Tag Archives: forex market

Information about Forex Signals

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What is a Forex Signal?

In essence, a Forex Signal is an indicator that alerts a FX trader on the nature of the market in terms of profits and losses while also giving directive guidance on whether to invest, withdraw or stay stagnant in the Forex market. Forex signals enable traders to settle on the best time possible to enter or exit a trade.

Basic Information on Forex Signals

Forex signals constitute a short message or an email which is sent through a signal system to traders. From these signals, we can obtain:

A currency pair.

An entry level – a currency value where a trader is advised to get into a market.

Take profit – a currency value where a trader is advised to leave the market with a profit.

Stop loss – a currency value where a trader is advised to leave the market with a loss.

The nature of trading currencies based on the Forex signals is shaky and one should keenly study market trends and not just rely on projections from the technical analysts. There are some exploitative people who may pose with Forex signals which entice people then quickly sink with many people aboard. This is, especially, based on the ever increasing number of con artists who pretend to be genuine analysts of the market and relevant signals to take when they are simply fake people trying to swindle you of your hard-earned money.

Three Useful Actions in a Forex Signal

Based on the above mentioned Forex signals, the three actions below emerge:

Buy action – These are signals that indicate to a person to buy a currency pair. With this action comes TARGET which signals to take profit, STOP signifying stop loss and @ which indicates entry. This type of action normally occurs in a market which is in an upward trend.

Sell action- These are signals that indicate to a person to sell a currency pair. And just like in the buy action, with this action also comes the TARGET, STOP and @ numbers. The action normally occurs when the when a market is in a downward spiral.

Standby action- These are signals telling a trader not to take any action. This generally happens when the market is in an unstable position to conduct a successful trade.

Final Pointers

The next time you receive your Forex signals, act intelligently not just based on what the signals say, but also based on professional guidance from experts in the world of currency trading.

Fixed vs. Floating Exchange Rates

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Are you interested to get acquainted with essentials of forex trading? Do you want to have your share out of this huge international money making market? If yes, then you have reached at right place because before you invest even a dollar into this huge lucrative business you must have understanding about fixed and floating exchange rates, which cause unpredictable fluctuations resulting in colossal profit or loss.

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What is the Meaning of Exchange Rate?  

Before we delve deep into comparing fixed and floating rates, it is imperative to understand the meaning of exchange rate first off. Exchange rate is rate used to exchange respective currency with another currency. It depicts the value of one currency in relation with any other currency. It acts like a standard price for specific currency you want to buy for certain use. For instance, you want to buy Egyptian pound for some reason and have dollars as your main currency then you’ll see the exchange rate which is almost 1:5.5. It indicates that you can but 5 and half Egyptian Pounds for 1 dollar only. Same rule applies for other currencies and their trading depending upon their current exchange rate.

Fixed Exchange Rates

Fixed rate is also known as pegged rate set and maintained by government’s central bank. Usually price is set against USD which is main currency, but it can be set for other major currencies as well like Euro and Yen etc.

Floating Exchange Rates

As the name indicates this rate floats or fluctuate depending upon its demand and supply. It is also known as ‘fluctuating’ or ‘self-correcting’ rate which can alter anytime during the day. This rate is determined by private markets which keep track of demand and supply. If demand of any currency decreases, it leads to expensive imports which creates extra room for local jobs and services. In this way it corrects itself automatically by changing scenario.

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Why Peg or Fix Exchange Rate for Currency?

The difference between two exchange rates is simple but here a question arises that what is the rationale behind pegging local currency when it can correct itself according to its demands and supply? The rationale behind pegged exchange rate is that:

  1. Central bank which has high level of foreign reserves is considered responsible for maintaining local currency exchange so it buys or sell it at fixed rate without any concern with fluctuating rate in private market. This thing ensures a balance in the supply and demand of local currency.
  2. Currencies are pegged to create a stable environment in local market not only to avoid unhealthy impact of changing rate in private market, but also to welcome foreign investments. In this way the investor knows the value of his investment with no fear of momentary changes in exchange rate in private markets.
  3. Pegged currency also proves helpful in lowering the inflation issue which leads towards generating demands of local currency resulting in more stability in country’s economic state.

Is It Possible to Maintain Pegged Currency in Long Run?

After this above discussion, another question comes to mind that if it is so easy to bring stability to the economic condition of a country then why we see countries experiencing financial collapse, why inflation and unemployment are major financial issues today? So the reason is that pegged currency can’t be maintained for longer time period. Sometimes government itself fails to cope with its pegged rate and then review it to change accordingly by assessing the value of influencing factors.

 

Forex Exchange Rates

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Forex is an acronym for Foreign Exchange, which involves exchanging currencies of various countries of the world either for business needs or for profit making due to the fluctuation in their values. So the rate at which one can buy or sell a currency is called exchange rate for that currency which shows its value as compared to currency being used in its exchange. This exchange rate represents the amount of currency you want to buy or sell in exchange of amount of currency you are having at the moment. For example, you want to buy Egyptian Pounds by paying in USD then you will see its exchange rate which is around 1:5.5, which means that you will get 5 and half Egyptian Pounds for 1 US dollar.

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Forex exchange rate doesn’t stay the same. It experiences continuous fluctuations depending upon various factors important in determining the value of certain currency. On the basis of these fluctuation and stability in forex exchange rate, it can be divided into a couple of categories: fixed and floating exchange rate.

 Fixed Forex Exchange Rate (Pegged)

As the term indicates, this type of forex exchange rate stays the same for longer time period and also called pegged exchange rate. Its value is set by central bank of government which is considered responsible for stabilizing demand and supply of its currency. The exchange rate is calculated in relation to USD mostly.

The purpose for keeping the exchange rate fixed, is to maintain a balance between supply and demand of a currency. Central bank sells or buys its own currency for this purpose. As it holds high foreign reserves, therefore it is convenient to absorb extra currency from forex market or supply required amount in order to keep the business running smoothly. This rate stays unaffected by ever-changing exchange rate of forex market.

Floating Exchange Rate (Self-Correcting)

Floating or fluctuating exchange rate changes many times during the day depending upon its demand and supply in forex market. These fluctuations make traders come to invest in forex business so that they can generate profit by buying currencies at lower rate and selling at higher rate. Private market not central bank is considered responsible for setting floating exchange rate.

This kind of exchange rate is also called self-correcting as it has ability to correct itself according to the changing scenario in the market. Suppose if demand for a certain currency decreases in forex market, it influences the value of imports and increases their overall cost. In such situation, the demand for local products increases to compensate the inability to invest into expensive imports. This leads towards creating employment opportunities. So the whole setup adjusts with the change in the demand or supply of currency.

 

So if you are intending to invest in forex business then you need to keep a vigilant eye over floating exchange rate which will determine the potential of profit you can generate by investing certain amount into the money making venture of forex trading.