FX Island

The central bank has been described as “the lender of last resort”, which means that it is responsible for providing its economy with funds when commercial banks cannot cover a supply shortage. In other words, the central bank prevents the country’s banking system from failing. However, the primary goal of central banks is to provide their countries’ currencies with price stability by controlling inflation. A central bank also acts as the regulatory authority of a country’s monetary policy and is the sole provider and printer of notes and coins in circulation. Time has proven that the central bank can best function in these capacities by remaining independent from government fiscal policy and therefore uninfluenced by the political concerns of any regime. The central bank should also be completely divested of any commercial banking interests. more…

You don’t have to be a daily trader to take advantage of the forex market – every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange (forex) market. According to the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivative Market Activity conducted by the Bank for International Settlements, the forex market generated $3.2 trillion dollars worth of transactions each day. This makes the forex market the quiet giant of finance, dwarfing over all other capital markets in its world.

Despite this market’s overwhelming size, when it comes to trading currencies, the concepts are simple. Let’s take a look at some of the basic concepts that all forex investors need to understand.

Eight Majors
Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market, you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. These following eight countries make up the majority of trade in the currency market:

1. United States
2. Eurozone (the ones to watch are Germany, France, Italy and Spain)
3. Japan
4. United Kingdom
5. Switzerland
6. Canada
7. Australia
8. New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit worthy and liquid instruments in the financial markets. more…

It turns out millionaires are just like us–but they have a lot more money. When asked about their secrets to success, they don’t cite anything magical or rare, but rather the steady application of wise investing strategies, hard work, and, believe it or not, a degree of frugality. Here are 10 secrets of millionaires’ money management:

Start early to avoid financial pitfalls. Adrian Cartwood, 49, author of the blog How to Make 7 Million in 7 Years, made his fortune by living frugally while he built his technology-related business. People often get into trouble, he says, by racking up personal debt early on, which acts as a big drag on their earnings. “Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there,” he says. more…

Technical analysis is the study of stock prices and pricing patterns that can help investors determine whether a stock is overbought (expensive) or oversold (cheap). By using various technical indicators together, called correlation, traders can bring the “big picture” about a stock into clearer focus.

Here we’ll look at volume, the Aroon indicator and Fibonacci numbers, three technical analysis tools that can be used to help facilitate more profitable trades. In fact, investors can use them in conjunction with each other to spot emerging trends and stay ahead of the crowd. Read on to find out how. more…

People’s emotions lead them to make bad financial moves in chaotic times. Here’s what to look out for. In a chaotic bear market like this one, it’s easy for investors to fall into traps. They might scramble to make trades based on the latest news reports. They might search for a miracle stock that will pay off big and let them recoup all their losses. Or they might go in the other direction — and get so scared of the market that they don’t make any moves at all. more…

Source: The Forex Trader

As a Forex trader you will always be attempting to make more profits than losses from the fluctuations of exchange rates between currencies in the forex market; in short, this is what is called forex trading. The good news is that nobody is going to ask you for a diploma, or somehow verify the amount of hours you’ve spent studying the foreign exchange market (FOREX). All you need is the proper training and the tools that will help you become a profitable trader. But this is not the only advantage you get when trading forex, compared to other ways of investment and speculation as stocks. You have a other great advantages that will make you decide for forex and forget about stocks and commodities.

1): There will Never be a Bear Market in FOREX.
You can have access to a mutually-inclusive (two-way) exchange of world currencies. In other words; currencies trade in “pairs”(for example, US dollar vs. yen or US dollar vs. Euro), one side of every currency pair is constantly moving (up or down) in relation to the other one. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value while the other will decrease proportionally. It is up to you to choose the correct currency to be long or short. Since currency trading always involves buying one currency and selling another, it all means that you have equal potential for profits in both a rising or falling market.

2): Trade with High Leverage – up to 200:1 Leverage.
Every trader participating in the forex market is allowed to trade foreign currencies on a high leverage basis – up to 200 times your investment with some brokers. This is primarily attributed to the higher levels of liquidity within the currency markets. Standard 100,000-unit currency lots can be traded with as little as 1% margin, or $1,000, which is a pretty nice feature of forex. Mini Forex accounts are permitted to trade with just 0.5% margin — in other words, just $50 allows you to control a 10,000-unit currency position. Futures traders, who are asked for margin requirements generally equal to 5%-8% of the total contract value, will immediately appreciate that the FOREX market provides much greater leverage; and stock traders, who must post at least 50% margin, may think they are dreaming.

3): Most Price Movements Are Highly Predictable.
Many times currency prices in the forex market may be volatile, but they have the great advantage that generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the “technical” methods and strategies.

Unlike stocks that sometimes seem to simple lay down in narrow price alleys, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. It is known that over 80% of the trading volume in forex is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit trading positions.