Spot Forex Market (Part I)

By Ahmad Hassam

Of all the financial markets, spot forex market maybe considered as the most pure in the sense that supply and demand is strictly what determines the prices. Spot means that both the buyer and the sellers agree on a certain price and make the transaction on the spot without any delay. The spot forex market is an over the counter market. The spot forex market is a decentralized network of buyers and sellers. There is no physical central exchange that acts as a central clearing house.

Over the counter means that the buyers and sellers make a binding contract with each other after agreeing on the price and this is not carried through an exchange unlike the forex futures trading that is carried out through the exchange like CBOT, CME etc.

There are several advantages of a central exchange like the counterparty risk for the trades is reduced. There is trading anonymity something that big players want to hide their trails. Forex traders in the spot forex market carry out their activities by dialing directly with one another or through brokers on telephone or internet.

For all the practical purposes, the spot forex market is unregulated and free of distorting red tape. The sheer size of the daily trading volume something like $3 trillions means that the government and the central banks interventions have little long term effect on prices. Chicago Mercantile Exchange (CME) along with Reuters launched the worlds first centrally cleared global forex market place in 2007; FXMarketSpace. CME will act as the clearing house and guarantee the performance of all the contracts for both buyers and sellers in this centrally cleared system.

Only sophisticated investors with net worth of more than $20 Million can trade on the FXMarketSpace. Unfortunately FXMarketSpace is an institutional trading platform and is not open to retail forex traders.

There are many players involved in the spot forex market. The spot forex market has long been the playground of only the biggest and the baddest global banks. At its core, the spot forex market is a credit market. The dominance of big banks is unlikely to be challenged soon. Recently NFA (National Futures Association) had also passed certain new rules that make it more skewed against the small investor like you and me. The spot forex market is still skewed against the retail forex trader. Why is it so?

Previously spot forex trading was the playfield of the big banks, multinationals and the hedge funds. With the advent of the internet, it became possible to introduce trading platforms for the retail investors.

The forex market differs from other traditional financial markets. Things deemed illegal in most of the other financial markets are simply considered part of the game in the forex market. Insider trading, front running, price shading etc are all regularly seen in forex trading and have no legal repercussions whatsoever. Retail spot forex is seeing a lot of growth in the recent years. A mushroom growth of online forex brokers took place. Many did not have even enough capital with them to start the brokerage business. Most of these forex brokers behave like bucket shops. But this is the way; the spot forex market has developed over the years.

It is essential for you that you understand the nature of the spot forex market and who are the main players. Why they trade forex? What type of advantages they have over the retail forex traders?

Over the counter nature (OTC) of the spot forex market means that currency transactions do not take place at any single place. Instead OTC means that the spot forex market is spread all over the globe.

Players in the spot forex market range from those who trade billions of dollars daily to those who only trade just a few thousand dollars daily. A players access to the spot forex market depends on the quantity of transactions of large amounts of money. Now who are the main players in the forex market against whom you as a retail forex trader will be competing? - 23204

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!

Trading Strategy - Rectangles Downside Breakout

By Jeff Cartridge

The rectangle can be traded on the short side entering the trade as the stock breaks out of the pattern to the downside. The pattern forms when the two boundary lines that contain the price movement are parallel. The bottom line and the top line are both near to horizontal. Sometimes these may be called a channel or a consolidation, but the most famous version of this pattern was a variation by Nicolas Darvas, published in his book "How I Made $2 million in the Stock Market".

Rectangles, Not Usually Traded Short

Rectangles are definitely not one of the most predictable patterns that are available to trade short. With just 46% of the patterns breaking down rectangles also don't deliver good returns when they do. The average gain is negative, -0.03% in 10 days with less than half of the breakouts (42%) being profitable. These results aren't great, but selecting the right conditions can make trading rectangles better.

Improve Your Trades

A break to the downside requires certain market conditions to be effective. Avoid falling markets, so look for markets that are consolidating or rising. By using filters that require the stock to be in consolidation and the sector to be in a trend, either up or down, you can improve the results.

The best results are achieved when the pattern does not have an outside day candle prior to the breakout. Also patterns with equal closes or higher highs before the breakout perform poorly.

If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.

Short Trading Rectangles Can Be Profitable

When trading rectangles short these filters are very important to get good results, making this an extremely difficult pattern to trade short. With these filters in place, an average return per trade of 1.07% in 13 days and a hit rate of 63%. There are better patterns to trade short.

Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23204

About the Author:

Jeff Cartridge has been trading CFDs since 2002 and created the website LearnCFDs.com Discover Patterns of Success

The Golden Years

By James Pynn

It is the duty of every concerned citizen to be informed. This includes basic economics. As the recession creeps into its second year and the number of unemployed Americans is in double digits, learning some economic essentials is a must. A good place to begin, is with the idea of the Gold Standard, which President Nixon discarded on August 15, 1971.

The gold standard is defined as, "A commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." Basically, the gold standard was embraced in an effort create an even playing field across all national economies. This common standard, then, could be used to value and devalue currencies.

In its past, the United States has embraced two precious metals in turn: gold and silver. Both metals were used to peg the value of the dollar thanks to the Standard Act of 1900. Now it's important to also know that whenever there is a recession or depression, central banks hate having such a shiny standard. What they like doing in such dire times is print more money giving the immediate illusion that markets are holding fast and steady. They don't like having to worry about a standard to uphold because that only slows the printing presses. But that's not how it works.

This tactic of printing more money is a favorite of central banks worldwide. When one powerful economy, like that of the United States, begins to print more money, so too, in most cases, do the banks of foreign nations. This had and still has -- a tremendous affect on the Forex (or Foreign Currency) markets. To keep parity with the dollar, they must print more or less money.

Since 1971, the US dollar has been pegged to nothing. Consequently, every major currency worldwide is a fiat currency, that is, it has no intrinsic value and is only as valuable as it is accepted for services rendered or goods created. The hidden danger involved is in the inflation that arbitrary printing causes. It has been estimated that the buying power of a 1971 dollar is now roughly eight cents to the dollar. Without a peg to the dollar, the Fed can print as much as it wants, thereby causing a massive tide of inflation that has the potential to flood our everyday lives. - 23204

About the Author:

Learn how world currencies can be bought and sold with an accredited Forex course. As the dollar begins to lose its value, it is essential investors look to foreign currencies to offset potential losses.

Forex Trading Robots Can Assist In Day Trading For Profits

By John Eather

Forex trading robots are programmed to seek and scalp small profits during day trading. This done on a long term basis is able to grown some considerable profits. Day trading in forex is not a huge challenge. Millions of traders are doing the same things at the same time of day, and a robot can look at these trends to build income in a relatively risk free manner. What may be a challenge is finding the right robot product.

Forex traders all use different trading systems; however these do tend to have a certain predictability about them. For you to actually take on the challenge day trading is a bit of a bore as volatility in short time frames is completely random. There is also the matter of support and resistance levels which are not valid, and because of these the trader is able to make losses when using a robot instead of profits.

There are a large variety of day trading robots available for purchase, and day trading can be good in terms of small regular profits. However, these robots come with simulated back tested track records and the only way to know how they really perform is by testing them in real time with real information. Doing this is called a "forward test" rather than a "back test". If you see what I mean!

Testing a forex robot in this way is called a "forward test" as apposed to a "back test". It has to be able to adapt to changing market circumstances while performing on a broker account. The test should reveal that the robot shows consistent trades, meaning more winning trades. And most vital of all is money management, the robot has to be able to protect the account equity without allowing any large draw-downs.

Ideally these robots should be tested against one another during the same or similar market conditions, with and identical capital deposit amounts. This is the only sure fire way to receive a true indication of whether a product is comparable or not. For vendors to cash in on day trading by means of a forex trading robot, don't rely solely on the hype of historical price data and tested performance analysis. This is marketing speak from the people who sell these products. Be prepared to test and compare products yourself. - 23204

About the Author:

Learn more about forex trading robots. Stop by John Eather's site where you can find out all about forex trading systems and what it can do for you.

Start Investing In Real Estate

By Thommas Anderson

Sadly only 5% of Americans will be able to find the money for retirement. For the rest of us, we are facing a big challenge. Conversely, with careful preparation and a basic understanding of investing, you can easily join that 5%, even if you don't make that much money each year.

A good way to join that 5% is through real estate. I recognize that this is not a trendy outlook right now given the circumstances of the market. Regardless, investing in real estate has made countless millionaires throughout history. As an investment channel, real estate gives significant benefits over other numerous other investments. These specifics are especially true in a down market because you as an investor have the opportunity to buy property at a low cost that should appreciate over time.

If investing in real estate is such a great chance, how do you get started? The first thing you must know is that there are three areas to focus on when buying an investment property. First and foremost, you ought to focus on making sure that the rent covers the costs and mortgage. The next is the broad appreciation over time. The third is the savings on your taxes by owning the property. When you look at a likely investment property these are the primary issues that you need to address.

A big mistake that countless investors make is not fully evaluating the financial impact of an investment before the purchase. You have a number of real estate investment programs to choose from, and many of these real estate software programs are complimentary for investors to download.

As a beginner in real estate investing, you could not totally understand all of the ratios and data that a retail or complimentary real estate investment software program gives, the data provided by the program is still necessary to guide you on your decision. For most software programs the fundamental data is relatively easy to understand and will allow you to get a feel for if the rent will cover the cost of the investment and if the investment property will truly be profitable. The more in-depth information returned from the real estate software could be better understood by bankers and accountants. However, these are professionals that you should come to know as you begin investing in real estate. - 23204

About the Author:

Freetrainer.com provides real estate investors with a free downloadable residential and commercial real estate investment software. Visit AgentsOnline today to learn more about investing in real estate.