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The Many Varieties of Forex Calculators

Forex calculators have been an integral element in the arsenal of forex brokers and traders since the beginning of time and while advanced versions at present can perform multiple calculations with multiple variables, the actual mathematics involved is usually straightforward algebra. In addition to forex calculators, forex brokers also use forex charts. All in an effort to understand what is forex.

Most popular forex calculators

Profit / Loss Calculator — This forex calculator version is the basic accounting calculation. Input parameters include: the Trading Pair; the denominating account currency; whether buy (long) or sell (short); the trade opening and closing prices; and the lot sizes. Results are given in either pips or monetary values
Lot Size Calculator — To understand the financial magnitude of a given trade, use this tool to calculate the position size in units and lots to precisely manage your risks. Correct lot sizing is key to managing your risk and to avoid excessive exposure to your account from a single trade. Input parameters include: Trading pair, stop / loss in pips, risk in percent, the account balance and the account currency
Stop / Loss Calculator — Use this calculator to determine exactly how much you stand to profit or lose when your respective stop loss and take profit levels are reached. Simply select the currency pair you are trading, enter your account currency and your position size. Included in the parameters are: the trading pair, lot size, acceptable risk in percentage-of-principal terms, the account balance and the account currency. The resulting calculation yields the maximum stop loss, in pips.
Margin Calculator — Margins allows you to buy securities by borrowing money. Thus, the margin calculator allows to compute the margin you need to hold open positions. The inputs consist of Trading Pair, leverage, account currency, and lot size.

What is Forex

Forex calculators come in variations from different forex brokers. Depending on their expertise, business model and market presence, different forex brokers will bundle their trade opportunities. Usually forex calculators are offered as inducements for trading along with forex charts. Forex charts are the key analytic tool in the beginning portion of trades wherein you decide which position to initiate. Forex charts have numerous components, including:

Time Units — Dividing your trade duration into helpful sub-units is critical in generating a meaningful chart.
Representative Graphical Elements — Enhancing the two dimensional tracking with multidimensional representation, like with Japanese candlesticks, is also of the utmost importance
Overlaying Indicators — Harnessing the computational power (if not the algorithmic subtlety) of cloud computing allows individual traders to pick and choose from among a plethora of offerings currently popular, like: Bollinger Bands, MACD (moving average convergence/divergence), Stochasitc Ocillator and more
Graphical Elements — The human tendency and ability to see patterns is aided by an innate semiotic capacity. Thus basic shapes and lines as well as more nuanced Fibonacci retracement and Gann Fan patterns help make sense of analog data patterns.

In conclusion, we have looked at the topic of forex calculators from several perspectives and found it to be an integral tool, like forex charts, for thoase trying to understand what is forex.

What is Forex Trading Used For

What is forex trading mostly used for, and how can traders and investors enhance their portfolios through the currency market, and is it really so easy?

What is Forex Trading And How It is Used

Many ask the question of what is forex trading, and how it can benefit them in their investments and businesses. Many people want to learn how to trade forex and implement this or that trading strategy to benefit from the global currency market. Forex is simply the global currency market, or otherwise known as foreign exchange market. To an investor, it is simply a mechanism for trading, through which they can buy or sell a specific exchange rate. These rates are floating freely in the market, and are depicted in forex charts. Where the forces of supply and demand determine how these rates move. Forex also helps price commodities, as many commodity prices are closely related to some local economies and their currencies. The market itself is largely decentralized through, and no central exchange exists. The Forex market has been around for decades, in the way that bankers and large corporations use it. But it was only in the late 90s that it became readily available and affordable to retail traders, and amateur traders. This has helped increase liquidity and make the market even more efficient. Which in turn helps stabilize many commodity prices and allows the consumer to get the best possible, and fairest price. This includes the goods that this consumer buys, as well as the physical foreign currency they will get wit them when visiting another country.

Where Forex is Used Most by Investors & Traders

Most traders are speculators, but many of these speculators are very serious traders who take their investment views with wisdom and determination. They make trades in order to either profit from the market, or to hedge against some market risk. All in order to protect another investment or the profitability of a physical business. This is all done through a forex broker, and these traders themselves actually make the market. This in a nutshell explains what is forex trading, and what it ‘s all about. But there is a third category of investors who pay less attention to exchange rates and more attention to interest rate differentials. These are long term investors seeking to profit from the opportunities that these differentials offer. This type of investing is known as Carry trade, and is much more difficult to do. Because exchange rate risk has to be hedged somehow, through other currencies, and there is not magic formula for doing so. Rather, the Carry trade investor works out some hedging plan, based on approximation and through making assumptions. The profitability of the Carry trade investments is made possible through the power that leverage provides.

What Are The Best Forex Signals

While no single definition of forex signals, it generally includes: suggestions for initiating trade on a currency pair, generally at a specified price and moment in time.^[1]. Signals can be generated either by a human analyst or an algorithmic Forex robot supplied to a subscriber of a forex signal service. Given the time-importance nature of signals, they are usually transmitted via tweet, email, website, SMS, RSS, or other relatively immediate delivery method. The communication channels over which forex signals are provided are evolving and with improved speeds, cloud data processing and smart-phone apps, we are on the verge of a new paradigm.

Why Forex Signals

Forex signals constitute data on a specific instrument, including recommendations with respect to the trade’s volume, position’s opening and closing details, for setting stop loss and take profit orders, and choosing an appropriate trading vessel. Using these signals protects you against unmonitored losses, thus giving you an edge in your market activities.

Signals should be understood as advisory, only. All trading decisions based on these signals should jive and be in conjunction with other available data.

What is Forex Trading

The purpose of forex signals is to empower a market trader with superior wisdom and insight, so that his activity results in profitable trades. Already, the era of big data has radically impacted the world of forex charts and the forex calculator . Traders using simplistic memory-driven hand-generated forex signals are hopelessly out-gunned by do-it-yourself algorithm home traders employing cloud-based computing technologies and cherry picking from among the endless freely-available services. The ability of big data analysis to abstract and aggregate the accumulated activity of millions of individual decision makers means that trading strategies must be continually refined to ensure that they remain unique and outside herd. If the metaphor for our era is that analysis is now finding haystacks for given needles, forex signals are those needles.

The issue of signals is even more complex because of all the levels of perception and commercial motivation of the various market participants. When you act on a signal or set of forex signals which you devised or acquired via a forex calculator or forex charts, and your trade is profitable, you might reasonably surmise that the insight you garnered and applied did, in fact, result in your success. And if another profitable trade also resulted from the same methodology and execution, then you would be even more confident in the correctness of your actions. And yet… the complexity of price determination might very well be an “unknown known” or even an “unknown unknown” (in the lexicon of Former US Defense Secretary Rumsfeld). Popularized in financial analysis circles as “The Black Swan”, the scenario is that everything is understood and proceeding swimmingly until suddenly it isn’t. This conundrum of underlying truth and causality is particularly vexing for the individual trader in our era without recourse to the apparatus and methodology of big data. At least with a “haystack” of data and analysis at the source of your determination process, a statistical logic and framework imbues your trading decisions with meaning and probabilities of success.

High Frequency Online Trading

The benefits of online trading can be enhanced when one trades at high frequency, or at least they partially extend their methods to high frequency trading.

Traders Find High Frequency Online Trading More Exciting

This is perhaps the most difficult kind of online trading, as it goes beyond even day-trading and forex news trading. Trading through a good forex broker is key, in order to be successful. High frequency means that one would have to trade almost like a scalper during some hours of the day, and like a selective day-trader during other hours. The benefits of high frequency trading is that the trader is able to profit much more than they otherwise would. So that even though the market moves say 60 pips overall for the day, the intra-day fluctuations are so many, that may add up to 100s of pips. And at least 30% of these fluctuations can be traded. These traders have different criteria for each day, and they attempt to make several $100s at least on each one. They also know which losing trades to keep open, and for how long. This is very difficult to do, but it allows them to achieve that high profitability for the day, without employing low risk to reward ratios in their trades. In fact they use high ratios, which means they are willing to risk say 100 pips to make just 10. Low risk reward ratios mean using large stop loss orders, and carrying some open losses through the day. But the probability of these losing trades coming back to break even or partial profit levels, is extremely high! Hence the $100s in daily profits is actually a realistic goal, but it requires many hours of devotion and nerves of steel, which few possess.

Known Volatility is Every High Frequency Trader’s Friend

Volatility is hard to accurately time, but generally the high frequency trader is looking for range bound trading hours. Hours when the currency pair in question will trade between some trendlines, simply going up and then down. The use of a forex calculator for figuring out LSS pivots for the day and stop loss levels is critical. Trading at high frequency means that there is not the luxury of time, and still all these numbers have to be calculated accurately. High frequency online trading is among the most difficult types of trading, in fact it cannot be taught at all. If a trader has such a skill they have learned it all by themselves. It’s something that comes naturally. Volatility alone is a very tough factor to assess, and the use of global forex time zones and LSS pivot levels and news are only the first clues one would have to use. A currency pair can still defy all these so that it trades within a range for a while but it suddenly goes out of that range and trends with momentum in one direction. That’s where most traders attempting high frequency trading and scalping lose most.

What Every Forex Trader Should Know

Every forex trader should know about market risk and how to be prepared for it. Because technical analysis does fail and will fail from time to time.

Some Key Factors Impacting Markets that Every Forex Trader Should Know

Technical analysis is generic, and is based on chart analysis and various patterns, which usually but not always, work. Every forex trader should know that technical forex signals can be totally overpowered by factors such as central bank interventions and geopolitical events. The US dollar for example can sometimes defy all technical analysis, all bearish type of signals, and rally. This is because the US dollar is not always a technical market. It is not even always a fundamentals market. It does trade as a technical and fundamental market for most of the time, but it can turn into a highly sought-after safe haven market when global unrest is high. The entire global forex converter mechanism can be affected by sudden geopolitical events, though it happens in one currency at a time. It will either be the US dollar, or some other particular currency being affected. The US dollar is most noticeably seen being affected because it has many crosses that are popular among traders, such as EURUSD and GBPUSD. But other countries’ currencies can also be affected in other ways, not in the sense of being used as safe haven currencies. Sudden central bank decisions can also make currencies defy all technical analysis. Good fundamental analysis however, if done beforehand, can predict these central bank decisions long before they happen.

What Else Can Go Wrong

Currency trading can be more difficult when a specific currency pair moves on speculation, days prior to some important economic announcement regarding either one of the two economies involved. Such moves are simply fuelled by speculation and may seem illogical and nonsensical. But regardless if it makes sense or not, when a market moves, traders watch support and resistance levels. A good forex trader does not ask too many questions, they just trade based on technical analysis, and on some broader fundamental opinion. If markets made perfect logic sense, they would be perfectly efficient and it would very hard for traders to make a profit. Another thing that can go wrong, is a firm belief that the crowd must be wrong. This is not always the case! The crowd can also be right. Any firm belief, in any indicator is actually a wrong belief. As no indicator should be used in a religiously firm way. Successful trading is about dealing with elusive goals, such as trying to catch a rainbow. When you get too close it’s all gone. But if you keep the right distance you can see it. That’s why all these indicators become useless when you try to make the most out of them, so keep the right balance.

What is CFD Trading

Contracts for Differences (CFDs) are investment instruments created to permit traders the advantages of holding Forex, Shares, Indices, and Commodity positions without taking possession (or shorting) the actual underlying instrument. Traders enter into a contract with a CFD market maker/platform at a specific price, and the change between the contracted price and the price at which it is closed is settled in cash for profit or loss. The needles expense and delay of a physical delivery of shares, for example and their registration, and any holding/safe custody charges that come with having a broker are eliminated, which saves you time and money.

Note that in trading CFDs traders have the potential to lose all or part of the capital in open positions.

CFD trading has continually grown in volume since their introduction over a decade ago. While originally focused on tradeable positions in equities, advances in technology and popular demand motivated the rapid evolution of this form to proprietary derivative financial instruments spanning the whole range of asset classes.

How to trade Forex

Today, the CFD market mirrors the larger financial universe with Forex CFDs representing the largest component. Thus, forex signals and forex charts are of great interest to CFD traders. The enormous leverage (minimal margin) commonly available (up to 400:1) on forex trades and the absence of brokerage fees are key elements in the appeals of CFDs. However, their proprietary / non-tradable nature classifies them as a “swap” under the US 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act and thus non eligible to be issued to retail customers.

The similarity between CFDs and Forex continues to grow:

Forex signals — Increasingly, forex movement is influenced by central bank governors and their bureaucratic minions. The implications of monetary policy are manifested throughout the global economy, thus increasing the overlap.
Forex charts — The basic tool in how to trade forex, forex charts, are also essential in understanding price movement in the CFD markets. After all, to understand what is CFD trading, you need to master the rules of price determination. And here, charting is a key tool. Mapping two dimensional sequential representation of price movement over time is a time-tested method to visually represent underlying prices. While far from definitive, it helps the trader to avoid mistakes and to understand trends, an essential part of trading psychology.

Example:

You decide that there exists a significant liklihood that the British Pound (GBP) will increase in value relative to the Japanese Yen (JPY) in the near future. So, instead of purchasing GBP and selling JPY in open market from banks and incurring brokerage, account management, and commission fees or using other exchange-based derivative alternatives, like futures contracts or currency options, (both of which have expiration dates) you buy GBP / JPY CFDs on a CFD trading platform. Each movement of a pip, (as an example in the price of 184.20 JPY per GBP) generates a gain or loss as if you held the underlying instrument.

In learning how to trade forex we gain a greater understanding of what is CFD trading. Looking at both forex signals and forex charts is critical.