Wednesday, January 13, 2010

Advantages and Disadvantages of Operating in the Foreign Exchange Market

If you are thinking of investing your money in Forex it is essential to know about the pros and cons of it. One of the main advantages and reasons why hundreds of people worldwide rely on this market is because it’s considered "the most liquid market in the world. This is because Forex can absorb many large operations, compared with any other financial market. Proof of this is that daily movements are more than 3 billion dollars in the Forex market.

Another very important factor is that due to the global economic crisis, Forex is in its best time to invest because they so clearly by the volatility in the foreign exchange crisis, leads to better profits for traders. These would be the 2 main advantages of investing in this market, but the greater risk that a trader can take in Forex, is to trade without knowing what they are doing, without receiving special education and believing that this market is a game. But here are we are going to show many other market advantages and disadvantages, as believe it is important to be clear and honest with the traders and users before investing.

Advantages of Forex:

• It's a liquid market: as I mentioned, Forex is a liquid market for the many large operations that are performed daily. They are operated trillion dollars a day.

• Access all day: It is available to operate 24 hours a day. From Monday to Friday.

• It is easy market access and globally used: I can operate from anywhere in the world and in any location. It only needs an Internet connection. In other financial markets it needs a single physical location to trade.

• No high fees or additional expenses: At this point if we stop to explain: The Forex is transaction costs much lower than other investment markets, so you should consider commissions to broker or intermediary companies to manage their capital, if appropriate. There are no fees for services. There are no additional costs of operating time, but you should know that if you want to be a successful trader, you must spend on your education and on a specialized course in Forex strategies.

• It is a transparent market: Due to the multi-day market movement, it is virtually impossible to market manipulation.

• There are no deadlines forced: Traders of other financial markets are constrained by having to comply with a particular extension in time. In the FOREX market, however, a position can remain open as long as the trader-investor deems necessary.

• It is a leveraged market: That is, you can take leverage when investing your money, which means that a broker with solid finances lends money for investment and your profit, is greater. The leverage allows the trader to enter the market with only one hundredth of what he has invested.

Leverage is from:

• 2:1 = $ 1 you pay $ 2
• 10:1 = $ 1 you pay $ 10
• 100:1 = $ 1 you pay $ 100
• 200:1 = $ 1 you pay $ 200
• 400:1 = $ 1 you pay $ 400

• There are lots of free and paid courses to train: There are many experts’ traders on the web, which provide specialized education and even video demonstrations for learning to trade. You can also open a demo account for you to start gaining experience before opening a practice account with real money. In we strive to provide adequate education and specialized, we have free courses, forums, articles, virtual classrooms and other services for you to be a skilled trader to operate properly and getting steady gains. If you would like to have more information please visit the following link:

Disadvantages of Forex:

• Runs the risk of choosing a inexperienced broker: On the web there are many unscrupulous people who are dedicated to defraud honest people. It is important when investing your money to have the support of a trusted broker; they usually must be properly registered, including some requests that the brokerage firms and they must have made at least 100 successful operations. Also do not forget that in the United States, the broker must be registered with the CFTC, which means by its acronym in English (Commodities Futures Trading Commission - Committee on Trade in Goods Fixed Term) or become members of the NFA (National Futures Association - National Futures Association). You can also check with Consumer Protection Office, depending on your country of origin and cyber laws thereof.

• Can leverage yourself:
As mentioned, you can take a leverage, which will allow you to enter the market with a larger capital, if the operations are successful, and use good strategies you can obtain better returns but if the opposite happens, you may lose all your money.

• Requires knowledge and time: If you know the market, you may enter without having the skills to trade and lose lots of money. If you manage to improve and train yourself, this ceases to be a disadvantage. Also if you do not have time to sit at your computer to monitor market movements, you may end up losing more than you think. If this is the case this would be a disadvantage if you take the signal service which ForexandaPips offers. In this service, an experienced trader will monitor and analyze the market and subsequently sends its results and it signals to buy or sell directly to you. For more information about this service click here:

• You have a complex nature: the techniques are complex market analysis and strategy implementation requires much training and education. The currency exchange rates are influenced by a variety of factors, which may fluctuate over time.

• By a winner is a loser: Unfortunately there is always a loser and you may have some operations in its early losses, but then begin to make profits.

Being a bit more specific, there are two ways to invest your money have both advantages and disadvantages, so you need to choose which best fits your needs, to avoid failures:

1. Operating its own capital.
2. Giving capital to a company specialized intermediaries.

1. Operating its own capital:


• You can devote yourself to a career as a Forex trader and expert.
• You can get unlimited income within their capabilities, if you use the best strategies.
• You can enter with a small investment.


• As a novice you can lose all your capital, by not having a proper education.
• To become a skilled trader it may take more than 1 year on their education to show positive results.
• It requires dedication and time.
• You must invest in education, with some capital.
• First trades may have losses.

2. Giving capital to a company specialized intermediaries.


• You do not need special skills and experience.
• The potential losses are lower because their capital is operated by experts in forex.
• You can forget about the management of emotions and psychology and not directly trade.
• Your capital can make big profits quickly.
• You can open an account with xxxx capital.


• There are unscrupulous companies that engage in cheating people. You must be sure the company you trust.
• The company does not provide a guarantee of profits.

Remember that the Forex is a market full of opportunities but also risks, especially for inexperienced traders and those who are not disciplined in receiving education and investing time. It is very complex to traders in this market and currency volatility is very high, so the chances of losing all the money invested is very high for new entrants, but if you use the right strategies and several indicators simultaneously, you can get great profits.

If You would like to have more information please clicke here: Trading Forex

Wednesday, January 6, 2010

Using the Bollinger Band indicator to invest in Forex

What are Bollinger bands? It is a technical analysis indicator used in the financial markets such as Forex, which are used to determine market volatility and relative prices in a period of time determined by the trader.

This technique was developed by John Bollinger in the early 80's. Bollinger was based on mathematical formulas commonly used by statisticians to determine the standard deviations of the data series and adapted for use in the Forex Market. Bollinger bands are used to determine over-bought and over-sold levels.

The use of Bollinger bands Indicator is more effective when the Forex markets is without trend (ranging markets) and it is suggested that it should be applied in periods of 20 days but it may also be used even in periods of 50 days.

Bollinger bands consist of three lines drawn in relation to price action. These three lines are:

• The middle or central band: it is as a rule; a simple moving average and provides information on market trends. From the middle band it is calculated upper and lower bands by one standard deviation.
• The upper band: is equal to a moving average of 20 periods and 2 standard deviations above the moving average.
• The bottom band: is equal to a moving average of 20 periods and 2 standard deviations below the moving average.

How to use Bollinger bands to invest in Forex?

You can use this indicator to determine market volatility and relative prices for trading in Forex. You must start tracing the 3 lines in the graphs, which provide you with the indications of when you should buy and sell.

In Markets without trends the strategy is to sell in higher bands and compared in the lower bands. The interval between the upper and lower band will provide you with information on the volatility or market activity to trade. This means that the higher the volatility in the Forex market is, the higher the standard deviation and because of that the bands are a little broader. If on the contrary, it happens that there is less volatility in the market, the lower the standard deviation and thus the bands will be narrower.

On the other hand, if you notice that currency prices will break through the upper band, in the band that is contrary, we must expect a continuation of current trends in the market.

Calculate the moving average (MA) using the following formula:

MA = (P1+ ... + Pn)/n

Pn = Price at an interval n
n = Number of periods

• Subtract the moving average (MA) of each data point (p) used in calculating the moving average. This will give you a list of deviations (d):
• Finally, calculate the three Bollinger Bands using the following formulas:

Superior Band = MA + 2σ
Media Band = MA
Lower Band = MA-2σ

It is not recommend using this indicator in volatile markets. But if you do use the indicator, you should buy right on the break above the upper band and sell right on the break below the lower band. This is important if you notice that the bands shrink too fast (consolidation), it is likely to occur a violent break, a moment you can use trade.

Bollinger Bands provide you with 3 types of signals:

• Contractions (squeeze) means that there is less volatility in the market.
• Expansion (expansion) means that there is greater market volatility.
• 2.0 STDV close : Breakouts

What you should NEVER do?

• Never buy or sell without observing the candlestick patterns.
• Do not buy or sell if it has not detected a clear breakout of the market.
• Do not use this indicator in periods longer than 100 days.
• If prices touch the band alone, it does not mean that you should buy or sell. Never trade without a preliminary analysis.

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Remember that no investment is risk free and the Bollinger Band indicator in Forex will help you most effectively when it is used in conjunction with other tools.

If you would like to have information about Technical Analysis, Please Click Here: Forex Trading