Forward rates can be very useful as a tool for hedging exchange risk. The caveat is that a forward contract is highly inflexible, because it is a binding contract that the buyer and seller are obligated to execute at the agreed-upon rate. Understanding exchange risk is an increasingly wort

Interest rate parity is the fundamental equation that governs the relationship between interest rates and currency exchange rates. The basic premise of interest rate parity is that hedged returns from investing in different currencies should be the same, regardless of the level of their interest ra

The foreign exchange market accounts for more than $4 trillion in average traded value every day, making it the world's largest financial market. Since there is no central marketplace for the forex market, traders must select a forex broker to help them conduct their t

The foreign exchange market accounts for more than $4 trillion in average traded value every day, making it the world's largest financial market. Since there is no central marketplace for the forex market, traders must select a forex broker to help them conduct their t

Low Costs Forex trading can have very low costs (brokerage and commissions). There are no commissions in a real sense–most forex brokers make profits from the spreadsbetween forex currencies. One does not have to worry about including separate brokerage charges, eliminating

Your Forex Trading Attitude Behavior is an integral part of the trading process, and thus your attitude and mindset should reflect the following four attributes: Patience Once you know what to expect from your system, have the patience to wait for the price to reach the levels tha

Carry is the most popular trade in the currency market, practiced by both the largest hedge funds and the smallest retail speculators. The carry trade is based on the fact that every currency in the world has an associated interest. These short-term interest rates are set by the central ba

Although some retail dealers trade exotic currencies such as the Thai baht or the Czech koruna, the majority of dealers trade the seven most liquid currency pairs in the world, which are the four "majors":EUR/USD (euro/dollar)USD/JPY (dollar/Japanese yen)GBP/USD (British pound/dollar)USD/CHF (dollar

The short answer is nothing. The retail FX market is purely a speculative market. No physical exchange of currencies ever takes place. All trades exist simply as computer entries and are netted out depending on market price. For dollar-denominated accounts, all profits or losses are calculated in do

Unlike stocks, futures, or options, currency trading does not take place on a regulated exchange, and it is not controlled by any central governing body. There are no clearing houses to guarantee trades, and there is no arbitration panel to adjudicate disputes. All members trade with each other bas

1. Security The first and foremost characteristic that a good broker must have is a high level of security. After all, you’re not going to hand over thousands of dollars to a person who simply claims he’s legit, right? Fortunately, checking the credibility of a forex broker isn’t very hard. There ar

It is not difficult to make money day trading but most people go about it all wrong and end up losing money instead. The "secret" to making money daytrading is twofold: 1. don't get greedy and 2. correctly capitalize your positions. You see most people believe that in order to make money trading the

Starting out as a trader, you lack experience. This means that you’ll be making more mistakes, which is natural in any field. Of course in trading, you want to minimize mistakes as much as possible, since that costs you your capital. Thus, making mistakes at the start of trading is akin to your tuit

Forex trading is principally risky for the following main reasons: 1. You don’t have strict money management rules in place. 2. You aren’t disciplined. 3. You don’t have a precise trading plan, which you stick to. 4. You aren’t trading with a reputable broker. 5. You’re studying with someone who wou

Step 1. What is Forex? Step 2. Learn Forex Basics Step 3: Find a Forex Broker Step 4: Start Trading Step 1. What is Forex? Forex, or Foreign Exchange is an unregulated market, also known as OTC (Over-the-counter) and is the biggest market with average daily turn-over that runs into billions. It is e