Hedging in Forex Trading ?

December 6, 2009 by  
Filed under Forex Trading

Just like in the stock market, forex investors often use a strategy called hedging to reduce some of the risk involved in trading. Many people believe in hedging transactions like buying an insurance policy for their currency position. It acts more or less the same way. Using investment vehicles known to financial futures, Forex traders can rest easy knowing that all losses are covered by the backup plan.

A type of financial instrument futures that many forex traders use to hedge a position is a futures contract, which is an agreement for the exchange of one currency to another at a specified futures price at the last the closing date. The contract currency futures are bought and sold on the forex market just like any other instrument such as shares or currencies.

For example, say you used to use the dollars to take a long position in euros on the forex market, but you are worried that the price of euro fell against the dollar. One thing you could do is buy a futures contract dollars using euros. As external factors affecting the prices of currencies, the price of futures contracts up and down as well, allowing your contract to Euro-dollars to offset your long position in euros. If the euro weakens, the price of futures contract rises, and vice versa. Thus, you have therefore eliminated the risk of your investment money.

Another form of hedging in the forex market is practiced regularly by companies who trade internationally with many clients in Europe. A weaker euro would cost money in the long run because the original price quoted in euros does not result in as many dollars. Taking a long position in dollars using the euro, the company would just as much money on the Forex it lost to fall on the value of the euro. Similarly, if it loses money on the forex market due to a fall in the dollar, the company would compensate the increase in profits due to the greater value of the euro on the sale of its products.

Forex Trading Analysis for Traders

May 11, 2009 by  
Filed under Forex Trading

When you invest your money, it’s a good idea to begin by understanding what you’re going to invest.

The stock market is a complicated entity, and do business in the minimum trading requires a fair quality of knowledge base, understanding and acceptance of high risk factor.

The more you know in advance about the functionality of the system, the less likely will you do that you have and you will avoid the heavy losses.

Firstly, of all and probably most important point in the shipping business, you should understand that what you invest is real.

When you buy or sell shares on the market, bear in mind that you deal with your money, not pieces of paper you are a buyer and seller of real property of a particular company, its products or of another product.

Possession of a “share” means you’ve really bought into the company and you become so much a part owner of this product.

Of course, you could be one of millions of shareholders, as most companies and products are carefully divided into pieces at all, but you’re still regarded as an investor in that company or product until you sell your shares .

Think about that company as if it was the vehicle that you share with your partner or companion.

You may have even bought the oil filter was put on the car, and you can estimate that the investment gives you so ownership rights.

However, when you look at the overall cost of the car, you’ve really contributed very little to this quantity. However, as you continue to refuel the car and take care, you can claim ownership of the car.

The value of a company and its products or services can float without interruption, the value of stocks you own will not be identical from day to day and may even change from hour to hour.

When the price tends to fall and the bottom is an ideal time to buy. This is by far the first thing to bear in mind in the world of trading. “Buy cheap and sell at high prices and vice versa without stopping”.