Interest Rate and Forex Trading

Let’s start by talking about borrowing money from the bank. You went to a local bank A and borrow $100 in your country currency as say its United State Dollars. This bank A charge you 5% interest yearly. Your friend goes to another bank B and borrows $100 United State Dollar at 2% interest yearly. So if you want to borrow another $100 and your friend lend it to you at 5% interest (he took loan $100 from another bank). By simple calculation, your friend is effectively earning 3% interest. (5%-2%=3%). If you hold on to this for 1 year, you are carrying over your trades over a year and yield you 3% interest rate on the principle amount.

Sound similar to carry trade?

Imagine your friend is the broker. Related Coverage Forex Trading – Understanding Rollovers And Rates Of Interest Examining open interest on forex futures might help you affirm the strength of a trend in foreign exchange market sentiment. Forex Trading System - Overnight Interest Now we will learn about the Overnight Interest in the forex trading which is also often called as an Swap or the premium interest. Here we will learn how to do the correct calculations. Forex Trading If interested in exploring the forex trading market, there are several ways to learn more.

Forex Spot Rate Forex Trading Course Online FAP turbo has the ability to conduct trades 24 hours a day and seven days a week without requiring human assistance. It has been said that FAP Turbo has the capability to double your initial investmen...You put money into your trading account instead of borrowing from banks, your broker account will reflect $100 (assume the earlier example, you put in $100.) and this is in United State Dollars. Since you are holding currency in your trading account, it is incurring interest from the government that issue that currency. Eg United state is giving 2% interest. On the other hand Japan Yen is giving 0.5% interest. So if you borrow Japan Yen to buy equivalent United State Dollar, you will gain 1.5% interest yield every year. (Or use United State Dollar to Sell Japan Yen.)

So total how much you will earn?

Assume you use $100,000 and use it on the carry trade between United State Dollar and Japan Yen, giving you 1.5% yearly, which work out to be $1,500. If your trading account is using 100:1 leverage, you are effectively using your original $100,000 to buy and hold $10 million, which give you $150k a year. This work out to be 150% Return On Investment.

Can this work in real life?

Of course there are few factors to consider before your 150% Return On Investment can be realized. Avoid margin call, the currency fluctuation and the exchange rate between United State Dollar and Japan Yen. Let’s start by taking the positive direction, the exchange rate is rising for (assuming you get 5% more Japan Yen if you sell), the currency fluctuation is at minimum of near 0% drawdown and no margin call. You can earn $150k + $500k = $650k about 650% Return On Investment.

But this is always not the case

The currency rate went down (assuming you get 1% less Japan Yen if you sell). The currency fluctuated 1% drawdown. You earn $150k - $100k  = $50k. but before you can realized your profit of 50K, you are hit will margin call of 1% ($100k) and your trade are call out within a week, which leaves you almost zero. And I mean zero dollars. Now you see the risk of forex trading using leverage. Of course I simplified a lot of the calculation and conversion. But it is enough to make you understand the basic of carry trade and interest rate.

My recommendation

Always take charge by calculating money management into every trade you execute. Keep it to 10% of your capital. For the earlier example, you should only use $20K to buy $1 million forex currency which potentially could yield profit of $65k or loss $35k (assume drop of 5% with 1.5% interest difference on the carry trade).

Which currency then?

There no recommended currencies to buy, but you have to look out for currency with the highest interest rate, currency with the lowest interest rate and a trending up exchange rate when you sell back. (buy low, sell high). Always remember to use money management calculation (assume 10% of your capital with 100:1 leverage). source.

Why to invest in Forex than anything else?

The forex market, or foreign exchange market, is a financial market where the international traders unite to earn their livings through the difference in buying and selling foreign exchange rates. Stock markets and local forex markets around the world host trading of foreign currency between different traders regardless of the time constraints. They allow the traders to trade any time in weekdays but no trade on the weekends.

These markets are permitted to define the comparative values of different currencies. Investors around the globe are attracted towards forex trading as they are familiar with forex rates and find it interesting to trade in the common commodity of currency. The various advantages of forex trading make the investors more attractive than any other trade such as commodity trade and stock market trade. The advantages are defined one after another that makes the people to choose forex trade as their primary source of livelihood.

You can invest as low as you like

The forex trade unlike other trades does not need heavy investments. It's about trading your invested amount of currency with other currencies. All you do is buying and selling other country's currency through your currency. The more you invest the more you trade and the more you earn. But with little capital still you can initialize a small business and can expand further by investing the same money that you have earned in the forex market. The foreign exchange rates let you choose the currency where you can invest small amount of capital.

Secondly the forex market bears no broker fees so what you earn will be your home-take-away profit. The profit you earn will not need any deduction in terms of broker's fee or commission. The forex market gives you the opportunity to start earning with low equity. The 24 hours service further equip the beginners to trade any time and learn from their dealings first on small level and then move forward.

 How to Earn More Profit?

The fact of risk and reward is present in every trade and business activity. Same is the case with forex trading. It has the potential of gaining more profits along with the risk. The risk of forex can be minimized with intellectual knowledge of currency exchange rates. As compared to the investors of a stock exchange, where the share price is dependent on various factors and the speculation becomes tough to decide which share to buy and which share to sell, the forex market benefits the trader to speculate easily a rise or fall in the live rates and trade effectively to earn a reasonable return. Doing business in forex is a very liquid option as it is famous for its liquidity which means you have a greater control on your funds. You can trade, earn and get paid soon.

Forex trade is free from insider dealing

Insider dealing is a term referred to the crime to the criminal act of utilizing insider information of an organization in its financial matters. For example, mostly the upper management of a corporate sector is aware of the company's status they may share the confidential information with family or friends who may benefit in either timely buying or selling its share at stock exchange. But the forex trade is free from insider dealing as it deals with the live currency rates and not with the companies or corporations. As information about currency is available publicly and no information is kept inside to a group of people or individuals. The live rates are displayed at the market and nothing is left hidden from the traders, investors or general public. Posted by Forex articles and reviews online.

Forex Trading, Things a Trader Should Know

Forex trading is now considered as a common primary profession among youngsters. There are many graduates who move to currency trades soon after leaving the college. Although forex market holds good chances of profiting opportunities it is also not devoid of risks and losses. Starting the trading career without much leaning about the market and its swings can cause serious problems to the trader and in the worse cases it can end his career. So here are some things a FX trader should know.

Market terminology: This start from the common market terminologies like long and short to some currency specific terms and jargons like greenback, loonie, cable, ninja and chunnel. Although many of these terms do not show up in day-to-day dealings they are widely used in market commentary and reviews and are often vastly quoted in news, articles, shows, etc. So knowing them can give you a better understanding of the market and the system.
Awareness of different strategies: Knowing different strategies help you in almost the same way as market terminology.  You can easily understand what your options are on a particular situation. This also helps you in improvisation and risk minimization. More over following a single trading strategy can cause problems with profitability and sustainability.

Demo trading experience: Simulated trading experience on real-life trading software is one of the best trading experiences one can have without risking money. Today most online currency brokers offer free demo trading accounts on their actual trading system. This is a perfect opportunity for starters to test their proposed strategies and skills. Although you can feel free to test some most complex strategies to get high proposed returns, it is better to test simple and good real-life strategies that you are actually planning to execute with all proper precautions and risk minimizing efforts.

Market movement patterns: These include realizing the relationship of currency pairs with others. As all the word nations have strong inter-trade and political relationships, the swings of one currency pair can result in positive or negative change of other currency pair. That is why often news about a country triggers up or down movement of a currency pair that includes some other nation's currency.

Awareness of fundamental and technical analysis tools: Both fundamental and technical indicators are very important in trading as you are trading based on them. If you can lean the situation quickly and can find or explore specific chart patterns, pivot points etc, that adds to your profitability. More over in most trades the opportunity most favors the ones who utilize that faster than others. Posted by Forex articles and reviews online.

Basic Programming for MT4 Forex Trading

With programming, Forex Trader can put their winning strategy into programming codes and run on MT4 trading platform to let the computer trades automatically. This is make possible using MQL or metaquotes languages to write and compile using metaeditor into executable ex files which are called expert advisor to run on MT4 trading account.

The programming is similar to C with declaration of variables, logic comparision and executing of files and functions.

Variables

MQL4 comes with various data types namely integer, Boolean, character, string, float, color and date & time. You can create local variable can using the standard declaration like int, double, string, etc. For global variables, you have to declare the variables before int start(). To have your variable available and value retained after program ended, use static variable declaration by static int, static double, etc

Standard Constants

It comes with many standard constant that you can use which is already predefine by the program. One of the most important standard constants are timeframe which comes with PERIOD_M1, PERIOD_M5, PERIOD_M15, PERIOD_M30, PERIOD_H1, PERIOD_H4, PERIOD_D1, PERIOD_W1 and PERIOD_MN1. This is useful in defining the currency chart to use for technical indicator trigger. Next is the OrderSend() function which uses trade operations constant OP_BUY, OP_SELL, OP_BUYLIMIT, OP_SELLLIMT, OP_BUTSTOP and OP_SELLSTOP which covers all the 6 different trade execution. The last importance standard constant is price related which is PRICE_CLOSE, PRICE_OPEN, PRICE_HIGH and PRICE_LOW which is often used in technical charting.

Predefined Variables

Ask, Bars, Bid, Close, Digits, High, Low, Open, Point and Time are widely use thru out the programming codes. When comparing currency price, Ask, Bid, Close, Open, High and Low are often called for operand operation. Bars is used when counting the number of bars in the selected currency chart. Point is the current symbol point value in the quote currency and Digits is the number after decimal point for the current symbol price. Both are used to compute stop loss, profit take, buy and sell price.

Account Information

This is a group of function which provided important information about your trading account and is used for computing trading lots and money management system including calculating of margin and balance. The often used function are AccountBalance, AccountFreeMargin, AccountLeverage, AccountMargin and AccountProfit. You need to input some margin requirement and usually I use minimum 200% margin requirement for max open lots using account leverage for maximum drawdown to avoid margin call.

Date and Time Functions

The widely used functions are DayOfWeek to get the Monday to Sunday of the date, Hour and minute for time and Seconds for looping. If your strategy is time constraint, meaning it only run during 2 to 4 am and only on Monday to Wednesday, this group of function is definitely the ones that you called to compare and execute codes.

Technical Indicators

This is the most important functions you be calling if you are using technical charting to execute trading rules. The common indicator that I used are iMA which is moving average simple/exponential/linear weighted calculation, iRSI which is Relative Strength Index, iMACD which is Moving Average Convergence/Diverage, iBands which is Bollinger Bands, iCCI which is Commodity Channel Index, iStochastic which is Stochastic Oscillator and iADX which is Movement Directional Index.

Trading Functions

This is required for any trading to be successful. The widely used trade function are OrderSend, OrderSelect, OrderClose and OrderModify. You may refer to MQL4 documentation for more information of the various functions. And refer to my website for more software offers with ready to use program codes. Posted by Forex articles and reviews online.

Which is the Best Automated Forex Trading EA

Forex Trading is getting more popular with especially a group of automated trading which is made possible by MT4 trading platform Expert Advisor. Expert Advisor are program written by MQL4 languages that comes with MT4 trading platform. These Expert Advisors are coded from winning forex trading strategy and can be run 24 hours continuously to trade for you. Such trading system have created thousand dollars of profit daily and helped many to achieve passive income in Forex Trading.

FAP Turbo is one of the best Forex Trading Expert Advisor. If you go to my website you can read the whole review about this expert advisor with outstanding results. I will briefly talk about this below.

Profit Factor

Why is Profit Factor so important for simulated automated Forex trading system? Profit factor is simply using the profit earned divide by the losses incurred. Related Coverage Forex Hedge Fund Ea - Do Forex Automated Trading Systems Work? Forex automated trading is without a doubt one of the shadiest and most dangerous markets I have come across during my life. When you begin your journey in automated trading you will find a lot of promises and a lot of potential which ultimately leads you to purchase products believing that you will achieve financial freedom within a few years or even months.

Best Forex EA Expert Review To trade in currencies, one needs access to a trading account. You get the access via foreign exchange (forex) software for trading. The number of standard types of softwares for trading currencies is four. Each and every type of this software has its own advantages coupled with its own flexibility for the trader. Forex Morning Trade Ea-Forex Morning Trade Ea Review Do you want to create dollars? Not surprisingly, we all want, however it is not effortless to generate dollars. Forex EA (Software Program) Reviews A fair and balanced review of the most popular FOREX trading programs on the market.

These are not going to net you the millions per year they may promise, but they do work as an affordable educational tool for any new/intermediate trader who really wants to grow his knowledge and extend himself in the way of automated trading platforms.To put this in an illustration mode for easy understanding, for every dollar you invest, you take the profit divide by your losses. For example Profit Factor of 3 meaning you earn $3 for every $1 you losses. For FAP Turbo, from the simulation data presented in the website, it comes with a high Profit Factor figure of 31.77 This equal to earning $37 dollars against losing only $1 dollars. This is one of the best rating a Expert Advisor can achieve.

Maximum Draw Down

Draw down is the lowest point in your trading account with all unrealized profit/loss trades. When I mention unrealized trades are trades that you executed but not yet closed. As the trading account will increase or decrease due to profit or losses made from trade closed. But with Draw Down, this will take into account closed trades which is already reflected in the trading account plus the unrealized profit/loss trades. With the maximum value on Draw Down, this indicator the lowest point in terms of pips or percentage of the trading account. For FAP Turbo, it only registered a very small 0.32% maximum show that you only loss 32 cents for a trading account of $100.

Winning Percentage

This is the percentage of winning trades over total trades. With this figure alone, we will know what the success rate of winning over any total trades. With a 50% trade, means 50 trades win over 100 trades executed. This alone is not enough but with stop loss and profit take, this is very significant if comparing between Expert Advisor. If all trades are stop loss at 200 pips, with 50 pips profit take, at 80% winning rate, you will have zero gains. For FAP Turbo, it has a 150 pips stop loss and a 99% winning rate with average 15 pips win. To calculate, it will need to have a 90% winning rate or more to stay profitable.

By looking at Profit Factor, Maximal Draw Down and Winning Percentage (With Stop Loss and Profit Take), you can easily determine if the Expert Advisor is working profitable for you or losses money on your trading account. Another factor I would like you to bring it with you before I end my discussion here, is the time factor. How long is this Expert Advisor running and what time duration is the strategy tester simulated results base on. I would highly recommended duration of more then 1 year in order to achieve effect trading results. source.

A Brief Introduction to Foreign Exchange Market

Currencies today can be defined as financial units of countries with indication of a certain type (gold, silver, paper) or economic units of a country which include payment and credit papers expressed in economic units and usable for international accounts in the form of cheques, bank statements, etc.

Currency market more popularly known as forex is the market, where all business done by its members is to trade some type of currency. Banks, multinational companies, brokerage firms and individual trader exchange a fixed amount of one currency for a fixed amount of another currency.

The forex market follows the rule of demand and supply and has two basic types of operations: buy and sell. The forex market is highly diversified and spread all over the world. It functions in the form of open market operations. Related Coverage A Brief Introduction About Foreign Exchange Trading Foreign exchange trading can be a profitable venture. Many investors opt to diversify their investment by investing some money in stocks and bonds, and some money in the foreign exchange market. Foreign exchange trading involves changing money from one currency to another on the Forex market.

Foreign Exchange Blessed are those which can be experts in forextrading. They know all the nuances of the money market and play with their money so as to maximise their profits. However the population of these individuals is moderately less. The bulk of folks who take pleasure in forextrading undergo foreign exchange brokers who are thought of the consultants on this field. Foreign Exchange Earning profits within the currency trading market is a piece of cake for somebody while others find it extremely tough to manage.

The reply for this is quite simple. Most individuals are lured by the large amount of cash that changes hands in this marketplace. Foreign Exchange Forex trading, as we all know, entails trading in the currency market place. The foreign exchange or the FX market is a strange place. While it makes some, it also breaks some. Hence, it is all the time good to be prudent when buying and selling in foreign exchange.No single person or company is capable of manipulating pricing through targeted buying or selling on the foreign exchange market because of the sheer magnitude of the volume of trading which exceeds $4 trillion every day.

All currencies are assigned a unique International Standards Organization (ISO 4217) code abbreviation to avoid confusion between currencies of different countries with similar sounding names. In currency trading, these codes are used to identify the currencies that make up a currency pair. For example, USD is the code for the US dollar, and JPY is the code for the Japanese Yen. For instance, the three-letter code for US dollar uses the ISO 3166-1 country code for the first two letters and the first letter of the name of the currency (D for dollar, in this example) as the third letter therefore United States currency, is referred to as USD worldwide.

The currency market has some primary currencies and majority of exchanges consist of pairs involving just these eight currencies:

USD (The U.S. dollar) - Most preferred currency of the Forex market, also called the buck, the greenback, the dolly.EUR (The Euro) - Currency for the European Union countries, second most preferred currency.GBP (Great Britain Pounds) - England’s national currency, also called the sterling, pound, and cable.CHF (The Swiss franc)JPY (The Japanese yen)AUD (The Australian dollar)?AD(The Canadian dollar)NZD (The New Zealand dollar)Some more Forex jargons:

A long position stands for buying a currency.A short position stands for selling a currency.Opening a position implies entering a new trade for a currency for both long and short positions.Closing a position implies buying or selling your holdings in a currency for reducing an open position to zero.Trades that do not involve US dollars are referred to as cross-rate trades.The largest currency exchanges are in London, New York and Tokyo. Foreign exchange market is the largest market in the world .The volume of daily transactions makes it the most liquid and rapidly growing international market. source.