The practice of trading commodities is known as futures trading. Experience combined with patience can make such a transaction very lucrative. It involves the trading of tangible items, like silver, gold, oil or even crops. This practice is based on your ability to predict the future price of a commodity. Companies and individuals alike make investments in futures trading. The wisest way to begin futures trading is to set your financial goals and conduct a well-planned research, before you get into it. Consider hiring a professional broker because even though it may be initially expensive, the expertise of the broker will help you to avoid the common novice mistakes.

Future trading endeavors can either be very beneficial or utter failures. Everything depends on how smart your moves and decisions are. You can be on your way to success, once you get an idea of the operations involved in this trade.

These are a few points to keep in mind:

- Remember that the prices at which the commodity futures are sold is not determined by the commodity exchanges. Prices are established on the demand and supply conditions. If the sellers are more than the buyers, the prices will decrease and vice versa. They are also determined by the buy and sell orders.

- Futures markets are considered clearing houses for the current demand and supply information. Buyers and sellers of financial instruments, agricultural commodities, petroleum products and metal meet in these markets.

- The primary purpose of a futures market is to provide an efficient method to manage the price risks.

- Hedgers and Speculators are the two groups of futures traders.

- Hedgers: They place their interest in underlying commodities and try to avoid the risk included in the change of the commodity prices. You can be protected against the fluctuations that take place in market prices by hedging. Transferring the risk to a professional risk taker is involved. For instance, if you are a manufacturer, you can protect yourself from the fluctuations in the price of raw materials by hedging in the futures market. Hedging includes hedge sale and hedge purchase. You can buy and sell futures of the same quantity, as a protection against the risk in price change, while you still hold the stocks.

- Speculators: They predict market moves and buy commodities of no practical use to them. They purchase these commodities ‘on paper’ and make a profit out of it.

- If you do not have the required experience or resources, it is advisable for you not to attempt speculating or predicting the market. Future performance results cannot be based on the results of your past performance.

- Futures contracts are traded on a futures exchange. They are standardized contracts that help in the buying and selling of a certain commodity, at a certain pre-set price and date. This contract gives the right to buy and sell, unlike the options contract that does not.

The advancement in technology and electronic communication has introduced new and better tools for futures trading. However, you could end up losing thousands of dollars if you do not execute the procedures involved correctly.

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. Using a hypothetical Forex investment, this article shows you how to calculate profit and loss in Forex trading.

To understand how the exchange rate can affect the value of your Forex investment, you need to learn how to read a Forex quote. Forex quotes are expressed in pairs and usually in five-digit numbers. In the following example, your pair of currencies are the U.S. Dollar (USD) and the Canadian Dollar (CAD). The Forex quote, USD/CAD = 170.50, means that one U.S. Dollar is equal to 170.50 Canadian Dollars. The currency to the left of the "/" (USD in this example) is referred to as base currency and its value is always 1. The currency to the right of the "/" (CAD in this example) is referred to as the counter currency. In this example, one USD can buy 170.50 CAD, because it is the stronger of the two currencies. The U.S. Dollar is regarded as the central currency of the Forex market, and it is always treated as the base currency in any Forex quote where it is one of the pairs.

Let's go now to our hypothetical Forex investment to show how you can profit or come up short in Forex trading. In this example, your pair of currencies are the U.S. Dollar and the Euro. The Forex rate of EUR/USD on August 26, 2003 was 1.0857, which means that one U.S. Dollar was equal to 1.0857 Euros, and was the weaker of the two currencies. If you had bought 1,000 Euros on that date, you would have paid $1,085.70.

One year later, the Forex rate of EUR/USD was 1.2083, which means that the value of the Euro increased in relation to the USD. If you had sold the 1,000 Euros one year later, you would have received $1,208.30, which is $122.60 more than what you had started with one year earlier.

Conversely, if the Forex rate one year later had been EUR/USD = 1.0576, the value of the Euro would have weakened in relation to the U.S. Dollar. If you had sold the 1,000 Euros at this Forex rate, you would have received $1,057.60, which is $28.10 less than what you had started out with one year earlier.

As with stocks and mutual funds, there is risk in Forex trading. The risk results from fluctuations in the currency exchange market. Investments with a low level of risk (for example, long-term government bonds) often have a low return. Investments with a higher level of risk (for example, Forex trading) can have a higher return. To achieve your short-term and long-term financial goals, you need to balance security and risk to the comfort level that works best for you.

There are plenty of people trading in the forex, and why not, there are so many reasons to do it. By trading in the forex demo you are able to start by using a free demo on real time, you have a leverage of 400:1, or another simple reason is just getting into the action and trading with international currency. However, even when you practice in real time testing services and other strategies you can still fail. Using the trading demo may not be enough; the trader must know what he is doing.

There are three things that all forex traders must remember if they are to succeed: practice, reinforcement and repetition. For this you will need to refine your strategies and you will also need skills. Therefore, I recommend that traders include forex simulators in their strategies in order to save money and help themselves start as winners and not as losers.

Compared to a demo that provides functions in real time, forex simulators allow traders to upload, review, and view historical data any time. This way, traders can fast forward and rewind and recognise valuable trading signals. This means that traders can better test their knowledge of the forex and therefore improve their trade and change, so they can stay in the pace of the ever changing conditions found in the forex market.

Forex simulators are an essential tool for traders. Simulators allow a high level of training within a few days of work as traders can pause, rewind, fast forward and play around with whatever knowledge they have acquired. A five-minute timeframe can be set-up to whatever chosen area. Simulators allow you to get snapshots, use any indicators you wish, and even keep journal trades in order to refine strategies.

First, the Figures

If you cast your minds back to last month (or take a look at our account of the October 2006 report) you will remember that the headline figure was much worse than expected. However, monthly revisions to the data from August, a better than expected unemployment rate and annual Non-Farm Payroll revisions (very few were aware of these annual revisions) overshadowed the headline data. To be honest this is fairly rare because the headline figures generally take centre stage but it was a good example of why traders should pay attention to all data releases and be aware of any potential conflicts that may arise. For example, strong revisions to previous data conflicted with September’s poor headline figure.

After hearing that it is fairly rare for the headline figure to be ‘out-influenced’ you may be surprised to read that the same occurred with the November report. We had further revisions to the August data from 188K to 230K. There was also a revision to September’s data; the extremely low figure of 51K was revised up to 148K. The unemployment rate was a further surprise coming in at 4.4%, a five year low! This positive data was enough to offset the disappointing headline figure of 92K versus expectations of 125K.

Price Action

By all accounts the price action caused by the November report was very similar to what we saw last month. As you would expect the headline figure is released a fraction of a second before any of the revisions, this caused a rapid spike higher in the EURUSD rate. This spike reached a high of 1.2792 and reversed immediately. Revisions and better than expected unemployment data became the focus causing the dollar to rally to a low against the Euro of 1.2682. Picture: Articles.TradingTheNews.NonFarmPayrollsNov2006.htm

Some Simple Economics

Why does positive employment data influence the foreign exchange market the way it does? Basically individuals with jobs have a greater amount of disposable income than those who are unemployed. If the unemployment rate falls it means that more people have disposable income to spend on consumer products and services. This creates an increase in demand that causes inflationary pressure on prices. At the same time companies expand their operations to meet the increase in demand but they now have a smaller pool of labour to choose from. This means that it costs more to hire and train the right staff, again causing inflationary pressure. The FOMC attempt to control inflation and keep it at a healthy rate so the US economy does not boom only to burn itself out and head into a crippling recession. To control inflation the fed uses interest rates. If inflationary pressure increases beyond the Fed’s threshold then they will raise interest rates thus making the dollar more attractive. At the time of writing the FOMC isn’t expected to raise interest rates further until mid 2007. However with encouraging employment data and the basic economic understanding that it will cause inflation you can see why there was such a strong demand for dollars post Non-Farm Payrolls

Statistical Trading consists of using statistical tools on historical price data in order to improve trading returns. The idea behind statistical trading is that if a trader can find even a slight statistical edge, then the expected return over a large number of trades will be positive. We'll talk about exactly how to calculate expected return below, but for now let's just concentrate on what it means to get a statistical "edge."

I'm talking about the same kind of edge that a casino owner or an insurance company has. This is a statistical edge based on the law of large numbers. The casino doesn't know if a particular spin of the roulette wheel will be a win or a loss, but they know that after 1000 spins they will very likely be richer. Their edge is simple to describe using the game of roulette as an example. The player has a 1/38 chance of winning on any given spin, but will only receive 36 times their money if they win. So for 3,800 spins, the player will win 100 of them on average, yielding $3,600. But the player will lose the other 3,700 spins at a dollar each for a loss of $3,700. So what's the average take for the house? It's $100 for every 3800 spins, or a little under 3 cents per spin. It adds up...and all other casino games of pure chance (these don't include poker or blackjack which can involve some skill) are variations on this theme. That's why casinos get rich and gamblers go broke.

Insurance companies get rich in pretty much the same way. The company has no idea if a particular person will die this year, but they do have a pretty accurate idea how many people out of 1,000,000 policyholders with a given profile will die this year. Let's say that statistically the death rate of a given class of people (males over 55, smokers, and in moderate health for instance) is 4% so that we expect 40,000 to die this year. If each policy pays $10,000 for a death, then the company expects to shell out $400 million dollars in benefits...wow! So how much should the company charge in premiums for those one million policies each year then? Well how about $500 each? That gives the company $500 million in revenues for an expected $400 million benefit payout, leaving $100 million for salaries, expenses, profits and whatever. That's their statistical edge.

This type of article is one of the most fun for me to write because it's really just a romp through the imagination. Since the 1990's, I have made a hobby out of exploring new and varied ideas for analyzing the markets, and this is a great opportunity to dust off some of my old notes, publish some of those ideas and perhaps get some feedback on them. I'm also looking forward to using some of the following concepts in my ongoing research work on FOREX price behavior. So put on your "what if..." hats and let's get started!

Market Models - Old & New

Most traders are familiar with the two basic schools of market analysis that we call Fundamental Analysis and Technical Analysis. In the 1970's, members of the academic community proposed a new model of the market known as the "Efficient Market Hypothesis". This is more commonly known as the "Random Walk Theory" and basically said that the first two schools of thought were both wasting their time. In response to the Random Walk Model, other academics put forth an even newer theory of how markets work called "Behavioral Finance". These are all examples of comprehensive explanations of what factors drive market prices. Here's a brief summary of market models, some of which are only in their infancy:

Fundamental: Market prices are driven by tangible events and conditions in the real world, such as earnings, sales, management, natural disasters, weather, economic conditions, geopolitical tensions and so forth.

Technical: Market prices are driven by what prices have done in the past. As traders observe these past and present price movements, their expectations about future prices lead to feelings of greed and fear which in turn create buying and selling pressures.

Random Walk: Current market prices are efficient reflections of all known fundamental and technical information, so we can discern nothing about future price movements. The factors that cause future price movement will be so varied that such movements can only be random in nature.

Forex Trading, also technically referred to as Foreign Exchange Trading, is the financial market of the world. Forex consist of selling and buying currencies on the market. Forex generally used by businesses and entrepreneurs looking to conduct international business and transactions.

To give you an example of Forex Trading, let us say that the United States is selling products to Canada. Canada would have to convert their money, the Canadian Dollar (CAD) into the United States Dollar (USD) to perform the transaction. So, essentially, what is happening is that Canada is buying USD currency with CAD currency for the conversion.

How can I trade in the Forex Market?

The Forex Trading market, works very similar to our stock market, with the exception that it deals with currencies. In order to trade on the Forex market, you must have a broker. Just like with the stock market, not just anyone can enter the market for trade. The Forex Market does differ from the stock market in that there is not a centralized exchange or clearinghouse to trade from. You must have a Forex Broker in order to take part in the trading.

How can I make a Profit?

To make a profit you will need to obtain a Forex broker specialized in the area. In some cases, in less serious trading cases, some people will use their local bank to handle the trade. However, if you are looking to hedge risks, convert receipts or profit at all in the Forex market, the first thing you need is a broker.

It takes a large amount of experience to begin earning large profits in Forex trading. Some people enjoy a thirty-percent return on their investments each month. To do this you must learn everything you can about Forex trading and speak with your broker about investment strategies. The internet can be a valuable tool in this area as well, there are many online Forex trading courses where you can learn just what it takes to become a competitive, profitable investor.

If you've just begun trading Forex, you probably want all the help you can get. Though Forex trading can be very lucrative, you'll want a Forex winning system that will work for you. There are several Forex killer systems available just as there are in marketing, sales, and other forms of business. You must find the Forex strategy that works for you, and develop good trading habits for long-term success. Here's a brief Forex winning guide for getting started.

Develop a Forex Trading System that You Can Stick With

Not only do you need a Forex strategy - you also need a system. You can have the best strategy in the world, but if you don't do it systematically, you could lose. Create a schedule of when you will do your Forex trading. Then, create a budget to manage your money coming in and going out. Just like operating any business, you'll have good and bad times. Stay with your Forex trading strategy through up-times and slumps for the best results.

Develop a Forex Trading Plan in Advance

Before the Forex market opens, you should already have a plan as to how you will trade. Don't get caught up in the moment. Carefully plan your investment as if you were making a big decision such as buying a home or a car. Even if the Forex trading amount seems small, treat it as if it were a million dollars. It could turn into that amount one day.

Expect Small Losses

If you plan to do Forex trading for the long haul, expect and accept small losses. They will occur no matter how well you know the market. A Forex winning system is one where you are prepared to accept the small losses in hopes of acquiring something greater in the future.

Be Patient

Remember, steady and slow is the key to any long-term Forex success. Don't sit staring at the quotes all day long! Take a break, enjoy life, and don't see a loss as the end of the world.

Avoid Forex Trading Strategies You Don't Understand

When developing a Forex winning strategy, avoid using methods you don't fully understand. Use helpful Forex guides and tutorials, but beware of Forex scams. There are many out there today - especially email scams. Be leery of companies who want to do your Forex trading for you. Develop a plan with the help of Forex experts, but please do your own trading or choose a reputable broker.

If you look at some websites around the net you’d think that day trading was some kind of disease or something. So much bad press surrounds it that you would thing that anyone who tries it must be nuts! So what exactly is day trading anyway?

That’s easy. Day trading is simply entering a trade on or after the opening of the day’s trading session and exiting a trade on or before the close of the day’s trading session. So logically the length of a day trade is no more than a single day.

Does day trading have risks? Of course it does. In fact all trading and investing has risks. Day trading became popular when the availability of real-time market data expanded to the masses. It appears that many trader became more fascinated with some of the fast-paced action rather than with the actual bottom line. It is true that some traders need more action than others and day trading may provide a way for those traders to satisfy their need for trading action.

Day trading is a method of trading and as such it is a tool. Now this may or may not be the right tool for you to use to build your fortune, but that depends on far too many factors for us to go into in this brief introduction.

A Few Day Trading Advantages

No over night positions - With the volatility of the markets constantly changing there are people who definitely prefer to be flat (holding no open positions) at the end of the trading day.

Rapid Feedback – Day trading gives you rapid feedback which allows you to see how well your trading system works in a relatively short period of time. Please keep in mind that making a fortune in the market is not a short-term proposition although the time frame you trade in may be.

A Few Day Trading Disadvantages

Typically increased transaction costs - Transaction costs are typically higher because trading frequency is typically higher.

FOREX is an international online currency exchange that was established in 1971. It is now the premier foreign currency exchange market in the world, with an average daily trading volume reaching as high as one and a half trillion. Three types of traders make use of FOREX-banks, individuals, and corporations. When they have need to exchange currency online, FOREX is the number one place to do it.

There are two basic reasons to do your online currency trading with FOREX. First and foremost, FOREX trading is done to make a profit. Depending on the market, a bank, corporation, or individual can make a windfall profit through FOREX trading. Another reason to do currency trading is to get into a secured position by eliminating trading risks arising from foreign exchange rate movement. In other words, FOREX online trading can help a bank, corporation, or individual to weather changes in foreign exchange rates by already having the foreign currency they need on hand.

FOREX is unique in terms of trading exchanges. Rather than the typical exchange like Wall Street or the Tokyo Exchange, FOREX is an entirely digital foreign currency exchange system. The rate of foreign exchange changes so quickly that traders must be able to react to market shifts within seconds. Online FOREX trading makes this possible by eliminating the classic stock broker. Rather than trading telephone calls and trying to catch a great deal by shouting and waving papers, FOREX trading is accomplished with a touch of a button on the computer.

The ease of online FOREX trading appeals to many, both businesses and individuals alike. All the information one needs to get started with FOREX trading is available online. FOREX exchange rates are continually updated on many websites. It is simple to buy one currency when it is low and sell it when it is high. However, what goes up can also come down, and new traders on the FOREX online markets must be prepared for losses. Still, despite the risks, more and more people are participating in online FOREX trading every day.

When a trader wants to open a forex account with any forex broker, there are options to choose from full service, discount and introducing brokers.

A full service broker offers all the standard services, such as investment advice and price quotes. They also keep traders updated with all current trends. With a discount broker, the trader has to take care of all buying and selling decisions. An introductory broker is a person that introduces new customers to the full service brokers. The full broker then provides full support in managing their accounts. They earn brokerage on every customer they introduce.

An introductory forex broker deals with futures contracts and commodities. The ranges of services provided are the same as that of a full broker. Futures trading deals with trading of treasury bonds, stock indexes and foreign currencies. Speculation in futures trading is on the rise with the availability of technology and services. Today, traders prefer to opt for a fully managed account with the brokers.

Introductory forex brokers are generally, existing traders who have solid experience and sound knowledge of the forex market. They can enhance their knowledge by managing other people?s accounts. They form a significant fraction of the workforce of many brokerage companies.

These brokerage companies offer traders the option of joining them as introductory brokers, and provide full support to set up their offices. Introductory forex brokers are generally provided with full back office support. They are also given access to training and workshops that the company conducts for its prospective customers.

Introductory forex brokers are presented with extensive tips and current trend updates and analysis to help their traders do well in the market. Total support is provided to these introductory brokers in order to establish a successful business.

Money can be made or lost on the Forex (foreign exchange) market, just like the stock exchange. With the proper trading education, the investor learns how to buy and sell at the right times, using various methods to achieve one's goals.

The investor is, in most instances, looking for higher interest rates to receive a greater rate of return on their investment, and adjusting the interest rate is a method used by a central bank to ensure continued interest to trade by investors.

The following are brief explanations of different types of currency trading:

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Forward transaction: To decrease risk, forward transactions are often sought on the Forext trading market. In this type of transaction, money changes hands at a predetermined future date. Transactions are set up by the buyer and seller in terms of days, months, or even years. Regardless of the circumstances on that future date, the transaction closes.

Futures: Similar to forward transactions, foreign currency futures also involve standard contract sizes and maturity dates. Standardized and traded on an exchange for this purpose, the average contract is roughly three months. Interest amounts are usually included in these types of transactions.

Swap: The swap is probably the most common type of forward transaction. Two parties exchange currencies for a predetermined length of time. They also reach an agreement on when that swap will reverse - at a later date. Swaps are not contracts and the transaction does not take place through an exchange.

The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not contracts and are not traded through an exchange.

Spot: As indicated by its name, a spot transaction is for a much shorter duration - two days. A "direct exchange" between two currencies, spot transactions involve cash rather than contracts. Interest is not included.

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Though easy to understand in theory, it is most advisable that the potential investor learn everything there is to know about trading prior to making their first successful trade.

The world currency market is a highly fluid market. Conditions, positive and negative, within countries has impact on the rate of exchange for that given currency at any given time. Learning to properly trade in any exchange market helps increase the odds of the investor's success. Forex trading education should be of the highest quality, with ongoing support and mentoring. Practicing one's trading skills in a safe environment provides an excellent training education ground before one decides to jump into any trading arena.

With the advent of technology, it has become possible for new and small investors to start currency trading. These investors do not have the huge capital that a conglomerate or an MNC (Multi-National Company) has. Therefore, such small investors are given an option of opening a mini forex account.

Mini-Forex Brokers allow investors to open their forex accounts by putting down a comparatively smaller down payment. The minimum requirement for actual forex trading is $100,000. Mini forex brokers may accept contracts as small as $10,000. Also, the margin in real forex trading is 1%, where as mini accounts may operate at around 0.5%. Many mini forex accounts can be opened with a deposit as low as $100.

A mini-forex broker offers the investor a quick and inexpensive way to trade from the comfort of home day and night. All the specifications remain the same, except that these trades are operated from a mini forex account.

For beginners, many online websites of these brokers offer demo or trial accounts that help the investor practice trading skills. These accounts also help increase the understanding of the functioning of the real time forex market.

Mini-forex brokers often guide their customers regarding the best trading options that could yield the most profit. The major factors to consider while choosing a mini forex broker are feedback from other traders about the broker, if the broker has insured his client's funds and the amount of commissions charged.

A trader's success in forex trading depends on the information they possess. Brokers keep traders informed of market fluctuations, which help them to take maximum advantage of the forex market.

If you are an aspiring Forex trader then you should be aware that there is a lot to learn about this huge market. Fortunately, there are many places where you can find out the information you need to help you become a successful foreign currency investor. Check online or in local bookstores and you will see there is a wealth of information on the topic.

One of the main benefits of trading Forex is that the market is open 24 hours a day. This means that investors are able to respond to any change in political and economic situations all over the world. This means that those interested in analyzing Forex based on fundamentals rather than technical analysis are helped greatly here.

The Forex market is very dependent on the smallest changes in world economies and political situations so if you are going to be profitable you need to be able to understand these nuances and how they should affect your trading. Additionally, an understanding of the overall market dynamic is important. Be careful also to only listen to sources of information that you are confident you can trust. As with the stock market you may find there are people trying to influence your trading with little information to back up their claims.

Probably the first thing you should do if you are still a novice is to read a good book on the subject. Examples of books you might be interested in are Trading in the Global Currency Markets by Cornelius Luca and The Disciplined Trader: Developing Winning Attitudes by Mark Douglas.

Once you have built up a good foundation of knowledge I would advise to delve into the Internet for some more information. The only problem with using the Internet here, though, is that the Internet is flooded with phony courses and systems promising to make you rich quickly. So, I would avoid paying a lot of money for any information as it is usually available for free.