The art of Forex currency trading is in identifying the long term momentum trend early enough to enter the market with an edge in your favor and also in learning when to exit an exhausted trend that is about to reverse. That’s, in a few words, all you need to make money with Forex.

Why Momentum?
First, we need to look at why momentum is so important to trading. A good way to understand the significance of momentum is to step outside of the financial markets altogether and look at an asset class that has experienced rising prices for a very long time – housing. House prices are measured in two ways: month-over-month increases and year-over-year increases. If house prices in New York were higher in November than in October, then we could safely conclude that demand for housing remained firm and further increases were likely. However, if prices in November suddenly declined from prices paid in October, especially after relentlessly rising for most of the year, then that might provide the first clue to a possible change of trend. Sure, house prices would most likely still be higher in a year-over-year comparison, lulling the general public into believing that the real estate market was still buoyant. However, real estate professionals, who are well aware that weakness in housing manifests itself far earlier in month-over-month figures than in year-over-year data, would be far more reluctant to buy under those conditions.

In real estate, month-over-month figures provide a measure of rate of change, which is what the study of momentum is all about. Much like their counterparts in the real estate market, professionals in the financial markets will keep a closer eye on momentum than they do on price to ascertain the true direction of a move.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Some Forex currency traders do not realize that interest ia eaither paid or earned when Forex market positions are held into the following trading day.

In theory all Forex currency trades must be settled in two business days. Traders who want to extend their positions without having to settle them must close their positions before 5pm Eastern Standard Time on the settlement day and re-open them the next trading the day. This pushes out the settlement by another two trading days. This strategy, called a rollover, is created through a swap agreement and it comes with a cost or gain to the trader, depending on prevailing interest rates.

The forex market works with currency pairs and is quoted in terms of the quoted currency compared to a base currency. The investor borrows money to purchase another currency, and interest is paid on the borrowed currency and earned on the purchased currency, the net effect of which is rollover interest.

In order to calculate the rollover interest, we need the short-term interest rates on both currencies, the current exchange rate of the currency pair and the quantity of the currency pair purchased. For example, assume that an investor owns 10,000 CAD/USD. The current exchange rate is 0.9155, the short-term interest rate on the Canadian dollar (the base currency) is 4.25% and the short-term interest rate on the U.S. dollar (the quoted currency) is 3.5%. In this case, the rollover interest is $22.44 [{10,000 x (4.25% – 3.5%)}/(365 x 0.9155)].

The number of units purchased is used because this is the number of units owned. The short-term interest rates are used because these are the interest rates on the currencies used within the currency pair. The investor in our example owns Canadian dollars, so he or she earns 4.25%, but must pay the borrowed U.S. dollar rate of 3.5%. The product of the difference in the numerator of the equation is divided by the product of the exchange rate and 365 because this puts our numerator into a daily figure. If, on the other hand, the short-term interest rate on the base currency is below the short-term interest rate on the borrowed currency, the rollover interest rate would be a negative number, causing a reduction in the value of the investor’s account. Rollover interest can be avoided by taking a closed position on a currency pair.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

How do banks determine the price?
Bank dealers will determine their prices based upon a variety of factors including, the current market rate, how much volume is available at the current price level, their views on where the currency pair is headed and their inventory positions. If they think that the euro is headed higher, they may be willing to offer a more competitive rate for clients who want to sell euros because they believe that once they are given the euros, they can hold onto them for a few pips and offset at a better price. On the flip side, if they think that the euro is headed lower and the client is giving them euros, they may offer a lower price because they are not sure if they can sell the euro back to the market at the same level at which it was given to them. This is something that is unique to market makers that do not offer a fixed spread.

How does a bank offset risk?
Similar to the way we see prices on an electronic forex broker’s platform, there are two primary platforms that interbank traders use: one is offered by Reuters Dealing and the other is offered by the Electronic Brokerage Service (EBS). The interbank market is a credit-approved system in which banks trade based solely on the credit relationships they have established with one another. All of the banks can see the best market rates currently available; however, each bank must have a specific credit relationship with another bank in order to trade at the rates being offered. The bigger the banks, the more credit relationships they can have and the better pricing they will be able access. The same is true for clients such as retail forex brokers. The larger the retail forex broker in terms of capital available, the more favorable pricing it can get from the interbank market. If a client or even a bank is small, it is restricted to dealing with only a select number of larger banks and tends to get less favorable pricing.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Most forex brokers allow you to open a demo account prior to funding a full account or mini account. Be sure to try out each broker’s charting software during their trial periods to help you better decide which broker is the best for you.

Which forex charting software provides the best charts of foreign currencies? Because the software from each forex broker is so different, the answer is very personal.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Here is an article by Jim Wyckoff of Synergistic Trading by Trader Planet on support and resistance. Jim is a stock market kind of guy. But after reading his article I believe his suggestions may apply to Forex currency charts as well.

CLICK HERE! to go to the complete article by Jim Wyckoff.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

This is one of the best articles I’ve come across about the benefits of using a solid Forex risk/reward system. The article is written by Scott Barkley from Synergistic Trading by TraderPlanet.com.

Scott writes about “retail traders break no trading rules more than the rules regarding risk and reward. We traders talk about risk and reward, and we say we trade with proper risk and reward, but reality is that we break these rules daily.”

“The simplest risk and reward rule is that you never trade greater than a 1:1 reward for risk ratio. This means that if your risk is 30 pips using a technical stop, then you must have a target that is at least 30 pips away from your entry even to entertain the thought of taking the trade. Obviously, a 1:2 or 1:3 ratio is better, but traders break the 1:1 rule all the time. How? We place a trade “thinking” there is a 1:1 ratio. For example, we risk 30 pips and the minute it falters or retraces (which it most certainly will do the vast majority of the time), we click out for 5 pips. We pat ourselves on the back having “conquered the market one more time” with a winning trade. We feel great – we are a winner!”

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Here is an article by Kevin Klombies of Synergistic Trading by Trader Planet.

Kevin explains “The basic point is that the trends are almost identical. The China growth theme interlocks with the commodity price theme. The trend for the Hong Kong stock market reflects the trend for energy and base metals prices which, in turn, go directly with the trends for the commodity currencies.

If the Hang Seng Index continues to resolve higher then we could still see a renewed burst of cyclical strength that could carry us through the balance of the year.

The point that we are attempting to make today is that we remain on somewhat shaky ground. We have argued the ‘decade theme’ on too many occasions to ignore it at this juncture.”

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

“The non-farm payroll (NFP) report is a key economic indicator for the United States. It is intended to represent the total number of paid workers in the U.S. minus farm employees, government employees, private household employees and employees of nonprofit organizations.”

Not that I recommend trading Forex currency news events but if you do you might want to read this article on trading the Non Farm Payroll Report by Cory Mitchell which was posted on Investopedia.com.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

The forex currency (FX) market has many similarities to the equity markets; however, there are important differences. This article by by Justin Kuepper at Investopedia.com will show you those differences and help you get started in forex trading.

Topics Covered;

Choosing a Broker: Quality Institution,Extensive Tools and Research, Wide Range of Leverage Options,Account Types

Things To Avoid: Sniping or Hunting, Strict Margin Rules

Define a Basic Forex Strategy: Fundamental Analysis,Technical Analysis

Finding Your Strategy – Most successful traders develop a strategy

Things to Remember: Open a demo account, Trade without emotion, The trend is your friend

The Bottom Line – “The forex market is the largest market in the world, and individuals are becoming increasingly interested in it. But before you begin trading it, be sure your broker meets certain criteria, and take the time to find a trading strategy that works for you. Remember, the best way to learn to trade forex is to open up a demo account and try it out. (Ready to try forex trading without risking your money)”?

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

The Wall Street Journal has just announced in an article written by Tom Lauricella and Dave Kanas that “Currency trading volume around the world has hit $4 trillion a day, fueled by investors in the wealthiest nations looking to diversify beyond their home markets in a time of economic turmoil”.

“The $4 trillion mark represents a 20% gain from $3.3 trillion in 2007, the last time the global foreign-exchange markets were surveyed, according to the Bank for International Settlements. While the survey found continued growth in currency trading, it did reflect a slowdown in the market’s growth from the prior survey, when trading volumes had soared 69% from $1.9 trillion in 2004.”

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.