OK, this is the final day of my Forex eCourse, clearly there's only so much that I can fit into a Free five day eCourse.
Today I want to start off with talking about Margin Calls and Requirements -
Obviously since leveraging is all about borrowing money from the broker you need to understand exactly how much risk your broker is going to allow you to take on trades. Once you establish that together and discuss it, the broker will know the prices and differentials in the fluctuations within which to trade by buying or selling. This can, however, adversely impact you if the broker has that discretion and trades at losses.
For example, assume you maintain a margin account and your positions dramatically fall before turning around and rising substantially even exceeding the beginning price. Whether or not you have sufficient capital, a broker might have traded out your position during the fall to lessen the broker's risk and potential loss. That trade could have been at or near the bottom of the price fluctuation. That would result in a margin Call to you and you could be liable for substantial sums of money even though the price rebounded after
The broker liquidated your position. Opening a Forex account, regardless of the type, is similar to taking out a rotating equity loan or maintaining an equity account. The main thing that separates them from the Forex account is that you are required to execute a margin agreement with relation to your Forex accounts.
The margin agreement acknowledges that you are trading with money borrowed from the broker and that the broker can insert itself into your trades as necessary to lower its risk and protect its interest. It also explains your liability relating to any losses. After you execute the agreement and deposit the beginning capital to the account you opened, you are ready to begin trading.
Here is a basic overview of Basic FOREX Strategy Technical analysis and fundamental analysis is considered the two main forms of analysis in both the FOREX market as well the equity markets. However, most FOREX traders opt for using technical analysis.
The following is a quick overview of both types of analysis and how they are used in FOREX trading.
Fundamental Analysis
Using fundamental analysis in the FOREX market tends to be somewhat difficult and is generally used to forecast long-terms trends. There are, of course, some traders who conduct their trades on a short term basis solely on current news releases. There are many fundamental indicators of currency values that are released at various times so we have provided a list of a few for to be aware of:
• Non-farm Payrolls
• Purchasing Managers Index or PMI
• Consumer Price Index or CPI
• Retail Sales
• Durable Goods
Of course these are not the only fundamental indicators you need to be aware of. There are also several meetings that can provide you with additional information that may affect a market. These meetings usually focus on interest rates, inflation, and other causes of currency value fluctuation.
Sometimes a volatile market is caused by something as simple as the wording of issues such as the Federal Reserve chairman's discussion on interest rates. The most significant meetings you should be aware of are the Federal Open Market Committee and Humphrey Hawkins Hearings. Simply studying the commentary can help FOREX fundamental analysts to better understand long-terms market trends and can also help short-term traders capitalize on the market.
Should you opt for the fundamental strategy, you should keep an economic calendar on hand so you know when these reports are available. Your broker should be able to keep you up-to-date on this information as well.
Technical Analysis
Technical analysis helps FOREX traders analyze price trends much like their counterparts in the equity market. The only difference is that FOREX markets are open 24 hours a day and 5 days a week. In order to work with that 24 hour a day time frame, some types of technical analysis needs to be changed or modified.
The following is a short list of technical analysis tools that are most commonly used in FOREX Trading:
• Moving Averages
• Stochastic Oscillator
• Channel Breakout
• MACD (Moving Average Convergence Divergence)
• Candlestick charts
• Elliott Waves
• Fibonacci Studies
• Parabolic SAR
• Pivot Points
