Forex trading has its own advantages over other types of trading. The fact that trading in different currencies does not take place in a centralized market unlike other trading options makes it quite an advantage in itself. Here are other advantages that trading in currencies offer.

One of the major advantages of forex trading is that it provides the opportunity to trade on a 24 hour basis. Trading in forex can start as early as Sunday evening at 20:00 GMT as late as Friday evening 22:00 GMT. This schedule gives traders from all over the world the welcome opportunity to react instantly to breaking news and information that greatly affects the markets and go through with deals that offer the most gains.

Another advantage of the forex market over other trading markets is that it exists in an environment with high liquidity. The forex market is so liquid that there won't be a lack of buyers or sellers to trade with. This helps ensure price stability and narrow spreads within the market, most especially for those of the major currencies. It is the banks that provide liquidity to investors, companies and other market players in the currency trade.

Another major advantage of forex trading is that the profitability of the deals is not being diminished by commissions paid to agents, etc. Every deal and transaction sealed and approved almost always comes without both parties having to pay hefty commissions. It is this fact that makes currency trading very attractive as an investment opportunity for investors who want to trade in currencies on a more frequent basis.

Leverage is another major advantage of trading in currencies. Leverage or gearing allows participating traders to hold a position that can be worth up to 100 times more than the margin deposit made. To cite an example, a USD 10,000 deposit can command positions in forex trading for up to USD 1,000,000 by way of leverage. In forex markets, it is possible to leverage the first USD 25,000 of a traders investment a hundred times and additional collateral for up to fifty times the actual value.

Another distinct advantage of trading in currencies is that there is profit potential even in falling markets. Since the forex market is constantly in motion, there are always trading opportunities available. Anywhere in the world, there is a currency that is either strengthening or weakening in relation to another country's currency. In forex trading, currencies work against each other. When a major currency weakens, it is because one of the other major currencies is strengthening. Falling currency rates may provide traders with buying signals for a possible increase in rates

 

If you want to enjoy currency trading success, you need to catch and follow trends and spot turning points and this tool will help you - it's an obvious tip in many respects but most traders simply don't use it, so here it is.

It's to look at other markets that impact on the currency you are trading and for the purposes of illustration let's look at the US Dollar.

The dollar is a net importer of energy and high energy costs hurt it and the main one we are referring to here, is crude oil. In recent history when crude has hit high levels (and we have had recent tests of $100 a barrel) it has hurt the dollar and the retreat from this level has seen the dollar stabilize and rise.

Tops in the oil market recently have warned of dollar rallies.

Another major factor is interest rates.

Recently the dollar has been hurt by the perceived view that interest rates will be cut and you can get an idea of how much by looking at interest rate futures. When the interest rate futures rally too hard to fast and then fall, you can often see the dollar rally.

Why? Because traders get ahead of themselves - the recent rally in dollar euro was preceded by 100% consensus that interest rates will be cut by 50 bps (probably true) but gave 50 - 50 that rates would be cut by 75 bps (unlikely) the level of interest rate cuts factored into the market was overdone and prices in interest rate futures fell and the dollar rallied.

Tops in oil and interest rate futures can be used to warn of dollar rallies.

Another important variable is the stock market. Weak stocks hurt the dollar and strong stock markets support it - so watch it in fact if you want another tip:

If you are trading long term trends and only want to look at the prices of currencies once a day, do it just after the stock market closes. This closing price is always significant and while currencies trade 24 hours they are effectively thinly traded until Tokyo opens and the US stock market close sets the tone for the next day

Other currencies are also affected by outside influences:

The Canadian Dollar - Is a net exporter of oil and high prices of oil and other commodities are supportive of the currency

The Australian Dollar - Australia is a big producer of gold and when gold prices are high it supports the currency.

By looking at other markets that are important to a currency, you can often spot whether trends are going to continue or reverse. While it's obvious that currencies don't move in isolation, many traders do not bother to look at other markets for clues - if you do, you can get a trading edge.

By: Monica Hendrix

TO Finding the best forex system that you may use to supplement your investment plan is not an easy task. After all, the field of forex trading is not a simple one as well. Despite the fact that it may be easy to understand the different key aspects involved, applying them in real life and using them in transactions is pretty daunting. Trillions of dollars are traded every day in the foreign currencies market, and losing an investment is easy as making a good amount of money out of a good transaction.

For this reason, traders often look for tools and equipment that they may use to increase their chances of winning in the field of trading foreign currencies. As a matter of fact, making money out of fx transactions relies heavily on a trader’s ability to choose the right tools that he will use in his trading career. For this reason, you should direct your efforts to finding a good forex system that you may use in trading fx. Here are a few things that you should look for in choosing the right system that will fit your skills and your preferences.

First, make sure that you look into the different claims made by system manufacturers, and compare them to various user reviews that you will be able to find on the internet. Of course, every single manufacturer would say that their product is the best. Stick to the one whose claims correspond to the reviews of their customers, in order to ensure that you will get what you will be paying for.

Next, find out what your main trading goals are. Since different trading systems are made differently, they will also help traders for different purposes. If you are failing to make the amount of money that you were expecting, then maybe, you are using the wrong forex system. Objectively assess your goals, in order for you to be able to choose the best forex system in the market.

Finally, find out whether the forex system that you have your heart set on will work well for you. More often than not, forex systems will offer you the use of a demo account. Make sure that you will be able to fully use a system before you enter a long-term contract.