Online Stock Market Trading Forex

Currency can be traded via online stock market trading forex brokerage firms, just like trading stocks and shares. Currency or forex as it's often called, or foreign exchange trading is a trillion dollar industry.

Before we go into how to make money trading forex via online stock market trading forex brokerage firms, let's explain a few important forex trading terminologies and some factors that can affect the price.

Forex, Currencies Trading Time

You can trade currency virtually 24 hours a day, 6 days a week ( including time difference between two countries) without using convention method of converting cash into a currency that you are interested in.

Currency Pair

Just like tradition way of exchanging currency, forex trading involves the trading of a pair of currencies, e.g changing from GB pounds ( known as Cable) to US dollar ( known as greenback), GB/US. The 1st is always the base currency, the second is a quote, e.g exchange rate is now 1.7650

There are many currencies or forex that can be traded globally via online stock market trading forex firms. The most common and widely traded forex currency pair are ( or liquid and heavily traded in the forex trading terminology) :

  • GBP/USD: Great British pound and United States dollar
  • USD/JPY: United States dollar and Japanese yen
  • EUR/USD : Euro and United States dollar
  • GBP/EUR: Great British pound and Euro
  • USD/CHF: United States dollar and Swiss franc
  • AUD/USD: Australian dollar and United States dollar
  • USD/CAD: United States dollar and Canadian dollar

Pips

Most forex or any currencies are quoted to the 4th decimal place and the smallest movement or unit is 0.0001 known as a pip. So if you bought GB/US currency pair@ 1.4600 and sold them at 1.4500 you have made 100 pips or 100 points.

The Japanese Yen are quoted to 2 decimal points, in 0.01

Contract Size /Lot

Forex through forex trading brokerage/ firms are traded in size of 100,000 known as 1 lot. You can trade in fraction of a lot.

If you are in UK and or can trade via spread betting, you can trade spot currency by betting £ per pip movement in the currency.

Margins

Online stock market trading forex broker firms, spread betting and contract for difference firms can offer ridiculous margin, some in the range of 100 or even 500 :1.

This means if you trade GB/US for example and you bought /long 0.1 * LOT, ie 10,000 contracts at 1.4600, instead of depositing $ 14,600, you only need to deposit $146 (and some extra in case it moves against you before your stop loss is triggered to ) open this trade.

If you trade currencies via spread betting companies, this wining is tax free in UK and profit / losses would be uk £ per point or pip. So if you place £10 per point / pip movement, and say margin or initial deposit requirement is 100, you need £1000 to open this bet.

If you were right, and you then sold to close the trade at say at 1.4500, you would have made 100 pips or $ 100. For spread betting, you would have made 100 pips x your stake like the above example of £ 10 = £ 1000 and this profit is tax free in UK

Shorting Without SEC Restrictions

Just like options, Contract for difference and spread betting, you can make money by shorting currencies. If you think currency like GBP/USD is going down , you could place a sell order via spread betting companies or via online stock market forex trading companies like www.gtforex.com

When you close a short position you buy the base currency and sell the quote currency.

Risk

Forex traders profits from fluctuations in currencies and these are very volatile since you are trading on speculating the movement of 0.0001 in currencies. As forex stock trading is highly leverage, this can be risky and you can lose as well as winning a fortune, so it's important to have a stern money management, stop loss in place on your trade.

Currency Online Stock Trading

Stock future forex trading can be done via online stock market trading forex firms that already handle the traditional stock trading such as Spread Betting , Contract For Difference companies. If these companies do not operate in your countries, you can trade forex or currencies pair via any registered member of Foreign Currency Market(FCM) companies like www.interbankfx.com

Forex Trading Futures Contracts

Just like options and futures, forex or fx trading for short can be traded electronically via currency trading firms with daily expiration, monthly or same as options expired every quarter.

Unlike options, when the contract expires, you do not need to buy or sell/ deliver the currency. You either win or lose when contract expire. Some forex trading firms automatically roll over to the next expiration contract. The profit/losses will be credited/ debited from your online stock market forex trading account.

Factors Affecting Currencies Value

There are a few fundamental and economic factors that can affect currencies prices. I have seen them shot up like a rocket and came down like tons of brick just before and after the economic data were released. Below are list of fundamental and economic data which you need to check before entering/exiting a trade:

  • Gross Domestic Product
  • Industrial Production
  • Retail Sales
  • Trade Balance
  • Net Long-Term Flows
  • Business Inventories
  • Durable Goods
  • Factory Orders
  • Housing Starts
  • Consumer Price Index (CPI)
  • Producer Price Index (PPI)
  • Interest Rates and Central Bank ECB/ FOMC
  • Beige Book
  • FED minutes
  • Employment Cost Index(ECI)
  • Intial Jobless Claims
  • Employment Situation
  • Consumer Confidence Index
  • Consumer Sentiment Index

You can check from this economic calendar

Ok, now that we covered the basic forex, spot currency trading. Let's see how we can make money trading currencies using some online stock market trading forex strategies.

Click here for

forex trading strategies.




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