forex

FOREX:

AT FIRST FOREX MEANS FOREIGN EXCHANGE RATES.

WHAT ARE FORIEGN CURRENCY EXCHANGE RATES?

FORIEGN CURRENCY XCHANGE RATE IS WHT IT COSTS TO XCHANGE ONE COUNTRY'S CURRENCY FOR ANOTHER COUNTRY'S CURRENCY.

IF U GO TO ENGLAND, U HAVE TO PAY FOR ALL MEANS IN BRITISH POUNDS,LETS THINK THAT U HAVE US DOLLARS,THEN U HAVE TO SELL SOME OF UR DOLLARS TO BUY BRITISH POUNDS

LET ASSUME U GO TO UR BANK BEFORE U LEAVE TO LONDON FROM US AND U BUY $1000 WORTH OF BRITISH POUNDS,U GET 565.83 POUNDS FOR UR $1000 DOLLARS i.e. FOR EACH $1 U GET .56583 POUNDS THIS IS THE XCHANGE RATE FOR CONVERTING DOLLARS TO POUNDS.

IF 565.83 POUNDS ARE NOT ENOUGH FOR UR TRIP THEN U HAVE XCHANGE STIIL MORE $1000 IF U GO AND XCHANGE IF U GET 557.02 POUNDS THIS SHOWS THAT THERE IS DROP IN CONVERTING.


HOW TO TRADE FORIEGN CURRENCY EXCHANGE RATES?

THE EXAMPLE STATED ABOVE SHOWA RISE AND FALL IN EXCHANGE RATES SO BUY SHARES WHERE THERE DROP IN EXCHANGE RATE AND SELL WHEN THERE IS PROFIT IN EXCHANE RATE.\


HOW DOES THE OFF-EXCHANGE CURRENCY MARKET WORK?

THE OFF- EXCHANGE FOREX MARKET IS A LARGE ,GROWING AND LIQUID FINANCIAL MARKET THAT OPERATES 24 HOURS A DAY. THIS MARKET TRADING MAINLY DONE BY TELEPHONE OR ELECTRONIC TRADING NETWORKS.

WHAT TRANSACTION COSTS WILL I PAY?

IN ORDER TO TRADE U HAVE TO OPEN DEMAT ACCOUNT OFFERED BY SEVERAL BANKS BEFORE OPENING U HAVE TO CHECK HOE A DEALER CHARGES THE CUSTOMER AND THE SERVICES PROVIDED BY THEM.IF UR ACCOUNT IS MANAGED BY SOMEONE , U MAY BE CHARGED A SEPERATE AMOOUNT FOR THIRD PARTY SERVICES.


HOW DO I CLOSE OUT A TRADER?

RETAIL FOREX CUSTOMER ARE NORMALLY CLOSED OUT BY ENTERING INTO AN EQUAL BUT OPPOSITE TRANSACTION WITH THE DEALER.

FOR EX: IF U ARE BOUGHT EUROS WITH DOLLARS, U WULD CLOSE OUT A TRADE BY SELLING EUROS FOR US DOLLARS,THIS IS CALLED OFFSETTING OR LIQUIS TRANSACTION.

IN THE RETAIL FOREX TRANSACTION U WILL SETTLEMENT DATE WHEN CUUENCIES ARE DUE TO DELIVERED. IF U WANT TO KEEP UR POSITION BEYON SETTLE MENT DATE U HAVE TO ROLL THE POSITION OVER TO NEXT SETTLEMENT DATE.IN THE THE DEALER CHARGES FOR EVERY ROLLL U MADE.


HOW TO CALCULATE PROFIT AND LOSS?

WHEN U CLOSE OUT A TRADE , U CAN CALCULATE UR PROFITS AND LOSES

PROFIT OR LOSS = PRICE(XCHANGE RATE) WHEN SELLING THE BASE CURREENCY - PRICE WHEN BUYING THE BASE CURRRENCY * TRANSACTION SIZE

HOW MUCH MONEY NEED TO TRADE FOREX?

FOREX DEALERS CAN SET THEIR OWN MIN ACCOUNT SIZES, U HAVE TO ASK DEALER HOW MUCH MONEY NEEED TO PUT TO BEGIN TRADING.MOST DEALERS WILL ALSO REQUIRE CERTAIN AMOUNT OF MONEY FOR TRANSACTION AND THEY MAY ALSO ASK FOR SECURITY BOND.

RISKS OF TRADING IN THE FOREX MARKET:

1) THE MARKET COULD MOVE AGAINST YOU

2)U COULD LOSE YOUR ENTIRE INVESTMENT

3)U ARE RELYING ON THE DEALERS CREDITWOTHINESS AND REPUTATION

4)THERE IS NO CENTRAL MARKET PLACE

5)THE TRADING SYSTEM COULD BREAK DOWN

6) U COULD BE A VICTIM OF FRAUD.

THE OTHER ISSUES TO CONSIDER

1) WHO REGULATES OFF-XCHANGE FORIEGN CURRENCY TRADING?