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Monday, November 19, 2012

Forex Trading and the Need of Information Edge

Forex market is unique in many senses. The facts that there are no centralized exchanges showing single price quotes, no geographical limits and continuous trading make forex trading far different from trading most other financial instruments. Interestingly, forex market can’t be considered as a total commercial trading market as the major part of the trading volume is for interbank foreign exchange deals and central bank interventions to control currency exchange rates.

The interbank forex market is characterized by very large position sizes, high trading volumes and tightest bid/ask spreads that beat any broker spreads. Also this interbank market always has an information edge over retail market. For example most of the interventions by central banks to control their currency prices are covert and swift. Only the major banks who are trading against the central bank can know the bid/ask spread, trading volume and the intention of the buyer. So they will surely have an information edge over other players especially small traders who have either long or short open positions for the currency in discuss.

The need of information edge and the need of swift communication methods are always necessary in forex trading. There are always high chances of uncertainty as most of the times the retail traders won’t have any idea about the intensions of central banks or major participant banks when the trades are happening. So imminent bid/ask price changes necessitate instantaneous adjustments. Having access to up-to-date market happenings can help you in catching up the opportunities or to avoid greater risks especially you are trading greatly on margin. So when choosing the online forex broker in Dubai, one of the things you should consider is getting this information edge.

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Monday, November 12, 2012

Online Spot and Forward FX Trading Dubai

One of the major advantages that online forex brokers provide you is to trade all major foreign exchange currency pairs 24 hours a day. This type of normal forex trading is referred as spot FX trading. The word spot trading refers to be the immediate delivery of the currency; but the settlement is completed within 2 business days after the trade execution to cover all paper work and transactions.

Forward FX trading works just like futures trading. It is trading of forex currency pairs for a future settlement date. Leading brokers like Orient Financial brokers offers quotes of both outright and broken-date forward FX quotes. Forward FX trading can help traders to hedge risks, meet specific cash-flow requirements, speculative needs and the offer the ability to replace existing open spot forex trading positions with a new forward forex trading position at a new rate.

Trading with forex brokers offering both online spot and forward FX trading services in Dubai also offer you the ability to combine both markets to get better control over trades and to minimize overall trading risks. As the spot forex market has high chances of downside risk because of high leverage rates, interest rate changes, slippage and overnight position holding, using forward FX trades can be a good idea. Also using forward FX trades can give the trader ability to develop a longer-term outlook. Traders can also use options contracts for high protection and low expense.

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