How to Benefit From Forex Market Trading

It’s surprising how many people believe that forex market trading is somehow similar to stock market trading. The two markets are completely separate entities, trading very different securities on different markets to each other. While you get to trade stocks and shares on the stock market, you trade the currencies of other countries on the forex market.

Forex is simply an abbreviation for foreign exchange and forex market trading is the activity undertaken by speculative investors hoping to profit from the frequent rise and fall in the value of various currencies. The beauty of the forex market is that it’s possible to profit no matter whether the market is going up or down.

When investors go about their forex market trading activities, they understand that each trade is conducted in pairs. Effectively they sell one currency in exchange for buying another currency. While it’s possible to trade any combination of potentially hundreds of currencies, the majority of traders stick to combinations of the seven Major currencies. These are USD, GBP, EUR, CAD, CHF, JPY, and AUD.

The predominant reason for sticking to the seven Majors is that they can be somewhat less unpredictable than some of the emerging currencies, which have been known to be exceedingly volatile. Successful forex market trading relies on finding a way to determine whether the price of a particular currency is likely to rise or fall against the value of a second currency.

If your own forex market trading strategies are based on using one specific currency as your base currency and then working out the comparative values of other currencies against it, this is a wise way to gain a rapid understanding of how currency prices can rise and fall several times over a day.

However, if you wish to increase the likelihood of placing profitable trades, then you might consider expanding your forex market trading activities to use any of the other Major currencies as your base and then calculating the comparative prices against those in other crosses that don’t use your usual favorite currency as the base currency.

Once you begin considering multiple currency trading crosses, it becomes much more difficult to keep track of the pricings and charts for so many potential crosses on your own. For your forex market trading business to prosper and grow, you should consider using some form of automated forex software that is capable of tracking the rapid pricing movements for every currency you want to watch. When the software recognizes that a pricing trend may be emerging, it can issue a price indicator or alert that tells you it’s a likely time to enter the market and place a buy trade.

Your forex market trading software may only issue one alert in a day or it might issue five or six. The point of using analytical software to assist your trading activities is so you will know when it’s the optimal time to enter the market, exit the market, or take no position at all and simply wait for the market conditions to be more favorable to your trading activities.

Stock Market Trading – The Inside Story

Stock market or share market is a platform for the trading of company stocks and derivatives at an agreed price. It is a place where the shares or stocks of companies are bought and sold. It provides numerous opportunities for trading. These stock quotes are determined by the demand and the supply. There are several stock exchanges in US which consist of New York Stock Exchange (NYSE), the NASDAQ (National Association of Securities Dealers Automated Quotation), the TSE (Toronto Stock Exchange), the London Stock Exchange and the American Stock Exchange. Other than the main securities, one can further trade on several exchanges like the New York Stock Exchange and Nasdaq. The other types of trading available are forex trading, currency trading and ‘contracts for difference’, which is also termed as CFDs. Transactions, dividends and capital gains in the stock market are charged with taxes.

In Stock trading, if you buy a stock which fails to satisfy you, then you can trade for it which shall be more satisfying to your financial needs. It basically means trading the current stock which fails to give you profit for another one which produces higher profits. Trading requires analysis, forecasting, reasoning and simple logic.

The traders in the market vary from small individual stock investors to large fund traders, who can be located anywhere. Usually the trading done in the stock exchange is a virtual kind which consists of a network of computers where the traders perform the trading electronically. It is known that the prices of stocks fluctuate as compared to the stability of bank deposits or bonds. Physical exchange or listed exchange are only those stocks that are listed while, the exchange may be traded. It is not easy to trade in stocks and you do require doing proper planning and having adequate knowledge to deal with stocks.

Below are a few tips mentioned which, shall help you in stock market trading.

  • You should always remember to sell the shares when the price is high and you should buy them when the price is low.
  • Always have sufficient knowledge regarding stock market trading before beginning.
  • Adequate research should be conducted regarding the company whose stock you are planning to trade in.
  • It is always advisable to select the appropriate stock which shall fulfill your future financial goals.
  • You should always prepare a stock trading plan for your trading business.
  • After preparing a plan, you should test your plan. You need to ensure that your plan works.
  • Prior to trading in stocks you should understand the basics of stock market. One must know how the stock exchange works, the manner of working of trading and the role of the broker.
  • Use easy and simple rules for stock selection, entry rules and exit rules.
  • You should have a good trading strategy as monthly income is generated through trading in the stock market.
  • Always plan and define the time frame for your trades. You should be clear regarding the duration you can hold the shares.
  • You do require having patience while trading in stocks. You must wait for the ideal trade setup and avoid chasing strong moves.
  • Invest for long term as it is observed that long term investment is more profitable as compared to short term investment.
  • You should be prepared to admit losses.

While trading in stock market, each and every step should be taken after deep thinking and consideration. Follow these above mentioned stock market trading tips which shall help you guide to bear huge profits.

Is Stock Market Trading a Good Idea in This Economy?

Is stock market trading good in this economy? To answer this question, we need to consider the nature of stock market trading. Stock trading happens every trading day throughout the trading hours and the stock prices fluctuate based on many parameters. The overall market may be bullish when economy is good or bearish when economy is bad, but this fact does not really stop the day fluctuations in the stock price. So when we are talking about economy, we are talking long-term and when we are talking about stock market trading, we are talking short-term.

However, if we talk about stock market investing, the outlook is completely different and that is not the focus in this article.

So coming back to stock market trading, here are some points to be kept in mind when the economy is not going well.

Margin costs

When the economy is not good, the interest rates would go high and the cost of margin can go high. However, when we are talking about day or position trading, this may not be the biggest factor unless you are doing over trading without getting good results.

Market volatility

Volatility can go up any time, but in a bad economy it can fluctuate even more due to increased uncertainties. Depending upon your trading system, you can have trading patterns that use market volatility or you may choose stocks or indices that have lower volatility, whatever may be the case, you should be well prepared for directly facing volatility any way, when you have taken up trading. But remember, in a flat market, you can not trade anyway.

Trading in global markets

This point is applicable if you are doing trading on global markets. Some global markets may rise faster than others depending upon the overall situation like it happened in Asian markets last year. However when one is looking at stock market cycles, and using well-proven strategies for trading, it simply boils down to which stock or which market you choose in a specific situation.

Bull or bear?

When the economy is down, the stock market also might be in a bearish cycle. If you are one who likes both shorts and longs, and are able to identify which side to take, this is not a big problem. But shorting is normally considered risky by many, though personally I don’t believe so. So for those, who prefer only playing long, it is better to avoid bear markets.

The final question:Trading or No-trading?

In trading you are utilizing the ups and downs of a stock price irrespective of long-term economic situation. Stock Market Trading is inherently risky in nature and one should be prepared for facing all risks while trading irrespective of economic situation. There are times when one should avoid trading but those times do come irrespective of the economy. Study and learn the skills, prepare well for the risks, take all the necessary precautions and do well in your trading.