No Liquidity

On holidays, banks are typically closed, as are large corporations and institutions. Because of these closures, two way trading can be limited and therefore not as profitable. This means that prices may move very easily in one direction if a large order comes in, and prices may not truly be accurate.

Unexpected Activity

Holidays are also a good time for unexpected activity and behaviour in the online currency trading market. The markets are not liquid on holidays so they will move a lot quicker.

Inactivity

Unexpected behaviour and activity can be an exception to the rule, because there is usually very little activity since everything is closed. If you are a Forex day trader, technical analysis will fail because of the inactivity. Additionally, the market will usually be so slow that you probably won’t be able to make much money at all.

Personal Time

Holidays are a great time to spend the day with friends and family, so why are you thinking about online currency trading? Take the day and spend it with the family and recharge your batteries. Come back the next business day to make some cash.

First of all, it is important to understand that trading on the Forex market is very different to trading on the stock market. Often, the return on your investment can be quicker, but so can the losses if you’re not careful. As with any market, there is a slew of Forex trading strategies out there, but the best ones are also referred to as leverage. Using leverage as a technique allows Forex traders to maximise the market’s fast fluctuations.

Another online currency trading technique you may have heard of is stop-loss. This technique helps Forex investors protect their money by setting a specific point at which all their trades will stop. This actually prevents losing beyond a certain limit.

Automatic entry orders are also frequently used in online currency trading. In most cases, this technique is used with an automated Forex trading platform. The idea behind it is that Forex traders will only enter into the market when the value is ideal for them. The ultimate value is predetermined by the investor’s goals.

In order to enjoy success in online currency trading, the various techniques should be studied in detail before trading begins.

First and foremost, technical indicators are widely used in technical analysis. So, what is a technical indicator? Basically, it is a graphical representation of the price action, and you can usually see such a graph at the bottom of a Forex trading screen.

In addition to technical indicators, investors also use trend lines in determining how the Forex market might move. Trend lines measure support and resistance over a period of time. Analysis involves looking at where the prices are going and in what range. Using this information investors use trend lines to predict where the prices might end up.

It is important to remember, as an investor, that technical analysis can be useful, but it is not perfect. Trading decisions will ultimately be yours to make, not the data’s. Technical tools and indicators can help you make decisions, but they are not a guarantee to where the Forex market will go.

The effectiveness of technical analysis and how it is applied will vary among Forex traders. Everyone will interpret the data differently and may, therefore, make different decisions. These decisions are likely to become your own online currency trading style.

Geopolitical Events

A geopolitical event can definitely move currencies with no regard to the technical indicators that one may be looking at. For example, when Iran announced that it was intensifying its nuclear programme, the USD dropped in 2007. Elections, G7 statements, and other political factors can also affect currency.

Economic Data

The economy can also move currencies in either direction. However, there are some economic factors that fuel currency movement more than others. These may include government announcements, unemployment rates, manufacturing surveys, and GDP reports.

Natural Disasters

Natural disasters cannot be predicted accurately, but they do have a direct impact on currency rates and values. This is especially true when a natural disaster affects a commodity supply. Commodity-linked currencies are particularly vulnerable to natural disasters.

Terrorism

Believe it or not, acts of terrorism can dramatically affect a currency rate. For example, during the 9/11 attacks in the US, the USD plummeted immediately afterward. The same happened in the UK after the 2005 tube bombings.

Internal Conflicts and War

Conflicts and war can also affect currency, and even more so when they take place in countries where the currency is linked to oil or gold.

What is the AIME method? First of all, the basic principle teaches traders how to use the proper tools to manoeuvre throughout the Forex market effectively. Here’s what acronym, AIME, actually means:

A – Assess and Access the Market
I – Identify Opportunities Available to You
M – Move In, Monitor the Trade, Move Out
E – Evaluate the Trade

Using the AIME methodology is a great way to work within the Forex market and enjoy the returns gained by online currency trading. It is a step-by-step reminder of how to succeed in Forex trading.

Any successful Forex trader knows that before putting money into the market, they must first assess it. This means taking advantage of any tools available, including, but certainly not limited to, fundamental analysis, socio-economic factors, financial factors, current trends, and historical information. Once the market is analysed, any opportunities must be examined before the investor can move into the market, make their trades, and get out.

The secret behind online currency trading is paying attention to the market and its trends. It is easy to make quite a bit of money in the Forex market, but that reward only comes with some risk that can be avoided when investors are educated.

Typically, the most active online currency trading times are between when the London trading market opens and when the US trading market closes each day. So, that’s 8:00 GMT to 22:00 GMT. However, the busiest time on the Forex market is when the London and US markets overlap, at around 13:00 GMT and ending around 16:00 GMT.

There are three major sessions for online currency trading which include the London session, the US session, and the Asian session. Here’s when each occur, so you can make a note:

The London Session

The London session is between 8:00 GMT and 16:00 GMT. The most common currencies to trade during these times are the EUR, GBP, and USD.

The US Session

The US session is between 13:00 GMT and 22:00 GMT. The most common currencies to trade during these times are the EUR, USD, AUD, GBP, and JPY.

The Asian Session

The Asian session is usually the quietest and slowest moving. It is not an ideal time to day trade because the only noteworthy currency activity happens with the JPY.

Technical Analysis Focuses on Price Movements

The main focus of technical analysis is watching the movement of prices in the Forex market. The charts used show how prices are moving, when they trend, and what the strength of the trends are at any given time. This kind of analysis focuses on hard data and facts, not theories and demand.

Trends Are Easy to Spot

With technical analysis, trends are easily found. The moving average line on most technical charts will give you a quick idea of the price that is trending, and if it happens to be stuck in a certain range.

Patterns Are Identified Easily

Patterns are clear and unmistakeable. The technical analysis charts help Forex investors see patterns that can help predict price movements. Though patterns can be complex, they are easily identified.

Charting is Fast and Cheap

Technical analysis is faster and less expensive than fundamental analysis in online currency trading. Computers and the internet have made it easy to access analysis tools in no time at all.

The primary reason for the foreign exchange is to facilitate international trade and investment. For example, the import of British goods is permitted by the foreign exchange for US businesses who pay in sterling, even though the business’ income is in US dollars. This supports speculation on the change in interest rates, which is involved in the direct speculation in the value of currencies and in the carry trade.

Savvy traders develop opinions based on world news and economic data, and apply those ideas to currency trading. Hungarian-American financier George Soros is said to be ‘the man who broke the Bank of England’ for making one billion US dollars during the 1992 Black Wednesday currency crisis in the UK. Stanley Druckenmiller was working at Mr. Soros’ Quantum Fund in 1989 when he bought German marks, which he believed would rally after the fall of the Berlin Wall and reunification of Germany. His idea paid off when the German mark climbed in value over the next few years and Quantum Fund boasted returns of over 60 percent. During the 1987 US stock market crash, Andy Krieger made millions for Banker’s Trust when he shorted 200 million in New Zealand dollars while other traders were buying any currency appreciating against the US dollar. Krieger’s belief that the rally would not last and the New Zealand dollar was overvalued proved correct.

Trading is heaviest when the major markets overlap. Estimates show that nearly two-thirds of New York activity takes place in the morning hours when the European markets also are open. It also is estimated that the volume of currency trading transactions are highest when the Asian market, including Australia and New Zealand; the European market; and the American market are open simultaneously. The average trading day begins with New Zealand, and then moves across to Australia, Asia and Japan, North America and Europe. Because the UK and US markets account for approximately half of the total world market, the times when both markets are open are especially busy.

Here are overlapping trading hours presented as US EST (United States Eastern Standard Time):
Great Britain market trade times: 3 a.m. to 11 a.m. EST
London market trade times: 2 a.m. to 12 noon EST
New York market trade times: 8 a.m. to 4 p.m. EST
Tokyo market trade times: 8 p.m. to 4 a.m. EST
Australian market trade times: 7 p.m. to 3 a.m. EST

The major markets overlap during trading hours between 2 a.m. and 4 a.m. EST for the Asian/European markets, and between 8 a.m. and 12 p.m. EST for the European/American markets.

What does this mean for you? Just because the market is available 24 hours a day does not mean it is always active. You make money when the market is moving down or up, not when it is standing still. It is important to know when currency trading is at its heaviest.

1. Have you been a forex broker for a long time?

2. What is the financial condition of your company? Will you show me your brokerage firm’s balance sheet?

3. Do you have good connections with reputable banks? What banks are they?

4. Are the spreads fixed or variable? If the spreads are variable, what spread will you give me?

5. Is fractional pip pricing available? (Pip, which means “percentage in point,” refers to the last digit of a currency price. The pip is the smallest measure of price move used in forex trading.)

6. Are there any trading restrictions? If so, what are they?

7. Can I lose more money than I put in to my account?

8. Can positive rolls earn interest? Is this the case for margin levels? (A rollover is interest earned or paid on forex positions held overnight. A positive roll is when you buy a currency that pays a higher interest rate, so you can earn interest.)

9. Are rollover rates displayed prominently? If so, where?

10. What customer support do you offer? Do you have a 24-hour help desk?