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If you have the penchant for watching CNBC daily, you will know that opportunity keeps on shifting from one market to another. What is market timing? Market timing is entering one market at the most opportune time and getting out when your profit targets have been met. There is always a bull market somewhere if you look hard. In other words if you look around you will always be able to find a market that is trending up or down that you can use to make money. Market timing maybe the trading method of the 21st century!

Global finance is undergoing a major shift. Money, power and influence are spreading to more places around the world. The world is moving from a North American and Eurocentric world view to one that includes Asia, South America and Africa. China, India, Brazil and Russia are the new emerging economies that have weathered this global financial crisis.

In today world, trillions of dollars get transacted online. In currency markets alone, daily more than $3.2 trillion get exchanged globally. Internet has ushered in a revolution in the global financial system. Money gets transferred around the globe at the speed of light. This is enough to create opportunity for market timing.

Successful market timing is more dependent on trading techniques. It also depends on your ability to establish positions early on in the trend and maintain those positions as long as possible to let time work for you. This is the new world where the ability to move faster in and out of trading positions and to trade markets that are rising or falling profitably is becoming increasing important to the long term investors. Don’t forget the hedge funds when we talk of long term investors. Hedge funds have the skills and resources for market timing around the globe. The buy and hold investing strategy is losing its appeal. Does buy and hold work in today’s market? If you are a traditional buy and hold investor you have been conditioned to hold to your portfolio forever.

In order to do market timing, you need to understand trading which is what market timing is all about. Whether it is stocks, options, futures, bonds, commodities or currencies around the globe, market timing is the act of entering or exiting trades at the most opportune times in any market.

If the market goes up, you go long and if the market goes down, you go short. Now if you can make money when the market is going up and when the market is going down, you have twice the opportunity to make money. Your goal in using market timing is to maximize your profit potential.

Market timing is about recognizing opportunities early on in any market. Consider timing different markets at the same time. Consider going long in one market and going short in another market at the same time. This will hedge your risk. Moving into positions with well planned strategies and monitoring the progress on a frequent basis. Market timing is not day trading. Many people try to confuse market timing with day trading.

Market timing has to do something with preparation, research and analysis. In short planning! Market timing is like swing trading and position trading. It means swing trading different markets at the same time. Swing trading can last as long as the trend continues in the market and getting out when your profit targets have been met. Market timing is about seeing the intermediate term trend which lasts for weeks or months.

In order to be good at market timing, you need to know how to trade in different markets. The good thing, most of the techniques are common. So if you know how to trade stocks, you can easily learn how to trade currencies or futures. Investors who can adapt to this new world are the ones who will have the best chances of success. What makes market timing one of the useful trading methods is that you can use the techniques to time stocks, bonds, mutual funds, futures, options, currencies, commodities or exchange traded funds!

Most of the markets are influenced by almost the same fundamental factors. Volatility in one market will definitely affect volatility in the other markets. Market timing requires knowledge of fundamental and technical analysis. You can diversify your investment opportunities with market timing. Market timing is as much a state of mind as it is a combination of trading methods.

Market timing also helps you decrease your exposure to risk. You want to stay with the dominant trend with market timing. You want to swim with the tide by buying stocks in a rising market and selling or shorting in a falling market. Get comfortable with technical analysis.

Many new forex traders all of sudden receive a margin call. Maybe they did not educate themselves properly about forex trading and started trading. Have you ever received the dreaded forex margin call? Whatever, you must be very clear about what is a forex margin call. But contrary to the popular opinion that a margin call represents that worst case scenario for the currency trader, this is far from the truth. The risk that is assumed when trading aggressively the currency markets often results in receiving a margin call. The worst case could be far worse.

If there would have been no margin call, the possibility of owing additional funds to your broker in case of a loss could not be ruled out. To owe additional funds to the broker is actually the worse case scenario. A margin call protects a trader from losing 100% or even more of the money in the trading account. A margin call is in fact a safeguard. The uncomfortable position of owing additional funds to the forex broker is largely avoided because of the existence of the margin call.

If you have been trading stocks you might have actually received a call or a text message from your stock broker that you need to add more funds to your trading account. So in stock trading, you will receive an actual call from your stock broker to add more funds to your margin account when equity is running low in your stock trading account. A margin call is not actually a physical call from your broker in forex trading unlike the world of stock trading.

This is what happens in forex trading when you get a margin call. There is no physical call telling you to add funds to your account. The trading platform software automatically closes out all the open positions and immediately realizes all losses at the prevailing market rates when a forex trader no longer has enough equity in the trading account to keep the open positions viable in forex trading. You might be thinking a cold hearted behavior of your forex broker.

Prices can move extremely fast in forex markets and because of the high leverage used, every price move is magnified. There are good reasons for automated margin calls in forex trading, although this may seem a bit cold hearted.

The forex margin call closes all open positions to help ensure that the trader does not lose the entire account or worse as a safeguard measure. The trading account can become depleted very quickly with not enough time to call for more funds when the trader’s equity runs low in forex trading.

Let’s make it clear with an example. Suppose you have $1500 in your trading account. So exactly when is a margin call triggered? This depends exactly on the number and the size of the lots being traded, the leverage chosen and the equity in the account. Suppose you use a leverage of 100:1 to trade in standard lots of $100,000.

You want to trade one standard lot of CHF/USD. That is CHF 100,000. Suppose the CHF/USD exchange rate is 1.3465. You need to convert into Swiss Francs since your account is in US Dollars. So you need $1346 to trade standard lot of CHF 100,000. This is because with a leverage of 100:1, CHF 1000 are needed to control CHF 100,000.

Suppose you are a new forex trader. You don’t know much about forex trading. However you have read that it is a great opportunity to make money. Naturally you are very enthusiastic about trading forex as quickly as possible. So you don’t know that stop losses are used to minimize downside risk in trading. You start trading without putting stop losses in place. Your trading account has $1500. The margin required to keep the trade open is $1346. Each pip is exactly equal to $10 in this case.

There are no stop losses in place. The chances are you are going to receive a margin call soon. When can you expect to receive a margin call? You will receive a margin call when your equity drops below $1346. You have $1500 equity in your trading account. Your open position will be automatically closed when you receive a margin call. That means once you lose the excess equity in your account above the margin required to trade a standard lot that is $1500-$1346= $154. Assuming that there are no spreads involved. This is equal to just 15.4 pips loss. This example will make it clear the fast moving nature of the forex market and how using high leverage can suddenly result in getting a margin call.

Rollovers represent the intersection of interest rate markets and forex markets.
When an open position from one value date or settlement date is rolled over to the next value date or settlement date, this is known as a Rollover in forex trading. Rollovers are unique to the forex markets.

Keep this in mind what you are trading is in fact the good old cash. Currency is money after all. So when you talk of money, interest rates naturally come into play. Rollover rates depend on the difference between the interest rates of the two currencies in the pair that you are trading.

You should expect an interest gain/expense on holding a currency position over time. It is similar to earning interest on a bank deposit and paying interest on a loan. It is like having a deposit in a bank account when you are long on a currency. It’s like take a loan from the bank if you are short.

Interest rate differential is the difference between the interest rates between the two currencies. You should think of the open currency position as one currency with the positive balance (the currency you are long) and one with negative balance (the currency you are short).

You should look for the base or benchmark lending rates in each country. The interest rates of two different countries apply because your accounts are in two different currencies. You can find the benchmark lending interest rates of different countries from any good financial website like the Wall Street Journal, the Financial Times, CNBC etc.

If you hold an open position past the settlement date or value date, rollovers are usually carried out by your forex broker. The smaller the impact of the rollovers, the narrower the interest rate differential! The larger the impact from rollovers, the larger the interest rate differential!

Some online forex brokers apply the rollover rates by applying the rollover credit or debit directly to your margin balance. Other forex brokers apply the rollover rates by adjusting the average rate of your open position. Rollovers are applied to your open currency position by two offsetting trades that result in the same open position.

Day traders don’t have to worry about rollovers. Rollovers do not apply for day traders who usually close their positions at the end of each trading day. Rollovers are not applied if you don’t carry a position over the change in the value date. Rollovers only apply to your over night open position carried over to the next day. Rollovers are applied to open position after 5.00 PM EST change in value date.

If you are short the currency with the higher interest rate and long the currency with the low interest rates, rollovers will cost you money. If you are long the currency with the higher interest rate and short the currency with the lower interest rate, rollover can earn you interest income.