2011-12
9

More European Woes

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Euro DebtOn Tuesday, November 29th, the worldwide markets began to climb back up after the rumor of a big breakthrough in the European debt crisis. That did not happen to materialize, and on the 30th, the European nations said that they would try to come up with an answer within ten days. Over the past few weeks, traders have stayed away from the Euro, and for good reason. The debt problem in Europe is out of control; it seems like the decision makers are dragging their feet in regards to coming up with a viable solution.

While it’s true that there is no single simple solution to fixing the debt problem, if the European nations want to preserve their currency’s value, something needs to be done quickly. The European nations have set up a ten day period in which they plan on coming up with a solution. After that, if no answer is reached, the world markets may suffer greatly. The Euro will be hit the worst of all currencies.

Knowing how to react to such news is essential for a trader using Banc De Binary. You might not be able to go long in many of your positions, but times like this create great opportunities for short sellers. If you want to profit off of both bear and bull markets, short selling is for you. The debt crisis will undoubtedly create some great opportunities for short sellers, especially if no valid solution is agreed upon to help bailout the troubled nations of the European Union.

2011-7
8

Types of Stock Market Shares

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Stock markets sell two main types of shares, common and preferred. Common stock is the type of stock that is usually sold on stock markets. These stocks are being referred to when a company’s stock is “up or down.” A company’s market valuation, the measure of the total value of the stock that has been issued, is largely based on common stock prices.

Common stock offers voting rights, which means that if the company has an issue that is raised at a shareholders meeting, persons holding common stock will have the right to cast a vote on the issue. Dividends are paid to shareholders of common stock, but those dividends can increase or decrease with the company’s profit margin, and dividends are paid out usually once a year.

Preferred stock is the second type of stock that a company may issue. Preferred stock has fewer rights over common stock and preferred stock holders have no voting rights. The value of preferred stock is that dividends are paid to preferred stock holders first, and typically, the amount is fixed rather than floating with profit margins. Each share of stock represents a percentage of ownership of the company. With preferred stocks, the value equals stronger returns on investment, while common stock offers ownership and voting rights. Sometimes investing in stocks can get very confusing. Using a product called the Oracle Trader in Forex will make investing much easier in the long run.

2011-5
11

Interest Rate Spread

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Forex traders base their decisions to buy or sell certain currencies on the economic factors underlying the associated countries. They keep an eye on both the macro-economic and micro-economic factors that may impact the value of these currencies. Interest rates are the most watched and followed piece of data that affects markets.

Interest rates are nothing more than rates offered by the central banks for very short term bonds. These rates are reset at regular intervals based on a number of local and international factors. Generally, the currency with the higher interest rate will attract more buyers than the one with the lower interest rate.

StraddleTrader Pro Traders, who are long in the currency with the higher interest rate, stand to gain the difference between the two rates. This concept is known as the Carry Trade in Forex. For example, the Australian interest rate currently stands at 4.75%, and the US rate is 0.25%. So, the interest differential is 4.5% in favor of the Australian dollar. If a trader is long the Aussie dollar, they will stand to earn 4.5% per annum on their investment in the carry trade, if the interest rates hold.

Interest rate differential between the two currencies determines to a large extent which currency will be favored. However, the more important aspect is the whether this differential is widening or reducing. A smart trader will also look beyond the obvious to the real reason why there is such a differential in the first place.

2011-4
10

Dangers of Forex Trading

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The Forex market has the potential for large returns, but the majority of peoples who trade within the Forex market lose money. This is because average traders are put at a disadvantage by the spreads that currency brokers apply. The bid and ask prices are placed at a wide enough margin so that you cannot buy a currency at the asking price and then immediately sell it at the bidding price. This also serves as a buffer because when prices only move sideways, the broker makes money off of the inflated ask price that traders purchased the currency at.

Leverage is also a powerful tool that can sometimes work against traders. By allowing traders to borrow large amounts of capital on margin with which to trade, they are setting traders up for failure even when using the TradeForgeFX trading platform. If you borrow 400 times the amount of your initial deposit to make a trade, and that trade loses money, you must pay back the broker the amount lost plus interest. The broker can conduct these margin calls at any time, thus causing them to secure a profit at their leisure.

In order to combat the leverage pitfalls that brokers setup, it is important that you use only an amount of money that you feel comfortable trading with. If you want to trade with only $5,000 and are presented the option of multiplying your trading amount by 100 times, it is probably not a good idea to trade the $500,000 that the broker is willing to let you use.

2011-3
6

Defining What A Good Broker Is

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Forex trading is about the right strategies for earning as much profit as one can. Laying the right foundation starts with the broker one chooses. It makes a big difference when you choose the right one. A Forex broker is a middle man between you and other people in the trade. As superior your strategy maybe, you cannot achieve much if you do not feel safe depositing your money with the broker.

Regulated countries are always safe to choose brokers from. Countries like Switzerland, for instance, are quite safe because their financial system is highly regulated. There is no room for a Forex broker to misallocate your funds. The very first thing traders in foreign currency do is study countries they are interested in, to make certain of the safety of the financial system.

Brokerage rules in Forex trade vary a great deal. They also count as much as the trading strategies do. Deposits of money and procedures of withdrawal can vary from one brokerage firm to another. Meaning that a Forex trader might have to choose a broker whose rules are more convenient to their style of trading. In the same line, a broker’s leverage against your business is very important and should be given serious consideration.

The history of a brokerage firm should give one signals that will help in choosing the best broker. Reviews and background checks are imperative to any serious Forex trader. Based on some of these aspects, you can distinguish good brokers from bad ones.

2011-2
11

Well Balanced Trading

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The most beneficial style of trading is one that is well-balanced. This means that even if you rely mainly on charts and patterns (technical analysis), you need to incorporate fundamental and sentimental analysis into your trading repertoire as well. This will allow you to see the bigger picture of a currency’s actual potential. Limiting yourself to just one method of analysis is like swinging at a baseball with one eye closed—your perception will be way off and you will more than likely miss.

This doesn’t mean that you need to devote your whole trading day to analyzing these things. You can always use the elemental trader to see other ideas. Just a few minutes spent on the opposite method of your natural inclination will open your eyes. Start your day by reading blogs and studying economic indicators; this will let you know what the home nations of the currencies you wish to trade are going through and how their currency value is likely to respond. It will also give you a view of how other traders perceive these events. By establishing what an economy is like and what other traders are planning on doing in response, you can begin to establish your own developed position.

Once you see the bigger picture, it is okay to go back to your preferred method of trading. Use the fundamentals as a framework for how you will perceive technical indicators. If the two methods of analysis are in agreement, you will be much more likely to have a winning trade. If the two don’t match up, you will want to be more cautious with your trading.

2011-1
31

Reading the COT

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The Commitment of Traders report can look overwhelming at first. It is filled with so many numbers and jargon terms that it will make the uninitiated’s head spin. If you know what to look for though, this report can be a powerful weapon in your trading arsenal. Let’s take a look at how best to approach this document.

The COT is issued by the Commodity Futures Trading Commission and shows traders where professionals and institutional traders think the forex market is headed. You can find this report every Friday at 2:30 on the CFTC’s website under the Chicago Mercantile Exchange’s heading. This exchange monitors the futures market, including currency futures.

The chart can be broken down into a few categories, making it much easier to read. There are both long and short positions accounted for, by looking at the difference between these two, you can get a feel for the discrepancies that exist between the buying and selling of a currency’s futures.

Commercial and non-commercial movements are recorded here as well. Commercial traders are the big banks that trade currencies on a daily basis in order to regulate their profit margins. Since these banks have specialists who sit around all day and analyze where they think currencies are headed, you can rest assured that these positions have merit. By looking to see where the banks have their money, you can stay ahead of the curve with your own money.

Non-commercial traders consist of private investors, hedge funds, and individuals who trade smaller amounts, either as hobbies or as a profession. These traders too are predicting where they think prices are headed, but they don’t usually trade in the same quantities that the commercial traders do, thus their positions do not carry as much weight.