Benefits of forex

Although the Forex market is by far the largest and most liquid in the world, day traders have up to now focused on seeking profits in mainly stock and futures markets. This is mainly due to the restrictive nature of bank-offered Forex trading services.Unlike others, NorthFinance offers both online and traditional phone Forex trading services to all investors, with minimum account opening values starting at 100 USD.There are many advantages to trading spot Forex as opposed to trading stocks and futures. In the peoples mind there is this opinion that brokerage firms and analysis’s can change the flow of the currency. But in reality, FOREX is an independent international foreign exchange market which can be influenced by many factors but NOT by the wants(wills) of traders and brokerage firms.Because of its diversity you are able to trade FOREX 5 days a week, 24 hours a day. US, Europe and Asia the major trading sessions enable you to trade on your own schedule and make a quick respond to breaking news from all continents of the world no matter where you are located.Complied benefits from both high leverage and potential profits from both rising and falling market, Forex is very interesting for speculators from every point of view. For example, with $10,000 cash in a standard account that allows 1:100 leverage (1%), you can control up to $1,000,000 in notional value. NorthFinance charges NO commissions or fees, simply take all your profits with you. Commission-free trading is one of the most attractive features of NF. The dealing spreads are as low as 2 pips(for EUR/USD). Providing a more comfortable environment when trading. Versatility all around The overall volume of FOREX market is $2 trillion. Almost all the amount of the volume involves trading of the major currency pairs, NorthFinance clients enjoy tight spreads on these pairs.NorthFinance clients have the ability to trade in both directions, compared to other equity markets where it is more difficult to make certain trades. This gives an advantage to all our clients.It is simple to open an account, you can do it on-line within 10 minutes. With multiple means of funding/withdrawing you can start trading within one hour. Access your trading account from anywhere in the world. Our company serves clients, from over 150 countries and with a large network of world wide located offices and representatives it makes contact us easy.Trader Y opened an account of USD 50'000. He buys EUR/USD 500'000 @ 1.3500 at the market and places a stop loss order at 1.3460.This point shows that his maximum risk is USD 2'000 and his margin utilization is 10%, well above the minimum.

History

As a response to the Black Saturday crisis in 1983, the linked exchange rate system was adopted in Hong Kong on October 17, 1983 through the currency board system[1]. The redemption of certificates of indebtedness (for backing the banknotes) were sent out by note-issuing banks to peg the domestic currency against the US dollar at an internal fixed rate of HKD $7.80 = USD $1[2]. The Hong Kong Monetary Authority (HKMA), Hong Kong's de facto central bank, authorised note-issuing banks are to issue banknotes. These banks are required to have the same amount of USD to issue banknotes. The HKMA guarantees to exchange USD into HKD, or vice versa, at the rate of 7.80. When the market rate is below 7.80, the banks will convert USD for HKD from the HKMA, HKD supply will be increased, and the market rate will climb back to 7.80. The same mechanism also works when the market rate is above 7.80, and the banks will convert HKD for USD. In practice, the HKMA also set a lower limit at 7.80 (7.85 as an upper limit and 7.75 as a lower limit since May 18, 2005) for the HKD to flow within. The HKMA will buy or sell HKD in the market when the exchange rate is at (or extremely close) the lower limit and upper limit respectively. The HKD is backed by one of the world's largest foreign exchange reserves, which is several times the amount of money supplied in circulation.

Linked exchange rate

A linked exchange rate system is a type of exchange rate regime to link the exchange rate of a currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The Macao pataca (MOP) is similarly linked to the Hong Kong dollar. Unlike a fixed exchange rate system, the government or central bank does not actively interfere in the foreign exchange market by controlling supply and demand of the currency in order to influence the exchange rate. The exchange rate is stabilised by a mechanism.

Exchange rate regime

The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors. The basic types are a floating exchange rate, where the market dictates the movements of the exchange rate, a pegged float, where the central bank keeps the rate from deviating too far from a target band or value, and the fixed exchange rate, which ties the currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro.

Maintaining a fixed exchange rate

Typically, a government wanting to maintain a fixed exchange rate does so by either buying or selling its own currency on the open market. This is one reason governments maintain reserves of foreign currencies. If the exchange rate drifts too far below the desired rate, the government buys its own currency off the market using its reserves. This places greater demand on the market and pushes up the price of the currency. If the exchange rate drifts too far above the desired rate, the opposite measures are taken. Another, less used means of maintaining a fixed exchange rate is by simply making it illegal to trade currency at any other rate. This is difficult to enforce and often leads to a black market in foreign currency. Nonetheless, some countries are highly successful at using this method due to government monopolies over all money conversion. This is the method employed by the Chinese government to maintain a currency peg or tightly banded float against the US dollar.[citation needed] Throughout the 1990s, China was highly successful at maintaining a currency peg using a government monopoly over all currency conversion between the yuan and other currencies.

Fixed exchange rate

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to. This facilitates trade and investments between the two countries, and is especially useful for small economies where external trade forms a large part of their GDP. It is also used as a means to control inflation. However, as the reference value rises and falls, so does the currency pegged to it. In addition, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.

Foreign exchange market

The foreign exchange market (Currency, Forex, or FX) market is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. [1]FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971. Today, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.[2] Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.[3] The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

Forex Options

Forex options, are another component that draws similarities with the stock market, they offer traders more security in being able to limit risk and increase profit when trading in the market. There are generally two types of options an investor can choose from, the first being a traditional option. This gives the buyer the right but not the obligation to purchase a currency at a set or agreed price and time. If a trader has taken advantage of Forex options and during the agreed time the currency being bought appreciates, the trader can sell this currency at a profit. However, if the currency depreciates the trader loses only the premium paid for the option. The second type of Forex options available is known as SPOT- Single Payment Options Trading. The Forex trader dictates this type of option, it is a prediction from the trader on what they forecast will occur on the Forex market. If the trader is successful the profit potential can be unlimited and if the SPOT is not a success only the premium is lost. Forex options give investors another tool with which to limit losses and increase profits, they are particularly popular at periods of economic reporting.

The Forex Strategy

Forex strategy generally provides independent traders, companies and dealers with currency and movement analysis in the marketplace. One of the most effective strategies employed in the Forex system is consistency; fluctuations need to be monitored in accordance with events that may influence trends. A country’s political, economic and social position will have an impact on the strength of their currency when trading on the global Forex market. This is known as a trend following system and is mostly suited to medium-term investments. Base strategy monitors the generation of signals on a daily basis, it offers the benefit of a fixed stable price and is more suited to short-term investments

Setup Forex

As with all aspects of the Forex system, setup Forex is a simple process that can be initiated right away. All that is needed to begin trading is a real account opening. New customers are advised to open a free trial demo account to familiarize themselves with the Forex options and organization. It is also useful in building confidence in first time investors and finding a suitable approach to trading. A demo account works like a virtual account, no real money is invested and so no money can be lost, all monies tendered are intangible and have no worth. This is the best method of introduction to the Forex trading system for new and hesitant investors. On being asked to submit a virtual deposit it is advised that customers deal with money equal to the actual amount of money they have available for investment. Customers are then free to test Forex strategy and techniques without the risk of losing money. Following the use of a demo account, the trader progresses to setup Forex real account opening, a registration will also need to be completed as well as providing required documents and signed forms. Once a real account opening has successfully been accepted it is important to remember that all monies tendered are real, your demo account will become obsolete. As with all personal accounts please ensure the details of your real account opening remain private, do not share your login or password details with others and always be vigilant and aware of security settings.

The Forex System

The Forex system offers huge potential for investors once they have learned to exploit the marketplace, as this is a relatively new investment area particularly to private investors, many would-be investors become intimated by the market. Uncertainty of the Forex trading systems mixed with fear of the unknown prevents many people from trading on this global market. NorthFinance Forex aims to simplify and explain the Forex options and the workings of the system to help all first time investors in the FX reach their prospective profits. From setting up your Forex account to beginning trading, Northfinance Forex will guide you through the process, in easy to follow instructions. There is always a range of dealers’ online supplying different quotes, regardless of being a large corporation or a private individual the rates remain the same. Being a 24-hour business allows customers to access their account at a time that suits them wherever they may be located- when trading in Forex there are no limitations.

Forex for Beginners

Forex is an international market that buys and sells currencies of the world; the mechanisms of the marketplace are very similar to that of other markets such as the stock market. The purpose is to buy low and sell high to maximize profits. There are various Forex strategy and Forex options to utilize, some investors find researching past trends and fluctuations helpful. By reading trends appreciating and depreciating patterns can be recognized. There are steps new trades can take in order to ensure their introduction to the marketplace is straightforward as well as rewarding. On joining this global trading arena it is necessary to maintain constant analysis while recognizing the value of time. There are numerous Forex strategy and Forex options to choose from, being familiar with these working makes Forex for beginners comprehensible.

Forex Trading

The rise of the Forex market or FX trading over the past thirty years has seen Forex trading become one of the most vigorous markets of its kind in operation today. Daily FX trading regularly peaks at over $1.5 trillion US Dollars. Traders exploit the market that has been created in the volatility of global currency. With foreign currency conversion rates constantly fluctuating, educated traders can use these fluctuations to their advantage to earn a profit. Forex trading hours are an influencing factor that has supported the growth of the market. As Forex trading occurs on a global scale Forex day trading rarely closes for business, overlaps and time differences mean the market closes for a brief period on Sunday. With a range of services and tailor-made packages available to suit every individual investor needs it’s not difficult to understand the appeal of FX trading.The best Forex trading system is employed to ensure traders can get the most out of the Forex trading hours, one of the major advantages offered by the Forex trading platforms is the flexibility allowed to develop unique individual trading accounts. Secure transactions are carried out daily on a global scale so investors can be assured their money lies with dependable experts. Forex trading signals, which are issued on a regular daily basis, keep traders informed on developments in the financial marketplace. Using the best Forex trading system for all customer accounts gives all investors these benefits, fair quotes, up to date reviews and flexibility regardless of the invested sum.

Paricipants of Forex

In the last years, the foreign exchange market has expanded from one where banks would execute transactions between themselves to one in which many other kinds of financial institutions like large commercial banks, which the basic operations under the instruction of exporters and importers are carried out through, investment institutes, insurance and pension funds and private investors. Also these banks carry out operations and in the interests due to own means, thus volumes of daily operations at large banks reach for billions of dollars. Some banks make the basic part of the profit formed only due to speculative currency operations.Brokerage firms like NorthFinance are the active participants of the market, which are carrying out a role of the intermediary between a plenty of banks, funds, commission houses and investors.

Brief history of Forex trading

Initially, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage in history, to set a common benchmark of value. In different economies, everything from teeth to feathers to pretty stones has served this purpose, but soon metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Originally, coins were simply minted from the preferred metal, but in stable political regimes the introduction of a paper form of governmental IOUs (I owe you) gained acceptance during the Middle Ages. Such IOUs, often introduced more successfully through force than persuasion were the basis of modern currencies. Before World War I, most central banks supported their currencies with convertibility to gold. Although paper money could always be exchanged for gold, in reality this did not occur often, fostering the sometimes disastrous notion that there was not necessarily a need for full cover in the central reserves of the government. At times, the ballooning supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls were increasingly introduced to prevent market forces from punishing monetary irresponsibility. In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended to be permanent. The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time, but eventually Bretton Woods collapsed in the early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits. The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values. But the idea of fixed exchange rates has by no means died. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001. The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable. But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.