The world of financial freedom

International financial markets offer unique opportunity of extraction a significant profit. Being a backbone of leading economies, financial markets regulate the whole process of world trade beginning from aluminum to oil and even cocoa. An integral part of global financial markets is transactions with foreign exchange cash on the Forex, trading with such financial tools as shares, bonds, commodity and financial futures.

Trading volumes are enormous. Daily trading turnover only on Forex – an international currency exchange market - accounts for 4 trillion USD per day. This daily turnover exceeds the total cost of shares which change their owners at the world stock markets during the whole year. The opportunity of obtaining prompt and unlimited profits using these tools is the reason why many businessmen prefer Forex and commodity markets on the platforms of “slow-speed” stock markets. In accordance with reasonable and safe mechanisms of risk control, trading on the global markets can become the basis for a long-term financial success.

Forex market is an interbank market established exactly in the 1970s of the last century when international trading switched from fixed to floating exchange rates. In this regard the rate of one currency relatively to another one determines by the most obvious way – by the exchange ratio between them which both parties agree with.

Strictly speaking, Forex is not a “market” in traditional sense of the word. It has not got a specific place of trading as stock market has, for example. Trading is executed by means of telephone and computer terminals simultaneously in hundreds of banks all over the world. Another advantage of the Forex market from the investors’ point of view is that Forex operates 24 hours a day, and the currency exchange does not stop during the whole working week. There are dealers willing to buy or sell the currency practically in every time zone (i.e. in London, New York, Tokyo, Hong Kong, Sidney and etc.). While the stock market discontinues trading at the end of the day, then resumes it only at the following morning.

Strictly speaking, Forex is not a “market” in traditional sense of the word. It has not got a specific place of trading as stock market has, for example. Trading is executed by means of telephone and computer terminals simultaneously in hundreds of banks all over the world. Another advantage of the Forex market from the investors’ point of view is that Forex operates 24 hours a day, and the currency exchange does not stop during the whole working week. There are dealers willing to buy or sell the currency practically in every time zone (i.e. in London, New York, Tokyo, Hong Kong, Sidney and etc.). While the stock market discontinues trading at the end of the day, then resumes it only at the following morning.

There are three main types of operations:

• Operations of Spot type, where the date of delivery is the 2nd working day after the date of making deal.
• Forwards transactions where the delivery time may range from several days to several years.
• Forwards transactions where the delivery time may range from several days to several years.

First of all it should be mentioned that currency speculations refer to the type of margin transactions which are not regulated by controlling body as SEC and the amount of margin or rate of leverage defines only between a client and that bank or brokerage firm which provides an access to Forex. The amount of the margin depends on actually the sum of clients trading margin and it usually accounts for 1:50 or 1:100. That is, depositing a pledge 2000$ and having a leverage of 1:100, a client can make a transaction with the amount equivalent to 200.000$.

Depending on various trading, economic and other indexes, interest rates, central bank policies, time of day, preferences and expectations of exchange speculation participants, on variety of different reasons, quotations, that is currency prices, are in the constant motion. The dealer’s task is to manage defining of the currency price change direction and buy currency, if the price rises, or sell the currency, when the price falls, and then execute back transaction to get the profit.

The key to successful trading in the global Forex market is being guided by such aspects of the investing process as:

• fundamental analysis
• technical analysis
• risk-management
• psychology

Fundamental analysis implies the interpretation and estimation of major economic indexes, which appear in the news published by informative agencies and bodies of governmental statistics. Fundamental indexes are published at the stated earlier dates and time, as investors and traders are aware of it from specially compiled calendars. Meanwhile, it is usually given the last value of the index, the average one, expected at this time, as well as the variance from the maximum to the minimum expected value. On the basis of this data an experienced trader can prepare himself for the release of the index. Usually, traders try to close all open positions or at least reduce its volume to the moment of publishing a significant fundamental indicator so that unexpectedness will not be able to affect considerably the trader’s account.

Technical analysis carries out in order to determine the price motion and time for execution of the deal. Using technical analysis we can detect the current direction of price dynamics. The options are the following:

• upward motion
• downward motion
• flat

Determine the validity of the trend:

• short-term trend
• long-term trend

Estimate the period of the trend:

• beginning of the trend
• maturity of the trend
• completion of the trend

Estimate the amplitude of price fluctuations in the current direction (volatility):

• a weak change of course
• significant change of course

Determined these components of the price dynamics, we can, with some confidence, buy or sell the analyzed instrument. Awareness of technical and fundamental analysis basic foundations influence only on the percentage of successful transactions in total volume of operations. But you can have a wonderful result for the ratio of successful and unsuccessful deals, and with that to be in constant loss. For solving exactly this issue the risk-management exists

Determined these components of the price dynamics, we can, with some confidence, buy or sell the analyzed instrument. Awareness of technical and fundamental analysis basic foundations influence only on the percentage of successful transactions in total volume of operations. But you can have a wonderful result for the ratio of successful and unsuccessful deals, and with that to be in constant loss. For solving exactly this issue the risk-management exists

Skills in analyzing of the Forex market and a reasonable trading tactics are necessary but not sufficient conditions for well-being of investors at the financial market. They still need to understand the psychology of market participants, their motivation and driving force that ultimately determines the understanding of the Forex market. All positive and negative qualities of the trader as a person are displayed in a kaleidoscope of quick change of market events and sometimes provide critical result of trading.

Narrow- minded and weak, self-confident and hesitating, indifferent and slow, all these “financiers” are condemned to become victims of the market. Knowledge of his own positive and negative characteristics may assist to avoid destruction. If in addition the trader learns how to appraise the psychological state of the market and behavior of the market crowd, his/her chances for success dramatically increase.

We have considered only the basic features linked with trader’s activity at the financial markets. This activity is interesting and multifaceted; it allows everyone to find their way to financial freedom, and maybe to a different way of life.