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Currency Trading
By Raul Lopez, Thu Dec 8th
Investors and traders around the world are looking to the Forexmarket as a new speculation opportunity. But, how aretransactions conducted in the Forex market? Or, what are thebasics of Forex Trading? Before adventuring in the Forex marketwe need to make sure we understand the basics, otherwise we willfind ourselves lost where we less expected. This is what thisarticle is aimed to, to understand the basics of currencytrading. What is traded in the Forex market? The instrument traded by Forex traders and investors arecurrency pairs. A pair is the exchange rate of onecurrency over another. The most traded pairs are:
EUR/USD: Euro GBP/USD: Pound USD/CAD: Canadian dollar USD/JPY: Yen USD/CHF: Swiss franc AUD/USD: Aussie These pairs generate up to 85% of the overall volumegenerated in the Forex market. So, for instance, if a trader goes long or buys the Euro, she orhe is simultaneously buying the EUR and selling the USD. If thesame trader goes short or sells the Aussie, she or he issimultaneously selling the AUD and buying the USD. The first of each pair is referred as the basecurrency, while second is referred as the counter orquote currency. Each pair is expressed in units of thecounter needed to get one unit of the base currency. Ifthe price or quote of the EUR/USD is 1.2545, it means that1.2545 US dollars are needed to get one EUR. Bid/Ask Spread All pairs are commonly quoted with a bid and ask price.The bid (always lower than the ask) is the price your broker iswilling to buy at, thus the trader should sell at this price.The ask is the price your broker is willing to sell at, thus thetrader should buy at this price. EUR/USD 1.2545/48 or 1.2545/8 The bid price is 1.2545 The ask price is 1.2548 A Pip A pip is the minimum incremental move a pair can make.A pip stands for price interest point. A move in the EUR/USDfrom 1.2545 to 1.2560 equals 15 pips. And a move in the USD/JPYfrom 112.05 to 113.10 equals 105 pips. Margin Trading (leverage) In contrast with other financial markets where you require thefull deposit of the amount traded, in the Forex market yourequire only a margin deposit. The rest will be granted by yourbroker. The leverage provided by some brokers goes up to 400:1. Thismeans
Forex Flash: EUR/USD may rally to 1.3500 on Greek debt deal - BNP Paribas
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<a href="http://www.fxstreet.com/news/forex-news/article.aspx?storyid=a9d13009-a4ba-499f-9fff-c4e5f7c17bec" style="font-size:1.2em">Forex Flash: EUR/USD may rally to 1.3500 on Greek debt deal - BNP Paribas</a>
<br> <span style="color:#888888;">FXstreet.com</span> - <span style="white-space:nowrap">2 hours ago </span>
<div style="width:80%;">FXstreet.com (Barcelona) - The Euro has largely priced in an almost done agreement on an aid package for Greece, says Rob Ryan, G10 currency strategist at BNP Paribas.</div>
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EUR/USD: Trading The European Central Bank Interest Rate Decision
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<a href="http://www.thestreet.com/story/11409181/1/eurusd-trading-the-european-central-bank-interest-rate-decision.html" style="font-size:1.2em">EUR/USD: Trading The European Central Bank Interest Rate Decision</a>
<br> <span style="color:#888888;">TheStreet.com</span> - <span style="white-space:nowrap">5 hours ago </span>
<div style="width:80%;">By DailyFX 02/08/12 - 04:10 PM EST By David Song, Currency AnalystMichael Boutros, Currency Strategist Although the European Central Bank is widely expected to keep the benchmark interest rate at 1.00%, the policy statement accompanying the rate ...</div>
<a href="http://wallstreetpit.com/89368-fed-to-devalue-dollar-by-33">Fed to Devalue Dollar by 33%?</a> - <span style="color:#888888">Wall Street Pit</span><br>
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Dollar Stuck At 2-Month Lows Despite No Resolution For Greece
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<a href="http://www.nasdaq.com/article/dollar-stuck-at-2-month-lows-despite-no-resolution-for-greece-20120208-01341" style="font-size:1.2em">Dollar Stuck At 2-Month Lows Despite No Resolution For Greece</a>
<br> <span style="color:#888888;">NASDAQ</span> - <span style="white-space:nowrap">7 hours ago </span>
<div style="width:80%;">(RTTNews.com) - The dollar was generally weaker versus other major currencies on Wednesday, as Greece struggled to pass austerity measures that may trigger relief funds from its neighbors and the IMF.</div>
<a href="http://www.reuters.com/article/2012/02/07/greece-tbills-idUSL5E8D724720120207">Greece sells 812 mln euros of T-bills, yield eases</a> - <span style="color:#888888">Reuters</span><br>
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No EURO Freeze, Just A Squeeze
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<a href="http://seekingalpha.com/article/350731-no-euro-freeze-just-a-squeeze" style="font-size:1.2em">No EURO Freeze, Just A Squeeze</a>
<br> <span style="color:#888888;">Seeking Alpha</span> - <span style="white-space:nowrap">8 hours ago </span>
<div style="width:80%;">By Dean Popplewell A Greek deal is almost here again, maybe tomorrow or Friday or next week. It's like dealing with an adolescent teen and their irreverent actions.</div>
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Banks' Addiction to ECB Cash May Stymie Bond Sales: Euro Credit
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<a href="http://www.businessweek.com/news/2012-02-08/banks-addiction-to-ecb-cash-may-stymie-bond-sales-euro-credit.html" style="font-size:1.2em">Banks' Addiction to ECB Cash May Stymie Bond Sales: Euro Credit</a>
<br> <span style="color:#888888;">BusinessWeek</span> - <span style="white-space:nowrap">9 hours ago </span>
<div style="width:80%;">By John Glover Feb. 8 (Bloomberg) -- The European Central Bank may be making it harder for the region's banks to revive bond sales by giving them access to unlimited cheap cash.</div>
<a href="http://www.bloomberg.com/news/2012-02-08/bank-addiction-to-ecb-cash-may-stymie-bond-sales.html">Banks' Addiction to Cheap ECB Financing May Stymie Bond Sales: Euro Credit</a> - <span style="color:#888888">Bloomberg</span><br>
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The euro question has been answered
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<a href="http://www.moneyweek.com/online-trading/spread-betting/sb-blog/spread-betting-The-euro-question-has-been-answered-20600" style="font-size:1.2em">The euro question has been answered</a>
<br> <span style="color:#888888;">MoneyWeek (blog)</span> - <span style="white-space:nowrap">10 hours ago </span>
<div style="width:80%;">First, I don't know whether you saw it, but there was a dramatic move in the EUR/USD yesterday. We'll look at the charts in a moment.</div>
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Wednesday Worries: Yentervention, Euro Style
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<a href="http://seekingalpha.com/article/350111-wednesday-worries-yentervention-euro-style" style="font-size:1.2em">Wednesday Worries: Yentervention, Euro Style</a>
<br> <span style="color:#888888;">Seeking Alpha</span> - <span style="white-space:nowrap">11 hours ago </span>
<div style="width:80%;">The yen finally got back to 77 and EUR/CHF back to 1.21 so my theory that the BOJ has given up on the dollar and moved to boosting the euro is playing out nicely.</div>
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Choppy EUR/USD tests range top but stalls
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<a href="http://www.forexlive.com/blog/2012/02/08/choppy-eurusd-tests-range-top-but-stalls/" style="font-size:1.2em">Choppy EUR/USD tests range top but stalls</a>
<br> <span style="color:#888888;">ForexLive (blog)</span> - <span style="white-space:nowrap">11 hours ago </span>
<div style="width:80%;">By Jamie Coleman || February 8, 2012 at 15:30 GMT Nothing particularly bullish on the wires in the last half-hour to spur the euro rally but we pretty much traded the US range in about 40 minutes.</div>
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CFR uses EUR 500 mln for railway modernization
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<a href="http://business-review.ro/news/cfr-uses-eur-500-mln-for-railway-modernization/13316/" style="font-size:1.2em">CFR uses EUR 500 mln for railway modernization</a>
<br> <span style="color:#888888;">Business Review</span> - <span style="white-space:nowrap">12 hours ago </span>
<div style="width:80%;">National railway operator CFR will modernize the railway infrastructure using nonreimbursable funds from the EU totaling EUR 479 million.</div>
<a href="http://www.romania-insider.com/romania-revamps-railways-and-train-stations-with-eur-500-mln/48388/">Romania revamps railways and train stations with EUR 500 mln</a> - <span style="color:#888888">Romania-Insider.com</span><br>
<a href="http://www.thediplomat.ro/articol.php?id=2565">CFR has signed contracts worth EUR 479 million for modernization of railway <b>...</b></a> - <span style="color:#888888">The Diplomat Bucharest</span><br>
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British Pound Sterling: Currency set to Outperform EUR in 2012 suggest BarCap <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-vs-eur-currency-latest-08021364.html" style="font-size:1.2em">British Pound Sterling: Currency set to Outperform EUR in 2012 suggest BarCap <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">14 hours ago </span>
<div style="width:80%;">Three factors matter for EUR/GBP: the risk from Greece; the UK's relative economic performance; and valuation. Looking at today's spot exchange rates, British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.17% lower at 1.1966.</div>
<a href="http://www.easy-forex.com/news/daily-reports-asia-pacific/daily-outlook-euro-and-aussie-at-fresh-year-highs-201202082174.html">Daily Outlook - Euro and Aussie at Fresh Year highs</a> - <span style="color:#888888">Easy-Forex</span><br>
<a href="http://www.forexpros.com/news/forex-news/forex---eur-usd-dips-on-fresh-greek-jitters-230090">Forex - EUR/USD dips on fresh Greek jitters</a> - <span style="color:#888888">Forex Pros</span><br>
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that you require only 1/400 or .25% in balance to open aposition (plus the floating gains/losses.) Most brokers offer100:1, where every trader requires 1% in balance to open aposition. The standard lot size in the Forex market is $100,000 USD. For instance, a trader wants to get long one lot in EUR/USD andhe or she is using 100:1 leverage. To open such position, he orshe requires 1% in balance or $1,000 USD. Of course it is not advisable to open a position with suchlimited funds in our trading balance. If the trade goes againstour trader, the position is to be closed by the broker. Thistakes us to our next important term. Margin Call A margin call occurs when the balance of the trading accountfalls below the maintenance margin (capital required to open oneposition, 1% when the leverage used is 100:1, 2% when leverageused is 50:1, and so on.) At this moment, the broker sells off(or buys back in the case of short positions) all your trades,leaving the trader "theoretically" with the maintenance margin. Most of the time margin calls occur when money management is notproperly applied. How are the mechanics of a Forex trade? The trader, after an extensive analysis, decides there is ahigher probability of the British pound to go up. He or shedecides to go long risking 30 pips and having a target (reward)of 60 pips. If the market goes against our trader he/she willlose 30 pips, on the other hand, if the market goes in theintended way, he or she will gain 60 pips. The actual quote forthe pound is 1.8524/27, 4 pips spread. Our trader gets long at1.8530 (ask). By the time the market gets to either our target(called take profit order) or our risk point (called stop losslevel) we will have to sell it at the bid price (the price ourbroker is willing to buy our position back.) In order to make 40pips, our take profit level should be placed at 1.8590 (bidprice.) If our target gets hit, the market ran 64 pips (60 pipsplus the 4 pip spread.) If our stop loss level is hit, themarket ran 30 pips against us. It's very important to understand every aspect of trading. Startfirst from the very basic concepts, then move on to more complexissues such as Forex trading systems, trading psychology, tradeand risk management, and so on. And make sure you master everysingle aspect before adventuring in a live trading account. About the author:Raul Lopez is a full time Forex trader and founder ofhttp://www.straightforex.com a high quality Forex training company.
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British Pound Sterling: Currency set to Outperform EUR in 2012 suggest BarCap <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-vs-eur-currency-latest-08021364.html" style="font-size:1.2em">British Pound Sterling: Currency set to Outperform EUR in 2012 suggest BarCap <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">14 hours ago </span>
<div style="width:80%;">Three factors matter for EUR/GBP: the risk from Greece; the UK's relative economic performance; and valuation. Looking at today's spot exchange rates, British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.17% lower at 1.1966.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1106-british-pound-in-euro-3242343243">British Pound Sterling: Currency to feel 'minimal impact' from QE say UBS as <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
<a href="http://www.bestsyndication.com/?q=20120107_forex_signals_trading_gold_silver_oil_prices.htm">Gold and Silver Prices Advance ? USD Up vs JPY but Down vs EUR ? Crude Oil Higher</a> - <span style="color:#888888">Best Syndication</span><br>
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Forex Trading and Currency Exchange Rates ? USD/JPY rises as EUR/USD drops
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<a href="http://www.bestsyndication.com/?q=20120205_forex_signals_usd_jpy_eur.htm" style="font-size:1.2em">Forex Trading and Currency Exchange Rates ? USD/JPY rises as EUR/USD drops</a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 6, 2012 </span>
<div style="width:80%;">(Best Syndication News) The dollar is trending higher early Monday as stock markets in Europe open lower (see forex tables below).</div>
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Currency Futures: Forex Speculators cut US Dollar bets. Aussie, Kiwi & Peso <b>...</b>
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<a href="http://countingpips.com/fx/2012/02/05/currency-futures-forex-speculators-cut-us-dollar-bets-aussie-kiwi-peso-positions-continue-rise/" style="font-size:1.2em">Currency Futures: Forex Speculators cut US Dollar bets. Aussie, Kiwi & Peso <b>...</b></a>
<br> <span style="color:#888888;">CountingPips (blog)</span> - <span style="white-space:nowrap">Feb 5, 2012 </span>
<div style="width:80%;">By CountingPips.com The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators cut back on their US dollar long positions last week and Euro short ...</div>
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Forex Trading and Commodities ? Gold and Silver Prices Advance while USD was <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120202_forex_signals_futures_gold_silver.htm" style="font-size:1.2em">Forex Trading and Commodities ? Gold and Silver Prices Advance while USD was <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 3, 2012 </span>
<div style="width:80%;">(Best Syndication News) Gold prices jumped again today as traders took advantage of the long-term policy signals from the Federal Reserve (see forex and futures charts below).</div>
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British Pound Sterling: Currency in 10-week high vs USD while falls vs EUR <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-high-vs-us-dollar-01021330.html" style="font-size:1.2em">British Pound Sterling: Currency in 10-week high vs USD while falls vs EUR <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Feb 1, 2012 </span>
<div style="width:80%;">Also boosting the pound sterling is news that UK manufacturing kicked back into life in January. British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is unchanged at 1.5757.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1093-british-pound-gbp-up-against-us-dollar-usd-456456456">British Pound Sterling: Currency faces 'another slug of QE' of 75bn GBP should <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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Gold Prices Climb as Silver Slips? USD Higher vs EUR but Lower vs JPY ? Brent <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120131_forex_trading_usd_eur_jpy_gold_silver_prices.htm" style="font-size:1.2em">Gold Prices Climb as Silver Slips? USD Higher vs EUR but Lower vs JPY ? Brent <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Feb 1, 2012 </span>
<div style="width:80%;">(Best Syndication News) Gold and silver prices moved in opposite directions Tuesday as traders looked for safe-havens (see forex and futures charts below).</div>
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Gold Prices Advance while Silver Slips ? USD down vs EUR and JPY ? WTI and <b>...</b>
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<a href="http://www.bestsyndication.com/?q=20120130_forex_signals_gold_silver_jpy_eur_usd.htm" style="font-size:1.2em">Gold Prices Advance while Silver Slips ? USD down vs EUR and JPY ? WTI and <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Jan 31, 2012 </span>
<div style="width:80%;">(Best Syndication News) The dollar fell broadly Monday while optimism in Greece turned to frustration (see forex and futures charts below).</div>
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British Pound Sterling: Currency finds GfK consumer confidence data of no use <b>...</b>
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<a href="http://www.euro-exchangerate.com/british-pound-to-euro-31011325.html" style="font-size:1.2em">British Pound Sterling: Currency finds GfK consumer confidence data of no use <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Jan 31, 2012 </span>
<div style="width:80%;">This morning the pound euro pair continues to be driven by events in the eurozone as domestic UK data fails to make an impact. British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is 0.37% higher at 1.5770.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1078-quantitative-easing-in-february-3444354334-and-the-pound">British Pound Sterling: Currency fins support vs EUR and USD as Miles says QE <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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Gold and Silver Prices Advanced while Crude Oil Falls ? USD Falls vs EUR and <b>...</b>
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<a href="http://www.bestsyndication.com/?q=201201229_forex_signals_usd_jpy_eur_gold_silver.htm" style="font-size:1.2em">Gold and Silver Prices Advanced while Crude Oil Falls ? USD Falls vs EUR and <b>...</b></a>
<br> <span style="color:#888888;">Best Syndication</span> - <span style="white-space:nowrap">Jan 30, 2012 </span>
<div style="width:80%;">(Best Syndication News) Gold and silver prices were higher last week while light sweet crude oil and the dollar declined in value (see the futures and forex charts below).</div>
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British Pound Sterling: Currency to fall further against US Dollar says <b>...</b>
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<a href="http://www.euro-exchangerate.com/pound-dollar-exchange-rate-forecast-27011314.html" style="font-size:1.2em">British Pound Sterling: Currency to fall further against US Dollar says <b>...</b></a>
<br> <span style="color:#888888;">Euro Exchange Rate News</span> - <span style="white-space:nowrap">Jan 27, 2012 </span>
<div style="width:80%;">Once the euphoria is over we should also see the euro dollar exchange rate retreating once more. British Pound Sterling (GBP) in Euro (EUR): GBPEUR is 0.13% lower at 1.1958.</div>
<a href="http://www.economy-news.co.uk/british-pound-sterling/1072-british-pound-and-quantitative-easing-forecasts-3435435435">British Pound Sterling: Analysts speculate on Quantitative Easing - 25bn, 50bn <b>...</b></a> - <span style="color:#888888">Economy News</span><br>
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Term commonly used when referring to the foreign exchange market.
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