What is the new forex trading tool
Forex - Background information on trading foreign currencies via Forex Trading
The Term forex is an artificial word that results from the abbreviation of the English term Foreign Exchange Trading. This means worldwide trading in foreign currencies, which can also be carried out by private individuals. There are more than 160 currencies in circulation around the world, the most important of which are involved in international foreign exchange trading. While forex trading used to take place on special exchanges in the participating countries, Today's trade has shifted to the Internet. Forex trading is particularly suitable for experienced investorswho are aware that they are trading with the world wide forex can also suffer financial loss.
Nowhere in the world is more money turned over every day than in the foreign exchange market. This is where the major global investors and traders trade, including central banks and governments. For example, daily sales in April 2019 were $ 6.6 trillion.
German consumers who go on holiday in a country outside the European Union (EU) exchange euros for the local currency in Germany or in their holiday destination. This cash in foreign currency is called sorts (the conversion into US dollars can be done with this dollar to euro converter, for example). Foreign exchange is book money that is in an account. Here, too, there is an exchange of one currency for another currency as soon as a foreign exchange trade is carried out. In order to make Forex trading easier and to give traders a quick overview of changes in exchange rates, the exchange rates are given as a pair. The quotation EUR / USD 1.1282 means that a forex trader receives 1.1282 US dollars for one euro. In this example, the euro is the base currency, while the US dollar is the quote currency (see the dollar rate page for more information).
If the rate changes by one pip, i.e. by 0.0001, the new rate EUR / USD 1.1283 or 1.1281 results. The change by one pip relates to a standard lot, which corresponds to 100,000 currency units of the base currency. In addition to standard lots, forex brokers also offer trading Mini lots (10000 currency units of the base currency) or Micro lots (1000 currency units of the base currency). For currency values with two places before the decimal point, such as the Japanese yen (JPY), one pip means a change of 0.01. The termPip stands for “percentage in point” and means the change in an exchange rate in the relevant decimal place.
In forex trading, traders can bet on rising and falling prices. Trading is only possible for private market participants through a forex broker. Only banks, financial institutions, states and large companies trade directly in foreign exchange and also process the position among themselves over the telephone.
Otherwise, forex trading takes place online, which means that private traders can also participate from their PC. In some forex forums, the trading hours on the foreign exchange market are given as 7 x 24 hours. However, this is not entirely true because of forex trading from the point of view of European retailers from Friday evening to Sunday evening and does not start again until the beginning of the week in Australia. During these trading hours, 24-hour trading in foreign currencies is possible due to the different time zones. However, most buying and selling take place when European and American forex traders are active. The Forex market is therefore after Central European Time (CET) Most active between 11 a.m. and 6 p.m..
Knowledge and analysis tools
In order to decide in which direction a foreign exchange rate is going, investors should have a good knowledge of the financial market. Interest in daily political and economic events around the world is also beneficial for successful Forex trading. For this reason, a good forex broker offers its customers the latest economic and political news. In addition, many forex traders trust special analyzes with the help of which they try to predict the next price movements of a currency. The dealers differentiate between two different types of analysis:
- Technical analysis
- Fundamental analysis
Technical analysis is also known as chart analysis. The analysts look at the historical course of a currency rate, which is graphically displayed in a chart. They assume that certain developments will repeat themselves and will therefore also occur again in the future. In addition, according to Charles Dow, the developer of technical analysis and the namesake of the Dow Jones Index, certain price patterns point to a trend reversal. By recognizing the changes in good time, a trader can set a stop loss order or a take profit order and thus achieve a profit or at least avoid a loss.
The fundamental analysis draws on the most important economic data of the underlying asset and its environment. The analysts use the data to determine the intrinsic value of the underlying asset. The intrinsic value is also referred to as fair or appropriate, whereby the value does not have to correspond to the market value formed from supply and demand.
Most forex brokers offer their customers charts that can be used to perform technical or fundamental analysis. Beginners in forex trading can test the effectiveness of the various analyzes via a demo account.
Simple to use interface and intuitive for beginners. But also with power for the advanced trader: - TradingView has many chart tools that are required for evaluating current trends and trading ideas. With real-time data and graphics, traders can research from anywhere; no further programming is necessary. Some brokers also offer the integration of TradingView Charts into their own program. Link: https://twitter.com/tradingview
Market development and volume
The turnover in foreign exchange has been increasing for years, as can be seen in Figure 1.
Fig. 1: Global foreign exchange turnover: net-to-net basis, daily averages in millions of US dollars. Source: bis.org
The volume traded on the FX market has been increasing continuously for years. Foreign exchange is traded in an over-the-counter market where brokers / traders negotiate directly with one another, so there is no central exchange or clearing house. The largest geographic center of trade is the United Kingdom, mainly London. In April 2019, trading in the UK accounted for 43.1% of the total, making it by far the most important center for foreign exchange trading in the world. Due to London's dominance of the market, the quoted price of a particular currency is usually the London market price. For example, if the International Monetary Fund calculates the value of its Special Drawing Rights every day, it uses London market prices at noon on that day. Trade in the United States accounted for 16.5%, Singapore and Hong Kong for 7.6% and Japan for 4.5%. It is questionable whether London will retain its market dominance after Brexit.
Table 1 shows the volumes of foreign currencies traded daily worldwide via FX options.
Tab. 1: Global daily turnover via FX options according to bis.org
|currency||FX Options [billion USD]|
The dominance of the dollar is evident. Its share is around 28% of total foreign exchange turnover.
Data origin of the Bank for International Settlements
The foreign exchange market activity has been examined every three years since 1986 and the market activity of OTC interest rate derivatives since 1995. The three-year survey is coordinated by the BIS under the auspices of the Market Committee (for the Foreign Exchange Share) and the Global Finance System (for the Interest Rate Derivatives part). It is supported by the G20-approved Data Gaps Initiative.
This statistical release concerns the foreign exchange turnover portion of the three-year 2019 survey, which took place in April and which involved central banks and other authorities in 53 countries (see page 15). They collected data from nearly 1,300 banks and other traders in their jurisdictions and reported national aggregates to the BIS, which then calculated global aggregates. Revenue data is reported from the points of sale of the reporting traders regardless of where a trade is booked and is reported on a non-consolidated basis, including trades between affiliates that are part of the same group.
The offer of a free demo account is part of the customer service of all recommended forex brokers. However, the traders must note that some brokers only offer the demo account for new customers or that the duration of the free use is limited. Nevertheless, the account with a fictitious credit is recommended for learning Forex trading or for testing new trading strategies. However, the demo accounts often do not offer all the trading tools that the broker makes available in real trading. In addition, the displayed exchange rate development often does not correspond to the real exchange rate. Instead, users are presented with a profit that they cannot make in real forex trading. In this way, some forex brokers try to find new customers and convince them of the profit opportunities in international currency trading.
For example, comdirect offers a free forex demo account here. The savings banks, such as the Sparkasse Hannover, on the other hand, usually do not offer such trading. Customers will find the right contact person in S Broker, who also offers a free demo account.
Trading account = Forex account
Each forex broker decides individually which one Minimum amount he demands from his customers on their trading account. Depending on the broker's place of business, the trading account is in euros or in another currency, mainly in US dollars. The minimum amount is between 5 euros or US dollars up to 50,000 euros or US dollars. The deposit is made in one of these ways:
- Via credit card
- Via the online banking service provider Neteller / 1-Pay
- Via the e-money institute Skrill (former name Moneybookers)
- Via the Russian online payment service WebMoney
- Via GiroPay
- By transfer from the current account
- Via the online payment system SOFORT Überweisung
- Via the electronic payment method paysafecard
The Payout is usually processed in the same way that the money was deposited. While deposits are booked free of charge, some providers charge a fee for withdrawals or only allow a limited number of withdrawals per month. In addition, in many cases the trader must have a minimum balance on his trading account before he can request a withdrawal.
The term Forex account is rarely used, more common are live accounts, micro accounts or trading accounts.
Since the various forex brokers are always looking for new customers, first-time registrants often benefit from a bonus that is paid to their trading account and is available for trading. Other providers provide free seminars and online advice for new customers or offer free online training with an experienced dealer.
Forex trading is an international business, which is why mainly brokers with a seat abroad offer their services on the Internet. But there are also some German providers with whom foreign exchange traders can rely on supervision by BaFin and on German deposit insurance for the credit on their trading account.
The few German Forex brokers include:
- FXFlat Wertpapierhandelsbank GmbH based in Ratingen
- direktbroker.de AG as a wholly owned subsidiary of trading-house.net AG based in Berlin
- for institutional clients: 7orca Asset Management AG is an established investment boutique that manages more than EUR 2 billion. The independent, quantitative asset manager offers institutional investors solutions for the management of exchange rate risks and for recording volatility as an alternative source of return. As a leading specialist in the management of the FX risks of its institutional clients, 7orca uses both FX futures and FX OTC forwards.
Forex broker with German branch but domicile abroad
In addition to the German providers Forex brokers are also active whose headquarters are in other European countries, but who have a German branch. This means that these brokers are subject to deposit insurance in their home country, but their activities on the German market are monitored by BaFin. The following forex brokers can also be reached via their German branches:
- AvaTrade is based in Dublin and has a German branch in Frankfurt am Main
- GKFX Financial Services Ltd. with headquarters in London and German branch in Frankfurt am Main
Other brokers, such as the Cypriot provider eToro, have a German website that is tailored to the needs of German Forex traders. eToro and other forex brokers such as Zulutrade or Ayondo also offer social trading. In this collaborative forex trading, traders can replicate other forex traders' trades in hopes of benefiting from another forex trader's experience.
CME as the market leader
Nowhere in the world are more futures contracts traded than on the CME. The Chicago Mercantile Exchange (CME), based in Chicago, Illinois, also offers a wide range of FX products.
The CME Group offers the world's largest regulated foreign exchange market, covering more than 40 currency pairs in G10 and EM. The average daily volume for FX futures was USD 125.9 billion in March 2020 and the record number of contracts was traded on March 12 as more and more clients spot CME products to complement their existing OTC FX activities , Forwards, swaps and options. More information in this white paper.
According to their own information:
Home to the world's largest regulated foreign exchange market.
Whether you want to hedge your currency risk or take advantage of changes in exchange rates, you should consider CME FX futures. For over 45 years, the CME Group has defined, developed and diversified access to foreign exchange markets via futures for clients around the world almost around the clock.
Customer support is especially important
Besides the individual pages, there is above all the Customer support the broker important to the trader. Therefore, German currency traders should pay attention to whether the provider has either offers a free hotline or at least a telephone number in Germany as well as German-speaking customer support and technical support. In addition to telephone support, customer service, which can be reached by e-mail and online, as well as live chat are among the offers of most brokers.
So that beginners in trading foreign currencies can familiarize themselves with this special form of investment, they should look for a broker who explains the process of a trading transaction in detail on his side. Often belong Webinars or the chat with a successful trader also to the help offers of the brokers. In addition, a recommended provider has various trading tools on offer, which he makes available to his customers for a fee or free of charge.
Trading software - MetaTrader 4
Many brokers use the forex trading platform MetaTrader 4, which provides the following tools for forex trading:
Real-time push rates, i.e. exchange rates in real time that update themselves
- Free charts with real-time rates
- Trade from the chart
- Analyzes from the chart
- Own watch lists
- Custom trading screens
- Set price alerts
- Trade evaluations through data export
The exchange rates do not necessarily have to be real rates on the foreign exchange market. If a forex broker works as a market maker, he sets the trading prices for his customers himself. The brokers use the real exchange rates as a guide, but they charge a premium or a discount on the buying and selling rates. For this range, the participants use the English term spread. The traders do not pay any trading commission to the broker, who instead earns on the spread between the bid price and the ask price. In a forex broker comparison, which traders can carry out online, the spread of the individual providers is usually given.
The opposite of market makers are ECN brokers. ECN stands for Electronic Communication Network and means that the broker passes on the purchases and sales of his customers directly to the foreign exchange market. Traders can watch their traded positions in the broker's order book. An ECN broker does not calculate spreads as it cannot influence the exchange rates. Instead, forex traders have to pay a commission for every position traded.Experienced forex traders use an ECN broker for scalping. With this trading strategy, the trader sets very tight stop loss limits for many small trading positions. As a result, a speculator hopes for numerous small profits that add up to high earnings.
Advantages & opportunities versus risks
Investing in international forex trading can make a quick profit. Especially during active trading hours, when numerous traders from all over the world are active in the foreign exchange market, purchases and sales take place within very short periods of less than a minute. Some traders offer 60-second trading on Forex as so-called binary options. By using a lever, a forex trader has to invest a smaller amount than when buying real values. With a suitable development of the exchange rates, a high profit is possible within a short time. Since most forex brokers also offer apps for smartphones or tablets, trading is possible from anywhere. In this way, traders ensure that they can monitor their foreign exchange position while traveling or on the move and can react quickly to changes in exchange rates.
The necessary quick reactions to changes in the foreign exchange market also show the risks and disadvantages of Forex trading:
- High risk of loss
- Possibly additional payment obligation
- Time consuming
- Debit interest possible for overnight position
- Good knowledge of financial topics and the current world economy required
Total loss and obligation to make additional payments
Next to the Total loss of the capital employed, it can also be in the context of some forex brokers Obligation to make additional payments come to a margin call.
When looking for a suitable broker, traders should therefore make sure that the broker excludes the obligation to make additional payments and closes positions that are lossy on their own initiative. The option of placing a stop loss order or a take profit order should also be part of the broker's offer. Nevertheless, there is a risk of total loss with every currency trade.
If a trader does not close a position before midnight, debit interest may accrue for the overnight position, which is debited from his trading account.
Forex traders need to plan a lot of time trading forex and keep an eye on their trading positions. Trading tools support the trader in setting limits or reacting in good time in order to avoid losses. Beginners should practice forex trading first and familiarize themselves with the basics of forex trading in webinars and online forums.
Tips for beginners in forex trading
Generally recommended for trading on the Forex market are characteristics of the investor such as Patience and strong nerves. Within a few moments, a dreamed-of profit can literally vanish into thin air. For this reason, successful forex trading requires flexible and quick thinking on the part of the investor. No other financial market is as fast moving as the Forex market. The investor should always keep this in mind in order to be able to apply a successful strategy in forex trading.
The use of so-called forex signals is of great help for every investor. The signals take into account various social, political and economic factors that are responsible for the stability of a currency. With such forex signals, investors are shown the best possible times for buying and selling various currency pairs.
What should you know?
In general, numerous platforms on the Internet offer the opportunity to actively trade on the Forex market. However, the conditions of the individual providers can differ significantly from one another in this area. For this reason, a comparison of the individual providers by the investor can be described as meaningful in any case. In this way, the investor can find out which ones, for example Minimum deposit amount a certain provider in forex trading asks or what the maximum leverage is. This is understood to be the leverage that is characteristic of the genre. With a leverage of 1: 400, the individual can therefore trade with a capital of 100 euros for 40,000 euros. This explains the high possible returns that are realistic in Forex trading.
Beginners in forex trading are advised to open a non-binding and free demo account before real capital investment. Here, the individual can gain initial experience in trading without having to worry about a real loss of the capital invested. A free demo account is ideal for every beginner in Forex trading and should be used accordingly.
Collateralisation for OTC derivatives: initial margin for derivatives that have not been cleared
With the Delegated Regulation (EU) 2016/2251, binding standards for risk reduction and the collateral to be deposited for FX transactions were put into effect on January 4th, 2017.
When the next stages of the uncleared margin rules come into effect, there will be an economic driver to better forex clearing.
There is almost unanimous agreement among foreign exchange market participants that unclear margin rules (UMR) are the main catalyst for the introduction of central clearing for OTC foreign exchange derivatives. This conclusion may seem obvious in and of itself, given that the higher volumes of FX clearing didn't really begin until 2016, in line with the first phase of UMR, and that those volumes (and the number of participants in the cleared ecosystem) were in the In 2017 and 2018.
Collateral Addendum for Initial Margin 2020 / Collateral Addendum for Initial Margin 2020. Source: Bankenverband
BaFin: collateral regulations for OTC derivatives
REGULATION (EU) 2019/834 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of May 20, 2019 amending Regulation (EU) No. 648/2012 with regard to the clearing obligation, the suspension of the clearing obligation, the reporting obligations, the risk reduction techniques for non-compliance with a central counterparty cleared OTC derivative contracts, the registration and supervision of trade repositories and the requirements for trade repositories
Taxes: Forex is not a betting business but is subject to the withholding tax
Contrary to previous beliefs, Forex trading is not a betting business. Profits and losses from trading are included in the exchange income, which will be subject to a flat-rate withholding tax as investment income at least until the end of 2020. For the trader this means: he does not need to worry about the transfer of profitable profits, as the broker automatically transfers the withholding tax to the tax authorities.
Federal Ministry of Finance - Individual questions on the flat rate withholding tax; New publication of the BMF letter GZIV C 1 -S 2252/08/10004: 017DOK2015 / 0468306
Value added tax or sales tax
For traders who pay as a private person, there is no VAT on trading transactions. Incidentally, this also applies to income from trading in Bitcoins, which, according to the Federal Ministry of Finance (source here), is exempt from sales tax.
FX are often traded as options. These are terminated derivatives. The options that expire daily are published daily, for example, at the Depository Trust & Clearing Corporation (DTCC). The appointment is known as the "New York Cut" and takes place at 10am NY time.
Basically there are call and put options. The most popular types of options are:
Double no touch
Trading FX Gold - Situation & Perspectives
Gold had reached an all-time high on August 6, 2020 at 2026 US dollars per troy ounce. In the meantime, prices are falling again in August.
The strength of the US currency pushed the gold price down to USD 1925 an ounce in early trading on Thursday, 08/21/2020, before later stabilizing around USD 1945. Gains at the start of the week's trading hit the 2015 USD resistance. After this decline, forex traders are wondering which level is best to buy gold again. In general, the factors of its gains are still there, and any decline is a buying opportunity to benefit from the rebound. Therefore, the 1937, 1920, and 1900 support levels may be best for trading this week.
The US dollar index DXY, which measures the dollar's performance against a basket of six major currencies, rebounded after hitting its lowest level in more than two years in the previous session, with cases increasing, albeit at a modest rate Tempo.
Analysts believe sentiment towards gold will remain very bullish in the medium to long term due to the extremely loose monetary policies of central banks around the world.
The minutes of the Federal Reserve meeting on August 20, 2020 stated: “The participants generally agreed that the prospects for further significant improvements in the labor market will depend on a comprehensive and sustainable reopening of companies. In turn, the reopening will depend largely on the effectiveness of health measures to limit the spread of the virus. The task force expected Congress to adopt additional fiscal stimulus measures, but these were delayed as the two political parties vie for advantage ahead of the November presidential election. "
At the July meeting, US Federal Reserve officials decided to keep interest rates at zero and maintain $ 120 billion in monthly purchases of US Treasuries and mortgage-backed securities. Fed chairman Jerome Powell said the central bank "isn't even considering raising rates." In their discussions, Fed officials noted that uncertainty about the economic outlook has increased since their last meeting in mid-June.
Richmond Federal Reserve Board Chairman Thomas Parkin said in his remarks after the minutes were released that "uncertainty is of great concern to economic actors". Parkin added to the National Economists Club workers "look frozen in place" saying that some business leaders struggle to find workers even when the unemployment rate is above 10%. ”
According to the minutes, "several" Fed officials said additional monetary easing measures may be needed to strengthen the economy. Some said strong financial support is essential.
04/23/2020 Foreign exchange trading can sometimes go wrong for central banks: The Swiss National Bank (SNB), which is spoiled by its success in investing, posted a loss of CHF 41 billion in the first quarter of 2020. The SNB speculates with a high amount of billions in foreign exchange, shares, gold, etc. The losses mentioned occurred on the FX market.
Here you can find converters for foreign exchange:
Converter Swiss Francs
Currency converter pound euro
BaFin - company database. You can check whether the broker has a license here: Link
Bank for International Settlements (“BIS”) - Less Turnover in Foreign Exchange Markets: Causes and Consequences. source
Federal Criminal Police Office - BaFin and BKA warn against rip-offs in investments on the Internet
Bundesbank - Forex trading customers of the Bundesbank can buy and sell euros for the following currencies on site: AUD, CAD, CHF, CZK, DKK, GBP, HKD, HUF, JPY, LTL, NOK, NZD, PLN, SEK, SGD, USD , ZAR.
European Systemic Risk Board, 2017 - Revision of the European Market Infrastructure Regulation April 2017
www.globalfxc.org - The FX Global Code ("Code")
Jagerson J., Hansen SW., 2011: All About Forex Trading McGraw-Hill Professional, June 17, 2011 Retrieved July 13, 2012
BnP Paribas - initial margin for uncleared derivatives: what is it? link
Consumer advice center - online trading: recognize dubious trading platforms
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