long term, no other type of investment tends to perform better.
WHY TO INVEST IN STOCK MARKET ?
# We can Invest as we Desire.
# Only Investment in India with no Encumbrance.
# Nobody can Encroach.
# Secured.
# Requires only less money, unlike buying property and Mortgages etc
# Requires minimal time to trade or to purchase for Long term
investments
# No Capital gains tax ( If holding more than 12 months )
# More possibilities to gain profits from the Stock market, apart from other sources
# Easy liquidity, can be en-cashed quickly.
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