All About Online Forex Trading

It was a strange sight in the past to witness customers exchanging stacks of money with their agents at public places such as the international bus terminus, prominent official buildings or even at the airports. These agents were prepared to sell you the foreign currency that you want with a little profit given to them. However, all these have changed over generations. Forex trading is now handled by licensed companies and unsolicited individuals are not allowed to operate illegally. With the invention of new technologies and the coming of professionals, Forex trading is now made easier and more systematic. It is also much safer to do business with these professionals to prevent scams.

At the beginning stage, most of the large companies would carry out their Forex trading via the different banks or even through the major institutes that deal with finances. These institutes had to be the ones that operate internationally. Forex trading has attracted a lot of popularity today because of the presence of modern technology. Via the use of the internet and the increasing telecom market, it is easier to spread messages and to bring across information on issues such as the economic polices worldwide. With the creation of the Forex Software that you can find on the internet, you will easily get the latest news about the Forex trading online. This has actually become a platform that facilitates the exchanges of trading since it makes it easy for you to seize opportunities on the spot and to implement your decisions immediately.

Apart from some problems at the beginning stage, Forex trading on the internet has become more standardized and the people who take part in Forex trading can now get a close to 100% secured access via the different companies that deal with Forex trading. The advantage of using these companies is that they are free from restrictions and give the customers more freedom of choice. As people now become more aware of the usefulness of Forex trading on the internet, it has helped to boost the popularity of advanced technology. Since it has been so successful to trade online, more people are entering this Forex trading platform and as a result, it has become commercially possible to use the Forex Software as a mean for trading exchanges to take place.

Surveys have shown that more and more people are getting involved in Forex trading. People joined for different reasons and in fact, some are even starting it as a hobby. In the conventional Foreign Exchange Market, this was usually dominated by big companies such as banks or Multi National Companies and you don’t get commoners involved apart from brokers. However, now there are many guide books on the trading methodologies, as well as trend analysis, so it will make it easy and safe for any newbies who might want to learn Forex trading online.

If you understand the margin trading concept that you apply in Forex, you can actually save a lot of money on deposits. It refers to the margin that is traded on and this margin differs depending on the banks’ policies but it will always in percentile terms based on the initial amount. How much you are allowed to play in Forex trading depends on what is the original amount given by the bank. The actual potential can be illustrated by the example below. Let’s say a bank has imposed a 2% as the margin deposit. This means you will only have to put in $20000 USD as a deposit in order to trade for two million dollars. As such, you will be able to increase by 200% for your profit. On the other hand, should you be unlucky and loses money in the Forex trading, the margin deposit of 2% will mean a loss of 200% too. Whether you are playing Forex trading online or offline, the rules are the same.

So long as you participate in investments, there will be the impending dangers of profits or losses. As it is, the Forex trader’s luck online can be anywhere between 2 to 25% on an average each day. As a newbie in Forex trading, it is essential that you know that your deposit’s interest rates will change depending on the currencies. As such, most traders play in a few different currencies in the world of Forex, which is what is known as the variable currency and the Base currency. This is applicable both in the conventional mode as well as the Forex online mode. In order to be a successful Forex trader, you will need to have an ability to analyze, a high level of knowledge on the subject and your intuition to act appropriately when the opportunities come. You must also be able to make full use of your Return on Investment (ROI) so as to gain the most profits from this lucrative financial market

A Brief Overview of Forex Markets

The global foreign exchange market is the biggest market in the world. The 3.2 trillion USD daily turnover dwarfs the combined turnover of all the world's stock and bond markets.

There are many reasons for the popularity of foreign exchange trading, but among the most important are the leverage available, the high liquidity 24 hours a day and the very low dealing costs associated with trading.

Of course many commercial organisations participate purely due to the currency exposures created by their import and export activities, but the main part of the turnover is accounted for by financial institutions. Investing in foreign exchange remains predominantly the domain of the big professional players in the market - funds, banks and brokers. Nevertheless, any investor with the necessary knowledge of the market's functions can benefit from the advantages stated above

Forex Strategy

A US Dollar breakdown led to impressive gains in several of our trend-following forex trading systems, and continued dollar tumbles would bode well for these strategies’ performance. Yet the Greenback’s tumbles did not produce a noteworthy shift in forex options market volatility expectations—suggesting that few expect strong continuation in US Dollar weakness. Record-high correlations to the S&P 500 and other key risk barometers suggests market conditions outlook will greatly depend on the trajectory of financial market risk sentiment.

Given great uncertainty surrounding near-term forex market conditions, we will maintain our bias towards Range and Breakout systems. If nothing else, our Breakout strategies' relative consistency through varied market conditions give us confidence that they may continue to trade well. To partially hedge against risks that currencies will return to broad trading ranges, we will watch for any worthwhile Range system opportunities. Yet risk on said trades should be kept tight in case of continued trending conditions in the US Dollar and Japanese Yen.

online forex

ParagonEX is inviting all EiG Copenhagen 2009 participants to enter the “Play the Markets” contest on the ParagonEX stand #363. The lucky winner will walk away with a brand new Nintendo Wii™.

In a trading game where players have to guess if the market will be above or below a set number at a specific time, ParagonEX have managed to create an online gaming extravaganza. Using ‘no download’ technology, ParagonEX are showcasing this latest offering at EiG in Copenhagen from Tuesday 15th September until Thursday 17th September.

The VP Business Development at ParagonEX, Arik Peretz explains in no uncertain terms that this is going to be the latest craze to form a bridge between Online Gaming and Forex:

“We are certain that our latest Binary Options game will attract players who like to place a wager on the financial markets. Imagine watching a roulette table and wagering on black to appear at a given time. Although there are subtle differences, our product gives users the opportunity to choose a currency pair, for example, at a set time with a set market price and to decide if they think that price will have gone up or down at the specified closing time of the deal. It’s as simple as that. “

“All interested operators are invited to our booth #363, at EiG to independently assess if the Binary Options game would make a good addition to their current offering. To add a sweetener, we are holding a “Play The Markets” tournament in which the winner will receive a Nintendo Wii™.” Stated Arik Peretz, VP Business Development at ParagonEX.

Binary Options games are becoming ever popular across the world. ParagonEx are offering binary options trading based on the movement of financial instruments such as Currencies, Indexes such as NASDAQ and FTSE and also in commodities such as crude oil and gold.

About ParagonEX:
ParagonEX brings a paradigm shift to the way Retail Online Forex is managed.

ParagonEX is the provider of trading platforms for the Retail Online Forex market. Our product is the first platform solution to offer a holistic, browser based (download-free) software suite to online retailers operating in the Forex market.

forex trading online

This year, at least three Internet companies have opened offices in Dubai, trying to capitalize on growth opportunities in the region. Case in point: The retail Internet platform of Deutsche Bank, dbFX.com, recorded a 501% year-on-year increase in Middle Eastern currency trading volumes in the first quarter of 2009.

"The opportunities are ripe for foreign-exchange firms, because businesses in Dubai are already very aware and sensitive to foreign-exchange fluctuations," said Kathy Lien, chief strategist at Global Forex Trading, which opened a Dubai office last year.

Oanda Corp., with headquarters in New York, is the latest currency platform to open shop in Dubai, following Saxo Bank and FXCM Holdings LLC earlier this year.

Large institutions have already been working in the region. Deutsche Bank began offering currencies as an asset class to Middle East clients in 2005.

"The people there use forex all the time. They're very international - international payments; they need to hedge their currency exposure, and there are always people who speculate," said Michael Stumm, president and chief executive of Oanda, an Internet-based foreign-exchange trading and currency information service for individuals and large corporations.

However, Oanda has few offices, with the majority of staff working in its technology team. Its Dubai office, therefore, says a lot about the importance of the region, particularly as business there is largely driven by money management rather than individual traders.

"We tend to have more people ask us if we have managed fund products," said Lien of Global Forex Trading. Alternatively, big money managers or banks may be looking for new systems to use for their trading operations.

This is very different than the core business model for most of the online foreign-exchange brokers operating in the U.S., Europe and Asia.

"There's a very big shift in strategy for companies that have offices in Dubai," said Lien.

Stumm said he hopes to increase liquidity and bring down the cost of trading in currency markets in the Middle East with Oanda's foray into Dubai.

"A number of companies have been opening there," said Stumm. "Our plan is to shake up the market."

currency trading

Currency investment manager Overlay Asset Management (OAM) has launched two currency funds: the SingleHedge Currency Options Fund and SingleHedge Multi-Strategy Currency Fund.

The SingleHedge Currency Options Fund aims to achieve capital growth by taking active positions on currency volatility in addition to the direction of spot foreign exchange rates. A discretionary strategy, it is managed by Xavier Lefevre, head of portfolio management and trading.

OAM expects the fund to be attractive to institutional investors, delivering returns with a low correlation to the majority of currency funds.

The Multi-Strategy Currency Fund is a feeder fund seeking to deliver strong risk-adjusted returns through exposure to three underlying currency programmes managed by OAM. These are developed markets diversified program, emerging markets currency program and the aforementioned currency options strategy.

The developed markets diversified program, launched in April 2003, invests in seven developed markets currencies (US dollar, euro, yen, sterling, Swiss franc, and Canadian and Australian dollars. It currently represents around 97% of the developed market currency trading volume

The emerging markets currency program, launched in November 2007, invests in US dollar and euro as well as emerging markets currencies deemed sufficiently liquid by OAM's investment team. These include Argentina, Brazil, China, Czech Republic, Hungary, India, Indonesia, Korea, Mexico, Peru, Philippines, Poland, Romania, Russia, Singapore, South Africa and Turkey.

Investments into the underlying strategies are made through zero-fee share classes. There are no layered fees.

The currency options and multi-strategy currency programs are also available as segregated managed accounts, with risk parameters and return targets tailored to the client.

The currency options fund has sterling, US dollar and euro share classes and will trade foreign exchange spot, forwards, swaps and options, including vanilla and complex ones as well as cash management instruments. Redemption is weekly.

The fund, domiciled in Ireland and listed on the Irish Stock Exchange, began trading in June and has a net cumulative performance of 1.88%.

Maximum ex-ante volatility is 25% a year.

The multi-strategy currency fund also has three currency share classes (sterling, US dollar, euro) and trades the same instruments as the currency options fund. Net cumulative performance since inception in June is 42%. Like the currency options fund, this one also offers weekly liquidity and is listed on the Irish Stock Exchange.

Maximum ex-ante volatility is 25% a year.

Overlay Asset Management is the BNP Paribas Investment partner that specialises in currency management. Established in 1998, it provides currency management services including currency alpha program as well as active and passive currency hedging services to institutional investors. At August 31, 2009, Overlay Asset Management managed over £11 billion in client assets.

currency

he $ fell last week to the lowest level in a year as price swings in foreign exchange declined, encouraging investors to borrow greenbacks at record low interest rates and buy assets in countries offering yields as much as 8.1 percentage points higher than U.S. deposit rates. Borrowing costs in dollars as measured by London interbank offered rates fell below those of and Swiss francs for an extended period for the first time since 1994 during the past three weeks.

Thoare the most profitable since before 2000, according to data compiled by Bloomberg. Borrowing dollars and then selling them is adding pressure on a currency that’s already weakened 14 percent since March as the budget deficit exceeded $1 trillion, the government sells a record amount of debt and the Federal Reserve floods the financial system with $1.75 trillion to pull the economy out of a recession.

“The dollar is the big funding currency,” said , vice chairman of New York-based FX Concepts Inc., the world’s largest currency hedge fund, with $9 billion in assets under management. “The reason why people are borrowing the U.S. dollar for carry trade is A: It’s very cheap to fund, and B: The expectation is it’s going to go down.”

Risk Versus Returns

London-based Standard Chartered Plc, the most bearish of 45 firms in a Bloomberg survey, predicts the dollar will decline 6 percent versus the euro by year-end. Deutsche Bank AG in Frankfurt, the most accurate forecaster of the dollar in the first half of 2009 as measured by Bloomberg, is bullish, calling for it to gain 11 percent by the start of 2010.

Using the world’s reserve currency to fund carry trades became more profitable and less risky last month than with the yen for the first time since March 2008, Bloomberg data show. The difference in Sharpe ratios for dollars and yeof performance versus risk, has averaged 1.35 since May, compared with minus 0.37 since 2004. The higher the Sharpe ratio, the higher the risk-adjusted return.

“The way everyone is funding their risky investments is by using dollars,” said the head of foreign-exchange strategy at Frankfurt-based Deutsche Bank, the world’s largest currency trader. “Interest rates between Japan and the U.S. are fairly comparable right now, which is incredibly unusual. Much of the past 20 years or so, the yen has been the funding currency of choice.”

29% Return

The three-month for dollars, a benchmark for about $360 trillion of financial products, fell today to an all-time low of 0.295 percent, compared with 0.355 percent for the yen and 0.305 percent for the Swiss franc, another traditional funding currency, according to the British Bankers’ Association in London. Over the past 20 years dollar Libor has averaged almost 3 percentage points more than yen Libor.

An investor who borrowed $10 million dollars in March to fund the purchase of a basket of 10 currencies including the Brazilian real and South African rand would have paid 1.27 percent initially. The trade would have delivered a 29 percent return through last week as the offshore funding rate dropped to 0.53 percent, according to three-month deposit rates for the currencies compiled by Bloomberg.

That same strategy funded in yen would have returned 19 percent with wider swings in daily returns, Bloomberg data show. That trade funded in francs would have earned 16 percent.

Real, Rand

The basket comes from the most actively traded currencies in the Bank for International Settlements’ triennial survey that offer the highest three-month rates. Brazil’s benchmark is 8.6 percent and the real has appreciated 26.4 percent this year. South Africa’s borrowing rates are 7.2 percent. The rand has strengthened 28 percent compared with the U.S. currency.

Volatility, which can wipe out gains from carry trades, also favors using the dollar over yen. Three-month euro-dollar volatility fell to 10.2 percent on Sept. 11, while three-month dollar-yen volatility declined to 11.9 percent. The difference is the biggest since December.

Record low borrowing costs, designed to help pull the economy out of the deepest slump since the Great Depression, may be hurting the dollar more than supporting it. The Fed and Chairman cut the target fed funds rate to a range of zero to 0.25 percent in December, from 5.25 percent in September 2007.

Dollar Index

The Dollar, which tracks the dollar against the euro, yen, U.K. pound, Canadian dollar, Swiss franc and Swedish krona, rose 17 percent from Sept. 15, 2008, to March 5, 2009, as investors sought the safety of U.S. assets following the collapse of Lehman Brothers Holdings Inc. and the government’s bailout of insurer American International Group Inc. When the panic receded, the index fell 14 percent to 76.972 today as investors focused on deficits in the U.S. and interest rates.

Investor appetite for dollars may benefit from the growing gap between short- and longer-term borrowing costs in the U.S., according to a foreign-exchange strategist at Barclays Bank Plc in Tokyo.

Yields on 10-year Treasuries ended last week at 2.44 percentage points more than two-year notes, the third-widest spread of any Group of 10 nation after the U.K. and Sweden. The so-called yield curve in Japan is 1.10 percentage points.

Rate Outlook

Policy makers may also help the dollar appreciate, at least against the euro. The European Central Bank will wait until the final quarter of 2010 to increase its mark rate from 1 percent, according to Euribor interest-rate futures. The odds that the Fed will raise its target rate for overnight bank loans as soon as the second quarter are almost 59 percent, fed funds futures on the Chicago Board of Trade show.

For now, the U.S. currency is weakening after the budget deficit expanded to $1.27 trillion in the first 10 months of fiscal 2009 that ends Sept. 30. The gap will widen to $1.6 trillion in 2010, according to the Congressional Budget Office.

The Obama administration has pushed the nation’s to an unprecedented $6.78 trillion to spur growth, support the financial system and service record deficits. The Fed is pumping in $1.75 trillion to keep credit flowing by purchasing Treasuries and mortgage bonds.

The drop in the U.S. currency has contributed to a 9.4 percent gain in theIndex of 19 raw materials. Gold has risen 13 percent this year to about $1,000 an ounce, while crude oil has soared 53 percent to $68.21 per barrel.

Last week, Standard Chartered reiterated its call for the dollar to weaken to $1.55 per euro by year-end, from $1.4571 on Sept. 11. Zurich-based UBS AG, the world’s second-largest currency trader, lowered its forecasts last week for the dollar.

Yen Volatility

Royal Bank of Scotland Group Plc in Edinburgh will probably raise its year-end yen forecasts to “the order of 88 versus the dollar and 122 versus the euro” Greb gires a foreign-exchange strategist in Sydney, wrote in a report last week. The yen ended Sept. 11 at 90.71 to the dollar and 132.17 to the euro.

Yen volatility may increase after the Democratic Party of Japan and two other political parties take power in Japan for the first time this week, according to, a senior currency trader at Mizuho Corporate Bank in New York.

The DPJ needs to find 7.1 trillion yen ($78.3 billion) to fund its election pledges in the year starting April 1, and the amount would swell to 16.8 trillion yen in 2013, according to its campaign manifesto. The new administration, led by Prime Minister-designate Yukio has said it will increase funds for child care, education and employment partly by diverting as much as 5 trillion yen of stimulus spending already approved.

“People are watching what this new government will do in this new era,” said Yanagihara. “That will cause higher long- term interest rates and maybe the budget deficit will inflate.”