Is The Forex Market Risky ??

Forex is sometimes described as one of the riskiest financial markets. However, the volatility of currencies rarely exceeds 1-1.5% per day and risks are only high when unreasonable leverage is used. By choosing the leverage size traders actually determine their risks themselves. We do not recommend our clients use leverage higher than 1:5. The Forex market is a highly speculative market. Hence, the ability to analyze price bahavior becomes an invalubale asset for any trader.

How Does 1 Analyze Forex ?

In essence,

analyzing the Forex market requires understanding price movement on financial markets. There are two types of analysis used in the financial markets: "fundamental" and "technical". While technical analysis gives the trader a grasp of patterns of movement in the market, fundamental analysis explains the reasons behind movements in the market and attempts to predict changes in price and market trends. A fundamental analysis takes into account the economic conditions of the countries whose currencies he or she trades, follows political events and trends in the world, and reacts to emergency news. Whatever method you prefer, the reality is that it has become increasingly difficult to be a purist of either persuasion. Fundamentalists need to follow the various signals derived from the changes in price on charts, while few technicians can afford to completely shrug off incoming economic data or critical political decisions. For example, if one looks at the chart that shows EUR/USD moves over the recent war in Iraq, it becomes obvious that victories of the Coalition forces meant a stronger Dollar and a weaker Euro. Conversely, military failures resulted in a decline of the American currency, and a strengthened Euro.

Forex Market and Stock Market

As a result of its global dimension, the Forex market is open 24 hours a day, which enables investors to correct their positions at any point in time. Given the large number of players, the Forex market has narrow spreads and virtually no price gaps. The lack of price gaps enables investors to count on non-slippage order execution. However, in a very volatile market the possibility for slippage exists.The large volume of participants also reduces opportunity for insider information. To put it simply, there has never been a case of complete currency collapse in a developed country. The volatility of leading currencies rarely exceeds 1% per day, in contrast to the volatility of stocks, which may fluctuate by up to 10% over one trading session. The Forex market generally provides more opportunities for leveraged trading.

Forex Forcasting - Fundamental Analysis

The entry "Fundamental Analysis" into your search engine will yield over a million results. Fundamental Analysis was first used to identify under or over-valued companies and forecast and profit from future price movements on the stock market. To take a fundamental approach on the Forex market you should view a country as if it were a company and consider the underlying forces affecting the country's economy.This fundamentalist approach is informed by a wide range of elements. Let's consider the currency of country "X".

A Fundamentalist would analyze economic indicators (Interest rate; Employment figures and GDP to name but a few) as well as government policy (is the government right or left leaning; how secure the government's tenure is; the geo-political pressures on the government, etc.) and societal pressures (are the people "spenders" or "savers"? How do they perceive country X's economy and its economic institutions?) The information both pertinent and available is a vast ever-changing mosaic and it is impossible to keep on top of everything simultaneously. The first thing to remember is that the more you research and the more you learn, the more you will understand the subtle dynamic of the market. The second thing to do is to choose which indicators you feel are most indicative of price action. The only way to make a measured choice is to research and to listen to and learn from more experienced traders.News of economic indicators is released at set times and has a marked effect on the behavior of traders on the market, so an ignorance of these indictors would make the moves of the market completely inexplicable. It is important, therefore, to know when news is going to be announced and what the implications of the news are. Keep fully informed using the wealth of information available on the Internet. Visit the sites of the Central banks of the currencies you are considering (see the Links page), access their calendars of Economic Indicators and develop a clear idea of what economic information is about to be released and how it will affect the currency. Forex Club's internet trading platform, IDSystem, provides a constant flow of real-time, up-to-the-minute financial news from Dow Jones Newswires directly to your trading screen, equipping you to devise sound, informed trading strategies. The two services available are Dow Jones Business News and Dow Jones Money News. These services are available to Forex Club clients absolutely free-of-charge.Fundamental Analysis is generally held to be an effective method of forecasting economic conditions, but is less precise when it comes to outlining a profitable trading strategy. A trader has to derive his or her own responsive strategy. Bear in mind, also, that not only are the figures themselves important but also how these figures influence expectations.One major difference between fundamental analysis on the stock market and fundamental analysis on the Forex market is that on the Forex market you have to consider two currencies, as there are two sides to every trade.