subject: Role Of Forex Software In Formulating & Executing Forex Strategies [print this page] Foreign Exchange or Forex deals with buying and selling of currency of different countries and making money out of it. It takes place in the foreign exchange market where currencies are exchanged not just for buying and selling (by speculating the value of the currency), but also to conduct foreign trade and business (like import and export of different services and commodities and to convert the income or expense into domestic currency value to maintain parity in the books of accounts of the importer/exporter). As a result of this, Forex market is the worlds largest liquid financial market, even bigger than the share market, trading 24 hours a day. Here, the investors can also respond to the market fluctuations at any time in these 24 hours. The causes of market fluctuations may be due to the laws of demand and supply governing the Forex market, which might be influenced due to change in socio-political and economic conditions of a country.
Exchange takes place with the help of currency pairs (i.e. one currency is treated like a commodity, which is being traded, while the other currency is treated as the value as per market rate). For example, there are four major currency pairs that are usually dealt with. They are Euro and US Dollars (EUR&USD), Great Britain Pound and US Dollars (GBP&USD), US Dollars and Swiss Franc (USD&CHF), and US Dollars and Japanese Yen (USD&JPY). So if someone decides to trade USD & EUR, he/she buys Euros against US Dollars and he/she sells Euros against US Dollars. The base of forex strategies to make money is therefore to sell high and buy low or to buy low and sell high.
The method of determining the optimum time to buy and sell can be determined by Technical Analysis (which is obtained with the help of past movement of rates and data to predict the future price) and Fundamental Analysis (which is used to predict the price on the basis of the socio-political and economic condition of developed nations like the US, the UK etc.). The latter is mostly opted by experienced traders while most prefer the former way of analyzing. However, it should be noted that none of them assures 100% accuracy. So forex strategies are employed to minimize loss. Other methods include forex scalping including using Fibonacci levels for scalping forex market. Apart from that, regular trend analysis and study of currency charts before predicting form an integral part of forex strategies.
The advantage of forex is that it ensures steady and good income if investments are made correctly and even a small amount of investment is enough for the initial start-up. Transactions can be done through a home-based computer with the help of forex software. In fact, when two different currencies are traded, it does not matter what currency a person has in his/her account. The trading software automatically ensures that the exchanges and transactions are taken care of. These software programs can hence be regarded as useful tools to deal with foreign exchange, helping the trader to take better decisions, thereby minimizing loss. It also provides the scope for the trader to interact with other traders in the forex community.
While choosing the forex software, one must see that the software application helps in understanding foreign exchange including international trading, the economies involved nationally and internationally, and the application of interest rate when included in the equations. It is also important to check the encryption of these software applications. They should be equipped with 128 bit SSL encryption to protect vital financial information from getting hacked. It should come with 24*7 security features and after sales technical support service.
