How to make profit in Forex and other financial markets?

Unlike other financial markets, the Forex market operates 24 hours a day, 5.5 days a week is carried out through an electronic network of banks, corporations and individual traders exchange currencies. For people operating in Forex is mainly used as a means for speculative investment and the actual physical delivery of the coins almost never happens. Operations begin every day in Sydney, they moved to Tokyo, followed by Europe and finally America.


Prices in Forex Market


"Offer" v / s "Demand" (Bid v / s Ask)

The currency prices or quotes, include a "bid" and similar to other financial products "demand". The offer (bid) is the price at which a trader can sell a currency pair. The price of the offer or sale of a currency pair is always the lowest price in the Capital FX platform. Conversely demand (ask) is the price at which traders are willing to buy a particular instrument. The difference between supply and demand is called "Spread". This is the cost per transaction or per transaction. Typically no additional commissions on the Forex market.

Reading the Price Quotes

Reading quotes from currency prices may seem a bit confusing at first. However, it's really quite simple if you are able to remember two things:

1. The first currency listed is the base currency

2. The value of the base currency is always 1 (one)

Example: A quote of USD / CLP to $ 610.00, meaning that 1 US dollar (USD) = $ 610 Chilean pesos (CLP). When the US dollar It is the basic unit and price increases, comparatively the dollar has appreciated and the currency in the pair has weakened. Using the USD / CLP as a reference example, if the USD / CLP increases from $ 610 to $ 615 the dollar is stronger because now you need to use more weight than before to buy the same dollar.




There are four currency pairs where the US dollar It is not the base currency. These exceptions are the Australian dollar (AUD) British Pound (GBP), Euro (EUR) and the New Zealand dollar (NZD). A price in EUR / USD of 1.1000 would mean that a euro equals 1.1 US dollars If the price of a currency pair increases the value of the base currency increases. Conversely, if the price of a currency pair decreases the value of the peel decreases basis.




What factors influence prices?
The currency markets and prices are mainly influenced by international trade and investment flows. They are also influenced, but to a lesser extent by the same factors that influence markets stocks and bonds: economic and political conditions, especially interest rates, inflation and political stability, or as often also by instability politics. While economic factors have long-term effects, is very recurrent immediate reaction in prices, which makes the market very attractive for intraday traders.




Foreign exchange operations also offer investors the opportunity to diversify. The forex market can be seen as a means to protect against adverse movements in equity markets and bond, movements which of course also affect investment funds. Keep in mind that the forex market is one of the riskiest forms of investment and you should only invest a portion of their risk capital in this market.



Currency pairs



Forex Currency Pairs Top

Some currency pairs are traded on more than others. Currency pairs with the largest volume are usually considered as the "majors". There is general agreement that the following six pairs are considered within this name:




EUR / USD

GBP / USD

USD / JPY

USD / CHF

USD / CAD

AUD / USD

the Majors

Most currency transactions occur in the "Majors", consisting of the British Pound (GBP), Euro (EUR), Japanese yen (JPY), Swiss Franc (CHF) and US dollar (USD). Many also added the Canadian Dollar (CAD) and Australian Dollar (AUD) to this category.




Currency pairs

New traders often have difficulty understanding the concept of currency pairs. "Why not just buy the euro?" One might ask. "Why have to be linked to the US dollar?" The currency on the right side of the couple is there to establish a comparative value, without it would be impossible to assign a value to the base currency (currency in left of the couple). If the coins were not linked, we could not determine that a single currency could gain or lose value.




pips

Market increases are measured in pips, or percentage points. A pip is the last digit in the value of a currency pair. All Forex currency pairs, except the Japanese yen, the Chilean peso etc, have 4 decimals, the pips are measured from the fourth decimal place.




For example, suppose a trader buys a standard lot of GBP / USD in Capital FX platform and the exchange rate is 1.6015. Essentially, this trader is buying 100,000 lbs in exchange for $ 160,150. Again, for example, suppose the price of the currency rose 15 pips to 1.6030 and trader liquidates the position. They are now 100,000 of $ 160,300, so the trader makes a profit of $ 150.









Margin in Forex Market






What is the margin in Forex?
In the currency market the margin term is used to refer to the amount of money needed to open a leveraged position, or a contract market. It can also be used to describe the type of account, ie regardless of the currency, which means that an account is being operated by leveraged funds. Generally, it is safe to assume that all foreign exchange transactions retail (or Forex) being negotiated with the margin account.

Without leverage to a trader place an order for a batch on the market would have to have the total contract value of $ 100,000 for example for execution. Leverage allows an operator (trader) to place the same $ 100,000 contract without possessing all of that amount using an amount of margin (determined by the level of leverage). For example, an account with leverage of 100: 1 would require U $ 1,000 of margin to place an order of $ 100,000.




Leverage levels default for new accounts in Capital FX is set at 100: 1. Forex leverage should be used with caution as it magnifies both your earning potential as losses. Remember that the higher the leverage, the greater the risk.




In order to protect yourself and traders, Capital FX sets margin requirements and the levels at which traders are subject to margin calls (Stop Out). The margin calls or margin calls occur when a trader is using too much of your available margin. Each trader must be clear about the parameters of their own, that is, at what level are subject to a margin call.




How to calculate capacity margin?
Traders always have the option to choose a lower level of leverage. Doing so can help manage risk, but bear in mind that a lower leverage means that a larger margin deposit is needed to control the contracts of the same size.




The amount of margin required to place an operation can be calculated using the following formula:

Margin = (contract size / leverage)




Example
To calculate the margin required to execute batch average USD / CLP ($ 50,000) to a leverage of 100: 1 in a $ 5000 USD, simply divide the size of the contract by the amount of leverage; for example, (50.000 / 100 = 500). Margin of $ 500 is required to place this operation, leaving a balance of $ 4500 in the account balance for future operations.




Contract sizes and Margin Call (Margin Calls)




Margin Calculation

Margin is calculated in two ways: Used Margin and Free Margin. Used Margin is the amount of money to maintain open positions. Free margin is the amount of funds available to place additional positions.




Calculation of Margin Call (Margin Call)




Capital FX has security mechanisms to help prevent a trader into major losses to their initial warranty. This is commonly known as a margin call (Margin call). The level of margin is calculated by dividing the equity in an account (Balance + Benefits) by the current amount of margin in use (used margin).




After dividing the heritage margin should move the decimal two places to the right. A trader whose equity is $ 1,000 and you are using a margin of $ 500, the 1000 divided into 500 which gives a result which is equal to 2. Then, move the decimal two places to the right, the current level this trader margin is 200%. At a level of 100% margin trader you are using all its margin. When the margin level drops to a certain percentage (50%), operations are automatically closed by a stop out.




Fundamental analysis
Fundamental analysis is the study of the elements that influence the economy of a given currency. This method of study attempts to predict price action and market trends by analyzing economic indicators, government policies and social factors. Fundamental analysis is a very effective resource predict economic conditions, but not the exact currency prices.




The key indicators for each currency include interest rates, the policies of central banks, unemployment, employment reports and the Gross Domestic Product (GDP), etc. These economic indicators or financial data are published by various agencies of each country's particular sectors or official. These statistics, which are published on a regular basis, help market observers monitor the pulse of the economy. Therefore, almost everyone in the financial markets followed religiously. With so many people prepared to react to the same information, economic indicators in general have tremendous potential to generate volume and to move prices in the markets.