Arbitrage on Forex

June 17th, 2010

The arbitrage concept means several ‘buy’ or ‘sell’ deals in order to profit from unequal prices of the same or resembling assets at the same time in different markets or in one market, but at different times.

Also there is the concept as Forex arbitrage. It is ‘buy’ or ‘sell’ operations made by a trader and a required further reverse deal for the purpose of making profit.

Controlling its risk, Forex arbitrage can be very beneficial. The meaning of Forex arbitrage is following: profit is made by mean of buying/selling of financial instruments at different times. In addition, a trader has opportunity to complete financial transaction in different market. Forex arbitrage means obligatory making both buy/sell deal in Forex and a reverse operation, which will bring a profit.

There are several types of arbitrage available. It is simple arbitrage, which involves using of just two currencies and a complicated type, which involves trading with three and more currencies.

Depending on what profit one can make there are following types of arbitrage:

- Temporary arbitrage is the most accepted type of arbitrage. Its meaning is in quotes difference of currency pairs at different times. The temporary arbitrage can be of two kinds:

1. “Purchase-Sale”. A trader buys a currency at a lower price in order to sell it at a higher price and get profit.

2. “Sale-Purchase”. Trader sells currency at higher price in order to buy at lower price in the future.

- Crossing arbitrage is one of the most complicated types of arbitrage. During the crossing arbitrage simultaneous synchronous exchange rates changing takes place in two pairs. Such cross-imbalances appear in Forex all the time.

- Intermarket arbitrage occurs in case of if you want to earn on exchange rates difference in different currency markets.

However, the using of Forex arbitrage is not always profitable, as in today’s conditions exchange rates in various exchanges do not differ often that does not allow traders to obtain additional profit.

The main essence of arbitrage is the complication of fixed-date buy/sell deals of currency options. The option must be executed without fail and its conditions depend on its type and the conditions of the contract.

In general, the choice of strategy depends on many factors related to each other, which trader must consider during the trading.

Added by Alexandr Kornilov,
InstaForex Clients’ relationship manager

The difference between games of luck and Forex

June 10th, 2010

There are two model of people’s activity –work or gaming. Game is always a risk, but in addition it is freedom of choice. Game can bring you huge winning and at the same time huge loss. However, it is insignificant how much efforts you spent for achieving the goal. So the main characteristic of a game is risk.

Work, on the contrary, is disciplined process, completely excluding any risks. The result of working process is salary.

Considering trade on the international currency market Forex, there cannot be any unambiguous answer for the question “What Forex is”. Everything depends on trader’s choice. Thinking of trading at Forex in terms of work, we can find many significant differences between it and usual working process. A trader does not have supervisors, position, career ladder, trader does not get fixed monthly salary, he does not need to go to the office every day. All this is both advantages and disadvantages of being a trader. It is not usual notion of work which everybody got used to.

Let’s now consider trading in the context of game. Opening and closing positions, traders parlay – what happens with the currency, whether its rate will move down or up. So having given correct forecast, trader gets profit, and, on the contrary, if he failed to predict changes on the market, he loses everything. It can be compared with casino but can not be called work.

As of today, many traders tend to suppose that trade on the international currency market Forex is work. The difference between casino game and trading on Forex consists in constant self-development, market analysis, basing on fundamental and technical factors of market behavior. A trader should monitor the quotations, follow the most important economic and political events in the world. And according to the information, he should make a decision on execution of operation.

If trader relies only on his intuition, the trading process adds up to casino game. If trading on Forex, you adhere to the basis of fundamental and technical analysis, you are always aware of economical and political situation in the world, estimate probable risks beforehand, then, undoubtedly, trade on the international market Forex is work.

Added by Alexandr Petryanin,
InstaForex Clients’ relationship manager

Are books about Forex useful and what do they teach?

May 28th, 2010

Popularity of Forex market is growing from day to day and due to development of the Internet and modern technologies currency trading became available for everybody. Thereby, many people with lack of experience and knowledge came to the Forex market. However, sooner or later every beginning trader faces the necessity of learning the basis of currency trading. So books about Forex will teach traders the essence of currency trading on the international currency exchange market Forex.

At present day, Internet carries a great number of literature on Forex trading – these are books on fundamental and technical analysis, books on the psychology of trading, books on capital management and so on. Thus, not only the beginning but also the experienced traders have a huge variety of literature on Forex to choose.

Below let us discuss a few categories of books on Forex, why they are useful and what every trader can find useful in them.

The books on fundamental analysis comprise the literature on economy, which dwell on different financial sides of not only Forex market but the whole global economy. Though not all books on the economy will be identically helpful, you should select only those who are destined for traders.

It is necessary to remember that in the process of trading not all traders keep to fundamental analysis. However, those traders who do, will have a handicap as due to the fundamental factors the international currency market starts to move more often. From the stated above it follows that even those traders who do not adhere to a based on fundamental analysis trade should definitely study the books on Forex fundamental analysis.

The books on technical analysis

The books on technical analysis are most popular among novices of the market. This happens because technical analysis is easier and in simple words deepens a trader into the principles of Forex trade. Exactly with reading these books the majority of traders begin their Forex work. Nowadays it is possible to find plenty of books on technical analysis in the Internet. Though there exists one disadvantage, connected with applying this analysis in trading process. Most part of the available books are too old, so a trader will not get the desired effect. Nevertheless it does not mean that technical analysis should be avoided, simply every trader using technical basis for operating on Forex should modify the applied strategies for himself.

The books on trading psychology

This type of literature should be read by absolutely every trader irrespective of his experience on the market. As it is psychology of a trader’s behaviour which can determine the traders correct actions and the correct schedule for the working day with no harm to health and your funds. Very often traders are making actions not in the accordance with the situation on the market but overwhelmed by emotions. The books about Forex psychology will teach you how to suppress your emotions without letting them into your trade.

The books on capital management

This section of Forex literature is very important and it cannot be omitted. Every participant of the market should study the books about managing the capital. These books help a trader to work out the maximally profitable and correct trading strategies. Moreover, this type of books is significant also because in the Internet there is not so much information devoted to capital management and reading it will not take much time.

Absolutely every participant of trade irrespective of his experience on the market should practice self-education. Analyzing Forex literature together with permanent practice will make your trading profitable and exciting.

Many of the described above sources of information can be found on the educational website of InstaForex Company – www.instafxeducation.com. This is the largest Forex library in pdf-files.

Added by Olga Vitkovskaya,
InstaForex Clients’ relationship manager

8 May mini-seminar of InstaForex Company was held in Johor

May 24th, 2010

There was the regular seminar held in Johor, Malaysia on May 8. The seminar was organized by the leading Forex broker InstaForex Company within the series of seminars 2010. Professional Forex lecturers of InstaForex Company Ismail Bin Mohamad and Asri Bin Mohamad and visitors had opportunity to discuss such topics as “Using medianline for high probability trading set up” and “Fundamental news trading”.

seminar-johor01

InstaForex educational seminar impressed by its friendly and constructive atmosphere of dialog. Everyone who visited this event on the 8th of May was satisfied with a lot of useful information.

InstaForex Company thanks all guests and participants of the seminar and invites everybody to attend our next arrangement.

Added by Dmitry Golynsky,
InstaForex
Development manager

Does the Japanese candlestick charting make sense?

May 20th, 2010

The Japanese technical analysis development was moving on during a lot of years. However, for a long time the Western world knew almost nothing about such popular technical analysis method as “Japanese candlestick charting” by means of which the Japanese traders and analysts have been running a financial analysis for more than 30 years already.

Opening the core of this kind of analysis worth saying that the Japanese candlesticks is a method which gives an opportunity to investigate the market condition for the present moment, in other words, consider the current state of the market. The Japanese candlesticks usage allows analyzing not only currency, but also stock and futures markets.

Methodically the analysis techniques based on the Japanese candlesticks is used above all for choosing the most suitable moment for making deals. However, if a trader has been practicing the Japanese candlesticks method for a long time, then the history of this method employment can introduce strategic changes into the general trading style of the trader.

Some experts of Forex market actively recommend to increase the Japanese candlesticks effect combining them with other indicators which are able to reflect the real financial markets situation strictly and clearly that will surely bring the highest results. But the analysis based on the Japanese candlestick charting can be a self-sufficient instrument for a trader. Actually, this method is more than autonomous and does not require additional “bells and whistles”.

The Japanese candlesticks have similar scheme with a bar chart.  As a rule, the Japanese candlesticks are used on the daily charts, it is caused by the fact that initially this analysis method was created and used for analyzing the day timeframe.  The meaning of this method comes from correlation of opening and closing prices during the same trading day, and closing prices of the previous trading day and opening of the next one.

Usage of the Japanese candlesticks charting together with other technical indicators as well without them will let each trader determine more accurate the current market sentiment and behavior.

More details on the Japanese candlestick charting are given in the book by John H. Forman “Candlesticks for support and resistance” where any currency player will get nuances and trade secrets of using this kind of analysis. The book describes over 50 different candlesticks and their combinations, in addition, you will know which from the technical instruments can be used with the candlesticks for achieving the most significant result, and which conversely will “dry” the effect of the Japanese candlestick analysis.

In the book you will also get the answers to absolutely all questions concerning the Japanese candles, besides, learning the book you will carry yourself with the new bounds of a technical analysis and graphically see how the Japanese candlesticks can bring success and profit on the international currency market Forex. Regardless of your experience and which market you work with: futures, share market, bonds, goods and currencies, John Forman’s book studying and further usage of these skills will make you successful on the market.

One more competent author John L. Person considering the technical analysis aspects carried out a research of the Japanese candlesticks charting in his book “A complete guide to technical trading tactics”.

You can download the books by Forman and Person devoted to the Japanese candles and other books covered all trading aspects on Forex market in “Library” section of InstaForex Company educational portal.

Added by Alexandr Demkin,
InstaForex Chief clients’ relationship manager