Forex Tips

 All you have to do is open up a Forex account with one of the brokers like FXCM, DBFX, Forex, etc. You can do this online through their websites. Once you've funded your account... all you have to do is buy a high interest bearing currency vs. a low interest bearing currency. For instance, the Australian dollar earns about 4.75% and the U.S. dollar earns less than 0.25%. So buy buying the AUD/USD pair, you're earning 4.75% but only paying out 0.25% of that. So you're netting roughly 4.50% on the position just from the interest differential alone. Even better, you're earning interest not on the amount you put down on the trade, but on the large position you're controlling with your trade. While you may only have a few hundred dollars of your money tied up in a $10,000 trade (by buying 1 mini lot), you're earning interest on the position as if you owned the entire $10,000 position outright. Yet it only took a few hundred dollars in your account to control that position. Now that's exciting... putting up a few hundred dollars to earn interest on $10,000. I'll do that all day long! With most of the major economies yielding 1% or lower, the clear leaders in the "yield game" are Australia and New Zealand. They stand out above the rest. Japan, Switzerland and the U.S. are the lowest yielders to pair against these high yielders. And with the distinct downtrend in the dollar, it's made it the number one candidate. When the Cash Register Rings Each Day Okay, so you open your account online and you fund your account (via wire, credit or debit card, etc.). Then you've bought your first interest bearing pair... for instance, AUD/USD. So when do you starting getting interest delivered to your account? This will happen at the end of each international trading day, which is at 5pm EST. Your firm takes a snapshot of your account at 5pm EST. If you're still holding the position at that time, then your account will be credited with that day's interest on your position usually within the next hour or two. It's at that moment that you've just become the bank. Imagine earning interest 365 days a year like a bank. When you sleep, you're earning interest.

When you're on vacation, you're earning interest. When you're working... so is your money, at the same time. Once you allow the interest to stack up over the course of a year or two, you'll start to realize why some call "compound interest" the 8th wonder of the world.  The most liquid of times of day are when two markets around the world are both open at the same time. That happens twice. It happens at night, at 1 AM EST to about 3 AM EST. Thats when you have an overlap between the Asian and European markets. Then it happens in the morning from about 8 AM EST to 12 noon. Thats when the big institutional traders in London and New York are both trading.  The first thing to look at is interest rates. Currencies love higher interest rates because Forex traders are always looking for a higher yield on their trades. As FX traders pour money into a higher-yielding currency, the currencys price goes up. So if youre looking for the healthiest thoroughbred currency, check out the one with the highest interest rates first. On the flipside, currency traders tend to dump low-yielding currencies if theres nothing else to bolster the price. Thats why the U.S. dollar started to sink in 2007 when the Fed first started cutting rates. So if youre looking for the loser currencies, check out the ones with the lowest interest rates. You also want to look at a countrys unemployment, and GDP growth when youre evaluating a currencys strength. The healthiest currency will come from a country with low unemployment, and solid long-term GDP growth. The weakest currency will have rising unemployment, low or negative GDP growth. So as a trader, you typically want to pair:
y y y

High interest rate countries with low interest rate countries. Countries with low unemployment against those with high unemployment. Countries with positive GDP growth against those that have a negative GDP growth (a shrinking economy) or slower GDP growth.

Heres where it gets interesting, though...

My No. 1 Tip for Fixed Currency Trading Even though there are over 60 tradable currency pairs in the world, 90% of all daily transactions involve trading the G-7 currencies (i.e., the major currencies). And as Im sure you can guess, a significant chunk of those daily trades involves the U.S. dollar. It makes sense. Traders want to pair the dollar against other currencies because the worlds reserve currency promises to be the most liquid and readily available. However, if youre looking to pair the weakest with the strongest, it helps to cut the U.S. dollar out of your trading. A the most overtraded currency, it can be difficult to see where the dollar lies on any given trading day. Also, theres just simply more opportunity to trading non-dollar pairs (also known as cross rates or crosses). Some of the most-commonly traded crosses include: 1. EUR/JPY (euro vs. Japanese yen) 2. EUR/CHF (euro vs. Swiss franc) 3. CAD/JPY (Canadian dollar vs. Japanese yen) 4. AUD/JPY (Aussie dollar vs. Japanese yen) 4. NZD/JPY (New Zealand dollar vs. Japanese yen) 5. GBP/JPY (British pound vs. Japanese yen) And the best part is, any kind of dollar-moving event isnt going to have much impact on these crosses. This is a great way to get portfolio diversity while spreading out your risk.