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At 7:00pm Sunday New York time, trading begins as markets open in Tokyo. Next, Singapore and Hong Kong open at 9:00pm EST, followed by the European markets in Frankfurt (2:00am) and then London (3:00am). By 4:00am the European markets are in full swing, and Asia has concluded their trading day.
The U.S. markets open first in New York around 8:00am Monday as Europe winds down. Australia will take over around 5:00pm and by 7:00pm Tokyo is ready to re-open.
Currencies are traded for hedging and speculative purposes. Corporations, private individuals and investors have currency exposures during the regular course of business. The Forex Trade Platform is an ideal platform to hedge any such exposure. An investor who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD.
Currency markets are ideally suited for speculative trading. The Forex has a daily volume in excess of 1.5 trillion USD, which is 50 times bigger than all the equity markets together. This makes the Forex by far the most liquid and efficient financial market in the world.
Unlike equity trading where restrictions limit a trader’s ability to profit from a market downturn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trendsthus increasing their potential profit.
The most commonly traded currencies are: USD, EUR, JPY, GBP, CHF, CAD and AUD.
The most commonly trade currency pair is EUR/USD.
All Forex trades result in the buying of one currency and the selling of another simultaneously.
Buying (Going Long) the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency – to pay for the base currency. It is not necessary to own the quote currency prior to selling, as it is sold short. A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.
Selling (Going Short) the currency pair implies selling the first base currency, and buying the second, quote currency. A trader sells a currency pair if he/she believes the base currency will go down relative to the quote currency, or equivalently that the quote currency will go up relative to the base currency.
Open Trade explained. An open trade or position is one in which a trader has either bought or sold one currency pair and has not sold or bought back an adequate amount of that currency pair to effectively close the trade.
When a trader has an open trade or position he/she stands to profit or lose from fluctuations in the price of that currency pair.
The Forex is the backbone of all international capital transactions. Some banks generate 60% of their profits from trading currency aggressively.
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Miles Carmichael is a successful daytrader.
