Monday, December 13, 2010
Man United vs Arsenal Goals + Highlights 13-12-2010
Man
United
vs
Arsenal
Goals
+
Highlights
13-12-2010
manchester
gunners
Saturday, December 11, 2010
Currency Carry trade — let the interest rates do the work
Experience shows that the most important driver of currency trends is the interest rate differential of central banks. Many financial strategies attempt to capitalize on this knowledge, but the most basic and widespread strategy is the carry trade. In this article we’ll take a look at the basic aspects of this strategy.
The carry of an asset is the return gained by holding it. For instance the carry on a Treasury bond is the interest received. The carry of a bar of gold held at a bank safe is negative, since the owner gains no positive return, but has to pay the bank a fee in return for the perceived security of the asset. Let us note that “carry” is unrelated to the speculative appreciation or loss on the asset value, but is the merely the opportunity cost of owning the asset, positive or negative. In the case of currency trading, the carry is the interest return on the position as it rolls over to the next day. By shorting a currency with a low yield, and paying the negative but negligible carry return, and buying one with higher yield, the trader aims to make a profit which is then multiplied by leverage. The most popular pairs for carry trading are: NZD/JPY, USD/TRY, AUD/JPY, AUD/USD, EUR/JPY and BRL/USD. There are other, more volatile, less liquid pairs that are offered by various brokers, but the beginning trader can at first confine his activities to the most liquid ones above.
Before moving on, we should note here that there are two kinds of situations that lead a central bank to maintain high interest rates, and only one of them constitutes the ideal conditions for the carry trade. These two situations are not in fact independent, but to make matters simpler for the forex trader, we will examine them as if they were. In short, central banks raise rates in response to the risk of both inflation and capital shortage. In the case of capital shortage, the central bank aims to stem capital flight out of a nation’s financial system, and it raises the main interest rate to lure investors and speculators to deposit funds in the nation’s banks. In the case of inflation, the central bank raises rates because there is too much money floating around in the economy, and by raising interest rates it aims to make the cost of borrowing higher, squeezing liquidity out of the system, contracting money supply, slowing the economy down and reducing the risk of inflation.
Of these two scenarios, the trader should only be interested in the inflation-induced one where capital flight is not a problem for the foreseeable future. Attempting to carry trade in an environment where interest rates are going up because of capital flight and panic is an extremely risky endeavor, and should be avoided as much as possible, unless the trader knows what he is doing, is very knowledgeable about the financial status of the country, and is comfortable with the risk he’s taking and the capital he allocates. Not only does capital flight increase the frequency and duration of volatility, but it also has the nature of a feedback loop, in which the situation deteriorates with great speed, and with little warning.
Carry trades depend on the principle that the interest rate differential between two currencies can be amplified by the successful usage of leverage, and that during periods of low volatility, the amplified profits can be compounded and reinvested to create massive returns over the longer term. If you have any experience with currency trading, you are already aware that the carry of an unleveraged account is usually minuscule, and it’s not possible to achieve meaningful returns unless you are willing to wait for a number of years. By utilizing leverage the carry trader aims at quicker profits, and justifies his choice on the premise that he’s always on top of his brief with respect to market developments, and will not be caught in the dark when there are periods of serious, but usually temporary shock and panic.
Since higher yields also attract capital and cause the currency to appreciate against its competitors, the returns are not limited to the leverage-enhanced interest gains that the carry account accumulates. The permanent gain in interest income actually allows the account to react to currency price fluctuations better by adding an interest income generated buffer zone to absorb them. Nonetheless, our general suggestions on sensible practices are valid in carry trading too: leverage higher than 10 is not really advisable, and one should never risk more than his risk capital.
The carry trade is sometimes advertised as a trade based on fundamental analysis in that higher interest rates indicate healthier economic growth, while steady capital flows reflect the underlying strength of the higher yielding currency. Nonetheless, on closer examination, we may not be very convinced by this argument. We know that the carry trader will long high-yield currencies such as the Turkish Lira, or the Australian dollar, and short those such as the Japanese yen, or the Swiss Franc. What do we notice in this type of currency allocation? First of all, many of the lower yielding currencies are reserve currencies as a result of their higher technological advancement and status as financial centers. Secondly, because nations raise interest rates, in many cases, to attract capital, they are likely to suffer higher volatility at times confusion and crisis. Third, the majority of high-yield currencies are issued by emerging markets where political instability is more frequent than it is among more advanced nations.
These observations should alert us to the fact that the carry trade sometimes entails trading against the fundamentals of the currency pair. Buying the currency of a nation with large deficits can hardly be said to be a safe and sound practice, but it may be profitable if there are too many people engaging in it. Similarly, shorting a currency backed by healthy surpluses is not safe under usual circumstances, but government policies, market behavior, and the general economic conditions may, at least on a temporary basis, reverse this rule. The carry trader follows the trend, and in that sense this method is more related to technical than fundamental analysis. There’s nothing wrong with that per se, but it is wrong to have false confidence based on the misleading association between high interest rates and economic strength.
Finally, we should remember that the carry trade is a directional bet. The trader basically forms his opinion, and acts in accordance, without giving much attention to the aspects of hedging or diversification. Since, at least during the past decade, the major carry trade pairs such as USD/TRY, NZD/JPY, GBP/CHF, or EUR/JPY all reacted in a highly correlated manner to fundamental shocks, an account that consists mostly of positive carry generating pairs cannot be thought to have diversified successfully. It is advisable that the trader either keep his leverage low, or hedge through the addition of some negative carry pairs into his portfolio, whichever he finds more comfortable.
The currency carry trade reached the bubble stage over the period between 2001-2008. As Japanese and Asian savers, tax haven-based large hedge funds, and other investors from all walks of life participated in this lucrative activity, at one point the amount of money invested was estimated as high as 1 trillion US dollars. Today the carry trade is still alive and well, but at a quite smaller scale than in the past as a result of the well-known global economic turmoil of 2008. Some of the highly leveraged players such as the aggressive hedge funds have been wiped out during the oil collapse and the successive waves of deleveraging that followed it, but those who were quick to cash out and realize their returns did indeed leave with tremendous profits. And of course we should not forget the massive gains registered even before the financial crisis began in the autumn of 2007. The carry trade did indeed create millionaires of those who were prudent in their choices, and relatively quick in their reactions.
Here are a number of principles that the carry trader can keep in mind:
The carry of an asset is the return gained by holding it. For instance the carry on a Treasury bond is the interest received. The carry of a bar of gold held at a bank safe is negative, since the owner gains no positive return, but has to pay the bank a fee in return for the perceived security of the asset. Let us note that “carry” is unrelated to the speculative appreciation or loss on the asset value, but is the merely the opportunity cost of owning the asset, positive or negative. In the case of currency trading, the carry is the interest return on the position as it rolls over to the next day. By shorting a currency with a low yield, and paying the negative but negligible carry return, and buying one with higher yield, the trader aims to make a profit which is then multiplied by leverage. The most popular pairs for carry trading are: NZD/JPY, USD/TRY, AUD/JPY, AUD/USD, EUR/JPY and BRL/USD. There are other, more volatile, less liquid pairs that are offered by various brokers, but the beginning trader can at first confine his activities to the most liquid ones above.
Before moving on, we should note here that there are two kinds of situations that lead a central bank to maintain high interest rates, and only one of them constitutes the ideal conditions for the carry trade. These two situations are not in fact independent, but to make matters simpler for the forex trader, we will examine them as if they were. In short, central banks raise rates in response to the risk of both inflation and capital shortage. In the case of capital shortage, the central bank aims to stem capital flight out of a nation’s financial system, and it raises the main interest rate to lure investors and speculators to deposit funds in the nation’s banks. In the case of inflation, the central bank raises rates because there is too much money floating around in the economy, and by raising interest rates it aims to make the cost of borrowing higher, squeezing liquidity out of the system, contracting money supply, slowing the economy down and reducing the risk of inflation.
Of these two scenarios, the trader should only be interested in the inflation-induced one where capital flight is not a problem for the foreseeable future. Attempting to carry trade in an environment where interest rates are going up because of capital flight and panic is an extremely risky endeavor, and should be avoided as much as possible, unless the trader knows what he is doing, is very knowledgeable about the financial status of the country, and is comfortable with the risk he’s taking and the capital he allocates. Not only does capital flight increase the frequency and duration of volatility, but it also has the nature of a feedback loop, in which the situation deteriorates with great speed, and with little warning.
Carry trades depend on the principle that the interest rate differential between two currencies can be amplified by the successful usage of leverage, and that during periods of low volatility, the amplified profits can be compounded and reinvested to create massive returns over the longer term. If you have any experience with currency trading, you are already aware that the carry of an unleveraged account is usually minuscule, and it’s not possible to achieve meaningful returns unless you are willing to wait for a number of years. By utilizing leverage the carry trader aims at quicker profits, and justifies his choice on the premise that he’s always on top of his brief with respect to market developments, and will not be caught in the dark when there are periods of serious, but usually temporary shock and panic.
Since higher yields also attract capital and cause the currency to appreciate against its competitors, the returns are not limited to the leverage-enhanced interest gains that the carry account accumulates. The permanent gain in interest income actually allows the account to react to currency price fluctuations better by adding an interest income generated buffer zone to absorb them. Nonetheless, our general suggestions on sensible practices are valid in carry trading too: leverage higher than 10 is not really advisable, and one should never risk more than his risk capital.
The carry trade is sometimes advertised as a trade based on fundamental analysis in that higher interest rates indicate healthier economic growth, while steady capital flows reflect the underlying strength of the higher yielding currency. Nonetheless, on closer examination, we may not be very convinced by this argument. We know that the carry trader will long high-yield currencies such as the Turkish Lira, or the Australian dollar, and short those such as the Japanese yen, or the Swiss Franc. What do we notice in this type of currency allocation? First of all, many of the lower yielding currencies are reserve currencies as a result of their higher technological advancement and status as financial centers. Secondly, because nations raise interest rates, in many cases, to attract capital, they are likely to suffer higher volatility at times confusion and crisis. Third, the majority of high-yield currencies are issued by emerging markets where political instability is more frequent than it is among more advanced nations.
These observations should alert us to the fact that the carry trade sometimes entails trading against the fundamentals of the currency pair. Buying the currency of a nation with large deficits can hardly be said to be a safe and sound practice, but it may be profitable if there are too many people engaging in it. Similarly, shorting a currency backed by healthy surpluses is not safe under usual circumstances, but government policies, market behavior, and the general economic conditions may, at least on a temporary basis, reverse this rule. The carry trader follows the trend, and in that sense this method is more related to technical than fundamental analysis. There’s nothing wrong with that per se, but it is wrong to have false confidence based on the misleading association between high interest rates and economic strength.
Finally, we should remember that the carry trade is a directional bet. The trader basically forms his opinion, and acts in accordance, without giving much attention to the aspects of hedging or diversification. Since, at least during the past decade, the major carry trade pairs such as USD/TRY, NZD/JPY, GBP/CHF, or EUR/JPY all reacted in a highly correlated manner to fundamental shocks, an account that consists mostly of positive carry generating pairs cannot be thought to have diversified successfully. It is advisable that the trader either keep his leverage low, or hedge through the addition of some negative carry pairs into his portfolio, whichever he finds more comfortable.
The currency carry trade reached the bubble stage over the period between 2001-2008. As Japanese and Asian savers, tax haven-based large hedge funds, and other investors from all walks of life participated in this lucrative activity, at one point the amount of money invested was estimated as high as 1 trillion US dollars. Today the carry trade is still alive and well, but at a quite smaller scale than in the past as a result of the well-known global economic turmoil of 2008. Some of the highly leveraged players such as the aggressive hedge funds have been wiped out during the oil collapse and the successive waves of deleveraging that followed it, but those who were quick to cash out and realize their returns did indeed leave with tremendous profits. And of course we should not forget the massive gains registered even before the financial crisis began in the autumn of 2007. The carry trade did indeed create millionaires of those who were prudent in their choices, and relatively quick in their reactions.
Here are a number of principles that the carry trader can keep in mind:
- Follow all the rules of sound money and risk management. Carry trade is just another aspect of currency trading, and all the rules of the latter are valid here too.
- Carry trades are very sensitive to periods of insecurity and confusion. Anything that threatens stability and GDP growth is likely to be detrimental to the carry trade, even if the relationship is elusive at first glance. Hurricane Katrina caused a lot of disruption even to non-USD based carry trades, and the difference between stability and instability is often only a function of trader psychology.
- Do your research and understand the economy of the currency which you trade. Are you comfortable with the nation’s deficits, its development strategy or the risk level it poses to your portfolio? Manage your leverage in accordance.
- Since we desire to minimize the impact of short term fluctuations on our portfolio, the interest bearing positions must be open for months, at the very least. The carry trader must have a long term vision in order to avoid the temporary impact of volatility on the account.
- Analyzing the historical volatility of the high-yield currency, examining the usual speed and range of its reactions to important economic events of the past can be very helpful in determining the stop-loss point of the trade. For instance, during the period of 2000-2007 the Norwegian Kroner, despite its fundamental strengths, was prone to react in somewhat stronger percentage terms to news shocks and market volatility in comparison to the behavior of other currencies. Similarly, the Turkish lira, while stable most of the time, could be extremely volatile in reaction to banking sector problems. The trader should make sure that he is prepared for such periods, at the very least on a mental basis.
- The trader should be aware of developments of international scale. The health of the carry trade, volatility, and liquidity of the market all strongly depend on the health of the global economy, and the phase of the business cycle. Carry trades can enter long, deep periods of liquidation in response to global shocks, as in the aftermath of 1998 Asian crisis, or the turmoils of 2008. It is therefore a good idea to be up-to-date with the fundamental developments.
On a concluding note, let us remind you that the carry trade is a proven long-term strategy that has the potential to create spectacular returns for the patient, impassionate and diligent trader who is not afraid of realizing profits or taking losses when events, backed by fundamental analysis, dictate that he do so. The carry trade is a trend following strategy, and requires little sophistication from the trader in order to be successful. But it is very important to have a clear idea on what you expect from your carry trading account. Are you confident about your analysis that you’re ready and able to ride out temporary, but severe shocks in return for long term gain? Or are you holding the position overnight to realize short terms returns and exit with quick profits or losses? Your responses to these questions, along with your analysis of the global economic environment, should guide your choices with respect to this popular, proven and profitable trend-following strategy.
- The trader should be aware of developments of international scale. The health of the carry trade, volatility, and liquidity of the market all strongly depend on the health of the global economy, and the phase of the business cycle. Carry trades can enter long, deep periods of liquidation in response to global shocks, as in the aftermath of 1998 Asian crisis, or the turmoils of 2008. It is therefore a good idea to be up-to-date with the fundamental developments.
- Analyzing the historical volatility of the high-yield currency, examining the usual speed and range of its reactions to important economic events of the past can be very helpful in determining the stop-loss point of the trade. For instance, during the period of 2000-2007 the Norwegian Kroner, despite its fundamental strengths, was prone to react in somewhat stronger percentage terms to news shocks and market volatility in comparison to the behavior of other currencies. Similarly, the Turkish lira, while stable most of the time, could be extremely volatile in reaction to banking sector problems. The trader should make sure that he is prepared for such periods, at the very least on a mental basis.
- Since we desire to minimize the impact of short term fluctuations on our portfolio, the interest bearing positions must be open for months, at the very least. The carry trader must have a long term vision in order to avoid the temporary impact of volatility on the account.
- Do your research and understand the economy of the currency which you trade. Are you comfortable with the nation’s deficits, its development strategy or the risk level it poses to your portfolio? Manage your leverage in accordance.
- Carry trades are very sensitive to periods of insecurity and confusion. Anything that threatens stability and GDP growth is likely to be detrimental to the carry trade, even if the relationship is elusive at first glance. Hurricane Katrina caused a lot of disruption even to non-USD based carry trades, and the difference between stability and instability is often only a function of trader psychology.
Monday, December 6, 2010
What is Forex?
Forex, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another. FXCM provides foreign exchange for the purpose of investor speculation. The investor wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies changes in favor of the investor, whether from market news or events that take place in the world. This market of exchange has more daily volume, both buyers and sellers, than any other in the world. Taking place in the major financial institutions across the globe, the Forex market is open 24-hours a day.[1].
To explain the global effect on the Forex market, there are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin. These Forex markets are followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts its trading day again. This example shows that you are no longer limited to trading using the comparatively short trading day offered by U.S. markets only.
Foreign exchange is one of the few true 24-hour markets. When trading Forex, clients enjoy unparalleled liquidity 24 hours a day. In many futures markets, however, the overnight access available to traders is simply window dressing. The lack of liquidity and restrictions on what types of orders a client can place make trading and protecting positions a nightmare.
A good example is the Globex market. While the Globex market is only closed for a 15 minute period each day, the liquidity available after the open outcry market is closed in Chicago is normally very low. Spreads are wider and the ability to place larger orders is non-existent. Because of this, most volume traders are forced into trading the exchange instead of physical market overnight. The EFP market is the spot market priced in futures pricing. EFPs, however, come with additional fees and are not available from an electronic interface. Electronic access, speed, no fees and unmatched liquidity, 24-hours-a-day makes spot Forex the choice for the foreign currency trader.
Risk management factors into the two major schools of thought that exist surrounding the analysis of the FX market: fundamental analysis and technical analysis. Fundamental analysis focuses on underlying economic conditions and indicators - for example economic growth rates, interest rates, inflation, and unemployment. Technical analysis uses historical prices and charts to predict future movements in prices.
Though there is a debate over which school of thought is the more accurate, accuracy is really a function of the time frame used. Short-term traders prefer to use technical analysis because these traders focus their strategies primarily on historical price action. Long term trading is more suited to fundamental traders as they analyze a currency's proper current value as well as future value.
Like all financial products, FX quotes include a "bid" and "ask". By quoting both the bid and ask in real time, FXCM ensures that traders always receive a fair price on all transactions. As in any traded instrument, there is an immediate cost in establishing a position. For example, USD/JPY may bid at 131.40 and ask at 131.45; this five-pip spread defines the trader’s cost, which can be recovered with a favorable currency move in the market.
Mini accounts were designed for those new to online currency trading. There is a smaller deposit required to open mini account and trading sizes are 1/10th the size of a regular account. The smaller trade size enables traders to take smaller risks. The Mini account were intended to introduce traders to the excitement of currency trading while minimizing risk.
Unlike the equity market, there are no restrictions on short selling the major currency pairs. Profit potential exists in the currency market regardless of whether a trader is long or short, or which way the market is moving. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market. As a cautionary note, to profit from a trade you must be right about the market direction (up or down) or you will lose money.
1.1.1 Forex vs. Stocks
Historically, the majority of the general public has viewed the securities markets as an investment vehicle. In the last ten years securities have taken on a more speculative nature. This was perhaps due to the downfall of the overall stock market as many security issues experienced extreme volatility because of the irrational exuberance displayed in the marketplace. The implied return associated with an investment was no longer true. (If indeed it ever was.) Many traders engaged in the day trader rush of the late 90s only to realize that, from a leverage standpoint, it took quite a bit of capital to day trade and the return, while potentially higher than long-term investing, was not exponential. After the onset of the day trader rush, many traders moved into the futures stock index markets where they found they could leverage their capital greater and not have their capital tied up when it could be earning interest or making money somewhere else. Like the futures markets, spot currency trading is an excellent vehicle for pattern day traders who desire to leverage their current capital to trade. Spot currency or Forex trading provides more options, greater volatility and stronger trends than currently available in stock futures indexes. Former securities day traders have an excellent home in spot foreign exchange (Forex). [1]1.1.1.1 No Middlemen
Centralized exchanges provide many advantages to the trader. However, one of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded will cost them money. The cost can be either in time or in fees. Spot currency trading does away with the middlemen and allows clients to interact directly with the market-maker responsible for the pricing on a particular currency pair. Forex traders get quicker access and cheaper costs.[1]1.1.1.2 Buy/Sell programs do not control the market
How many times have you heard that "fund A" was selling "X" or buying "Z"? Rumor had it that the funds were taking profits because of the end of the financial year or because today is "triple witching day", all as an explanation of why this stock is up or the market in general is down or positive on the session. No matter what your broker says, the stock market is very susceptible to large fund buying and selling and it is not uncommon for a fund to run a particular issue for a few days. In spot currency trading, the liquidity of the Forex market makes the likelihood of any one fund or bank to control a particular currency very slim. Banks, hedge funds, FCMs, governments, retail currency conversion houses and large net-worth individuals are just some of participants in the spot currency markets where the liquidity is unprecedented .[1]1.1.1.3 Analysts and brokerage firms are less likely to influence the market
Have you watched TV lately? Heard about a certain Telecom stock and an analyst of a prestigious brokerage firm accused of keeping its recommendations, such as "buy" when the stock was rapidly declining? . No matter what the government does to step in and discourage this type of activity, we have not heard the last of it. IPOs are big business for both the companies going public and the brokerage houses. Relationships are mutually beneficial and analysts work for the brokerage houses that need the companies as clients. That catch-22 will never disappear. Foreign exchange, as the prime market, generates billions in revenue for the world's banks and is a necessity of the global markets. Analysts in foreign exchange don't drive the deal flow, they just analyze the Forex market.1.1.1.4 8000 stocks vs 4 major currency pairs
There are approximately 4,500 stocks listed on the New York Stock Exchange. Another 3,500 are listed on the NASDAQ. Which one will you trade? Got the software? Got the time? In spot currency trading, you have 4 major markets, 24 hours a day 5.5 days a week. You have approximately 34 second-tier currencies to look at in your spare time (if you are so inclined). Concentrate on the majors, find your trade. Spend your afternoon on the golf course or with your kids (instead of with your eye doctor trying to diagnose why you are seeing double).1.1.1.5 Commission free
Simply put: no commissions, no clearing fees, no exchange fees, no government fees, and no brokerage fees. Sure there may be different names for different fees at different places, but in spot currencies no commissions means just that – NO COMMISSIONS.1.1.1.6 Same price for broker assisted trades
There is no premium for calling in orders, whether or not you trade Forex via the phone, use market orders, stop orders, limit orders or even contingent orders. In spot currency trading you do not have to worry about extra charges. Ever wonder why a securities brokerage houses charges you more if they have to guarantee you a price than if you give them a market order with no price qualifier? Well you don't have to worry about it if you trade the currency markets.1.1.1.7 Trade off of your profits
Ever been up on a stock and wished you could leverage that profit and get in a little more of the issue? In spot currency trading you can. Use your open profits to add to your positions. As you gain experience, experiment with pyramid trading strategies. The options are endless because the market is cutting edge.1.1.2 Forex vs. Futures
1.1.2.1 Highly Trending markets
Because the foreign exchange market gaps are very limited (the market is closed briefly on weekends), it's not dramatically affected by buying programs that allow it to be easily manipulated. The Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market, making it a haven for traders who do not have to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the lower volume markets, like futures or options.1.1.2.2 No Commissions or Hidden Fees
Some speculators are unaware that all financial markets have a spread (the difference between the bid and ask price). In the futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the futures market typically signify the last traded price, not the spread. Global Forex Trading offers you commission-free trading on tradable prices. In a sense, what you see is what you get, allowing you to make quick decisions on your Forex trades without having to account for fees that may affect your profit/loss or slippage between the price you have just seen on the ticker and the price upon which the order will be filled.1.1.2.3 Better Leverage
Trading in the spot currency markets provides advantages over trading currency futures contracts. One of the main advantages for traders trading spot currencies is the margin rate or leverage that clients are given. In spot currency trading, customers receive one low margin rate for trades done 24 hours a day. In currency futures trading, the client has one margin rate for "day" trades and one margin rate for "overnight" positions. This can become a hassle for traders and decreases the overall tradability of the currency futures markets. Margin rates in spot currency trading vary from around 1 to 5 percent depending on the size of transactions a particular trader initiates. Global Forex Trading's spot currency trading gives the customer one rate all the time, no hassles and no margin calls. One rate enables the traders to manage their own risk efficiently and simply.1.1.2.4 24-hour Trading
Since the Forex market, in a sense, follows the sun around the globe the market, it rarely experiences periods of illiquidity. What this means is that any trader in any time zone can trade Forex at any time during the day or night. You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other American futures pits have closed for the day. This gives the Forex trader added flexibility and continuous market opportunities that just aren't available in futures.To explain the global effect on the Forex market, there are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin. These Forex markets are followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts its trading day again. This example shows that you are no longer limited to trading using the comparatively short trading day offered by U.S. markets only.
Foreign exchange is one of the few true 24-hour markets. When trading Forex, clients enjoy unparalleled liquidity 24 hours a day. In many futures markets, however, the overnight access available to traders is simply window dressing. The lack of liquidity and restrictions on what types of orders a client can place make trading and protecting positions a nightmare.
A good example is the Globex market. While the Globex market is only closed for a 15 minute period each day, the liquidity available after the open outcry market is closed in Chicago is normally very low. Spreads are wider and the ability to place larger orders is non-existent. Because of this, most volume traders are forced into trading the exchange instead of physical market overnight. The EFP market is the spot market priced in futures pricing. EFPs, however, come with additional fees and are not available from an electronic interface. Electronic access, speed, no fees and unmatched liquidity, 24-hours-a-day makes spot Forex the choice for the foreign currency trader.
1.1.2.5 Forex Methodology
Foreign exchange is the principal market of the world. If you study any market trading through the civilized world everything is valued in money, the root of all pricing. Global finance is the distribution and redistribution of money throughout different channels and different financial derivatives. Trading spot currencies can be done with many different methods and you will find many types of traders. From fundamental traders speculating on mid-to-long term positions based on worldwide cash flow analysis and fixed income formulas, to the technical trader watching for breakout patterns in consolidating markets or the Gann fanatic looking to duplicate the techniques of W.D. Gann, the methods for trading foreign exchange are many. Spot currencies are a great market for the "trader". It is where "big boys" trade and can provide both large profit potential as well as commensurate risk for the speculator.1.2 The Principles of Trading
The most basic precept of trading FX is Risk Management. In order to sustain profitability, a trader must properly monitor his positions by employing stops and limits.Risk management factors into the two major schools of thought that exist surrounding the analysis of the FX market: fundamental analysis and technical analysis. Fundamental analysis focuses on underlying economic conditions and indicators - for example economic growth rates, interest rates, inflation, and unemployment. Technical analysis uses historical prices and charts to predict future movements in prices.
Though there is a debate over which school of thought is the more accurate, accuracy is really a function of the time frame used. Short-term traders prefer to use technical analysis because these traders focus their strategies primarily on historical price action. Long term trading is more suited to fundamental traders as they analyze a currency's proper current value as well as future value.
1.3 Buying/Selling
In this market you may buy or sell currencies. The objective is to earn a profit from your position. If you have bought a currency, for example, and currency appreciates in value, then you will earn a profit by closing your position. When you close your position and sell the currency back in order to lock in the profit, you are in actuality buying the counter currency in the pair. By trading currency pairs, one currency valued against another, a rate of worth has been established. After all, a country’s currency has value only relative to the currency of another country.1.4 Quoting Conventions
Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip.Like all financial products, FX quotes include a "bid" and "ask". By quoting both the bid and ask in real time, FXCM ensures that traders always receive a fair price on all transactions. As in any traded instrument, there is an immediate cost in establishing a position. For example, USD/JPY may bid at 131.40 and ask at 131.45; this five-pip spread defines the trader’s cost, which can be recovered with a favorable currency move in the market.
1.5 Margin
The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value.1.6 Rollover
For positions open at 5pm EST, there is a daily rollover interest rate that a trader either pays or earns, depending on your established margin and position in the market. If you do not want to earn or pay interest on your positions, simply make sure it is closed at 5pm EST, the established end of the market day1.7 What Every Currency Trader Should Know
The Forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available. Without proper risk management, this high degree of leverage can lead to enormous swings between profit and loss. As even seasoned traders suffer losses, speculation in the Forex market should only be conducted with risk capital funds that, if lost, will not significantly deplete one's personal financial well being.Mini accounts were designed for those new to online currency trading. There is a smaller deposit required to open mini account and trading sizes are 1/10th the size of a regular account. The smaller trade size enables traders to take smaller risks. The Mini account were intended to introduce traders to the excitement of currency trading while minimizing risk.
1.8 Be Able To Ride Down Trends
In the equity market, finding profitable trades in a downward moving market is difficult. Market regulations make it impossible to short a stock when the price is moving down. As a result, equity traders are often faced with the choice of not trading or fighting against the trend.Unlike the equity market, there are no restrictions on short selling the major currency pairs. Profit potential exists in the currency market regardless of whether a trader is long or short, or which way the market is moving. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market. As a cautionary note, to profit from a trade you must be right about the market direction (up or down) or you will lose money.
1.9 Technical Analysis
The same technical strategies and tools used to analyze the equities and futures markets can be applied to Forex. The large number of buyers and sellers in foreign exchange combined with the strong trending nature of the market make it the ideal market for technical analysis.1.10 Liquidity
The spot Forex market is the largest and most liquid market in the world with a daily volume of over $1.4 trillion. Because many foreign exchange brokers have access to the largest banks in the world, their clients consistently receive the best prices, spreads, and the best execution.1.11 Analyze Countries Like Stocks
Currencies are traded in pairs so if a trader “buys” one currency he is simultaneously “selling” the other. As with a stock investment, it is better to invest in the currency of a country that is growing faster and is in a better economic condition. Currency prices reflect the balance of supply and demand for currencies. Two primary factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment, and the trade balance reflect the general health of an economy and are therefore responsible for the underlying shifts in supply and demand for that currency. There is a tremendous amount of data released at regular intervals, some of which is more important than others. Data related to interest rates and international trade is looked at the closest.1.12 Equity Market: Making the Transition to Forex
Equity markets can be used as a key indicators for movement in the Forex market. As technology has made transportation of capital easier, investing in global equity markets has become far more feasible. Accordingly, a rallying equity market in any part of the world serves as an ideal opportunity for all, regardless of geographic location. The result of this has become a strong correlation between a country's equity markets and its currency: if the equity market is rising, the investor are coming in to seize the opportunity. Conversely, falling equity markets will have domestic investors selling their shares of local publicly traded firms only to seize investment opportunities abroad.2 References
Forex Trading - Understand Your Principles
Forex trading has been growing rapidly among day traders since the 1990s, as day traders have seen the advantages that trading currencies can have over trading stocks. However, since there are fewer currencies for beginners to purchase over the large number of stocks available, forex trading can be much more difficult for a newcomer to learn and master. Still, there are some basic principles that someone new to forex trading should learn, and these concepts may even be helpful to the experienced trader.
The first principle of forex trading is to understand that trading is an investment, not an income. If you are looking to constantly boom in forex trading, then you may need to do a reassessment. forex trading, like other forms of trading, allows you to make a good return on your initial capital annually. However, during that year you need to expect some ups and downs in your forex trading. You could even have several months where you have consecutive losses. It is probably in your best interest to have another source of income while you do forex trading.
Another area where beginners sometimes find themselves frustrated is that they try to predict the forex trading markets. Thousands of traders have influence over the forex trading markets, along with politics and economic events, so there is no way to predict which way the market will move. There are some types of analysis that may provide an educated guess into market flow when doing forex trading, but they are not always reliable. Do not be discouraged, though, by the fact that you may lose on more trades that you gain on, as using sound money management can help you be successful with forex trading.
Making money from forex trading means that you need to make enough to cover your losses and gain profit to increase capital. When forex trading, you will need to allow your money-making trades ride while knowing when to cut your losses as soon as possible. forex trading means learning some finesse, as there can be a fine line where you will want to wait a little for the market to turn in your favor on your losing trades and also making sure you do not take your profit to soon on your better trades.
One way to handle your forex trading is to use a tested system and a money management strategy. There is no room for emotion when forex trading, so you will need to use a business-like approach that has been tested on market data. Using a tested approach will save you a lot of stress when forex trading. Also, using a sound money management strategy will allow you to use your capital in the best way when forex trading so that you can maximize profit and avoid major losses.
Finally, you should always remember the basics of forex trading. When things seem overwhelming, it is always good to get back to the basics, as those principles drive the forex trading world in the long term. Plus, you should not always put everything in the ands of expert recommendations and comments. You will find that there will be hundreds of experts offering advice on forex trading, and it may seem like too much for a beginner – and sometimes even for someone experienced in forex trading. Make sure you stick to your system and only use what you deem useful when forex trading.
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Commercial companies
Banks
Banks
The interbank market caters for both the majority of commercial turnover and large amounts of speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account. Until recently, foreign exchange brokers did large amounts of business, facilitating interbank trading and matching anonymous counterparts for large fees. Today, however, much of this business has moved on to more efficient electronic systems. The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeably smaller than just a few years agoMarket size and liquidity
The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Daily turnover was reported to be over US$3.98 trillion in April 2010 by the Bank for International Settlements.[3]
Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.85 trillion, or 36.7% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York City accounted for 17.9%, and Tokyo accounted for 6.2%.[4] In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.
Exchange-traded FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.
Several other developed countries also permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges. All these developed countries already have fully convertible capital accounts. Most emerging countries do not permit FX derivative products on their exchanges in view of prevalent controls on the capital accounts. However, a few select emerging countries (e.g., Korea, South Africa, India—[1]; [2]) have already successfully experimented with the currency futures exchanges, despite having some controls on the capital account.
FX futures volume has grown rapidly in recent years, and accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).
Foreign exchange trading increased by over a third in the 12 months to April 2010 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues have made it easier for retail traders to trade in the foreign exchange market. In 2009, retail traders constituted over 5% of the whole FX market volumes (see retail trading platforms).[6]
Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to TheCityUK estimates has increased its share of global turnover in traditional transactions from 34.6% in April 2007 to 36.7% in April 2010. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. For instance, when the IMF calculates the value of its SDRs every day, they use the London market prices at noon that day.
Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.85 trillion, or 36.7% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York City accounted for 17.9%, and Tokyo accounted for 6.2%.[4] In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.
Exchange-traded FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.
Several other developed countries also permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges. All these developed countries already have fully convertible capital accounts. Most emerging countries do not permit FX derivative products on their exchanges in view of prevalent controls on the capital accounts. However, a few select emerging countries (e.g., Korea, South Africa, India—[1]; [2]) have already successfully experimented with the currency futures exchanges, despite having some controls on the capital account.
FX futures volume has grown rapidly in recent years, and accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).
Foreign exchange trading increased by over a third in the 12 months to April 2010 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues have made it easier for retail traders to trade in the foreign exchange market. In 2009, retail traders constituted over 5% of the whole FX market volumes (see retail trading platforms).[6]
Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to TheCityUK estimates has increased its share of global turnover in traditional transactions from 34.6% in April 2007 to 36.7% in April 2010. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. For instance, when the IMF calculates the value of its SDRs every day, they use the London market prices at noon that day.
Foreign exchange market
The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.[1]
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.[2]
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of
The $3.98 trillion break-down is as follows:
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.[2]
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of
- its huge trading volume, leading to high liquidity;
- its geographical dispersion;
- its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
- the variety of factors that affect exchange rates;
- the low margins of relative profit compared with other markets of fixed income; and
- the use of leverage to enhance profit margins with respect to account size.
The $3.98 trillion break-down is as follows:
- $1.490 trillion in spot transactions
- $475 billion in outright forwards
- $1.765 trillion in foreign exchange swaps
- $43 billion currency swaps
- $207 billion in options and other products
Where to Get Forex Training?
For those of you who are interested in forex trading, you may want to start off by getting some good forex training. Forex training is a necessity for anyone with this interest. This is because a lot of money is involved in forex trading. If you don't get some forex training, you are bound to lose a lot of money.
Some of you may not even know what forex trading is. If you don't know this, you defiantly need some forex training. Forex stands for foreign exchange. Forex trading is basically the exchange of one countries currency for another countries currency. This is done simultaneously in hopes of gaining a profit.
You can get forex training from several different places. The first place you should get forex training from is online. There are many websites that offer free forex training. The forex training these websites offer is both reliable and accurate. The forex training on these websites often offers a free demo account to teach you how to trade without actually using any real money.
A second place to get Forex training is at your local college campus. Forex training courses at college are usually inexpensive and very thorough. The forex training courses offered should also include hands on experience with trading, to help you get the edge. You can also get some books on forex training or research forex training at your local library. The best place to get forex training is from someone who is already involved in forex trading. The forex training these individuals provide will be more realistic for you and give you different aspects of the forex trading game.
The forex training you get should first start with learning how the foreign trade market works. The trade market is always changing, so you need to understand it first. The second part of your forex training should be about risk control. You never want to invest more than you can afford. The right forex training should teach you how to cut your losses and have less risks of failure. Next, your forex training should teach you how to open and manage a forex trading account. But this should be done with a demo account. All forex training should be done this way first, before you try the real thing.
With all of this in mind, you should be able to find some good forex training. Learn the ropes of forex trading and take the time to learn it well. Be sure to try a demo forex trading account before you start a real account. With the right forex training, you will soon be on your way to a profitable way to supplement your income
Some of you may not even know what forex trading is. If you don't know this, you defiantly need some forex training. Forex stands for foreign exchange. Forex trading is basically the exchange of one countries currency for another countries currency. This is done simultaneously in hopes of gaining a profit.
You can get forex training from several different places. The first place you should get forex training from is online. There are many websites that offer free forex training. The forex training these websites offer is both reliable and accurate. The forex training on these websites often offers a free demo account to teach you how to trade without actually using any real money.
A second place to get Forex training is at your local college campus. Forex training courses at college are usually inexpensive and very thorough. The forex training courses offered should also include hands on experience with trading, to help you get the edge. You can also get some books on forex training or research forex training at your local library. The best place to get forex training is from someone who is already involved in forex trading. The forex training these individuals provide will be more realistic for you and give you different aspects of the forex trading game.
The forex training you get should first start with learning how the foreign trade market works. The trade market is always changing, so you need to understand it first. The second part of your forex training should be about risk control. You never want to invest more than you can afford. The right forex training should teach you how to cut your losses and have less risks of failure. Next, your forex training should teach you how to open and manage a forex trading account. But this should be done with a demo account. All forex training should be done this way first, before you try the real thing.
With all of this in mind, you should be able to find some good forex training. Learn the ropes of forex trading and take the time to learn it well. Be sure to try a demo forex trading account before you start a real account. With the right forex training, you will soon be on your way to a profitable way to supplement your income
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Sunday, November 21, 2010
Saturday, November 20, 2010
What Does Commission Free Forex Trading Really Mean
Most retail foreign exchange brokers will list "commission free trades" as one of the benefits that they offer to clients, but this statement can be potentially misleading and it is important to understand this in its proper context so that you do not lose money due to a misunderstanding of how currencies are priced. When you trade the stock market you will likely work with a broker that will charge you a commission for every trade that you place, as this is how the brokerage earns a profit and is able to maintain the resources necessary for constant market liquidity.
The statement "commission free" in forex trading Does not Mean that it is completely free to trade this market, it simply means that broker commissions are priced in a different format. On the stock market you can trade stock from any publicly traded company, and since the stock brokerage Does not much care which of these companies you are trading they will charge a flat fee commission for buying or selling any stock. In the currency market however the amount of money that you pay for trading a particular currency pair has to do with the liquidity and market volume of that currency pair, and the lower the market volume is the more you will end up paying.
In forex instead of a commission you have a "spread," where the broker prices in a small difference between the buy and sell price of that currency pair. Unless you are a professional trader than the extent of your foreign exchange activity is likely confined to travelling to a foreign country, and when you exchange your dollars or pounds for another foreign currency you are likely only concerned with the second decimal place or the cents column. But in online foreign exchange trading you are concerned with the fourth decimal place or the 1/100th of a cent, and this is called a "price interest point" or commonly referred to as a pip. Your forex broker will determine a number of pips to separate the buy and sell prices for a certain currency pair, and when you enter into an open trade you will automatically need to gain this predetermined amount of pips in order to break even.
Some of the most popular and highly traded currency pairs will have lower spreads as low as one or two pips, and the more exotic and less frequently traded currency pairs will have spreads as high as 25 pips or more. When you are formulating your trading strategy for a given currency pair it is important to include the spread in your strategy, because if the spread is too high then you might need to hold an open trade for hours before you can even reach the break even point. This is the reason that common currency pairs such as the EUR/USD are very popular for day trading strategies where open trades are held only for minutes or a few hours, because the spread is low and it Does not take very long for an open position to become profitable as long as the market is moving in the right direction
The statement "commission free" in forex trading Does not Mean that it is completely free to trade this market, it simply means that broker commissions are priced in a different format. On the stock market you can trade stock from any publicly traded company, and since the stock brokerage Does not much care which of these companies you are trading they will charge a flat fee commission for buying or selling any stock. In the currency market however the amount of money that you pay for trading a particular currency pair has to do with the liquidity and market volume of that currency pair, and the lower the market volume is the more you will end up paying.
In forex instead of a commission you have a "spread," where the broker prices in a small difference between the buy and sell price of that currency pair. Unless you are a professional trader than the extent of your foreign exchange activity is likely confined to travelling to a foreign country, and when you exchange your dollars or pounds for another foreign currency you are likely only concerned with the second decimal place or the cents column. But in online foreign exchange trading you are concerned with the fourth decimal place or the 1/100th of a cent, and this is called a "price interest point" or commonly referred to as a pip. Your forex broker will determine a number of pips to separate the buy and sell prices for a certain currency pair, and when you enter into an open trade you will automatically need to gain this predetermined amount of pips in order to break even.
Some of the most popular and highly traded currency pairs will have lower spreads as low as one or two pips, and the more exotic and less frequently traded currency pairs will have spreads as high as 25 pips or more. When you are formulating your trading strategy for a given currency pair it is important to include the spread in your strategy, because if the spread is too high then you might need to hold an open trade for hours before you can even reach the break even point. This is the reason that common currency pairs such as the EUR/USD are very popular for day trading strategies where open trades are held only for minutes or a few hours, because the spread is low and it Does not take very long for an open position to become profitable as long as the market is moving in the right direction
Beginning of the road in the Forex market for beginners
Beginning of the road in the Forex market for beginners
In order to understand the meaning of Forex you should understand the meaning of the Stock
Exchange first,
Bourse is a commercial market has a lot of traffickers, the most important of these traders are investors, banks and investment funds, brokerage firms and speculators, and there are many, many things that are traded in accordance with the type of stock, there is a stock exchange and bonds (which is the exchange of stocks and bonds) , and commodity exchanges (such as wheat and oil), and the stock exchange in which they are buying and selling major currencies
So is Forex: Foreign Currency Trading market through the purchase of one currency and selling of foreign currency against which the other is an abbreviation of the word ForeignExchange (which means the exchange of foreign currencies)
Example is the purchase of U.S. dollar to pay the single European currency (euro), or vice versa any purchase to pay the U.S. dollar Euro interview.
Or buy the U.S. dollar to pay the Japanese yen, or vice versa.
Or buy the U.S. dollar to pay the pound sterling, or vice versa.
And obtained a profit of exploiting the differences minor between the price of currencies, which spreads a simple majority of the time, but it can turn into huge profits when they are buying and selling large amounts of money, using the leverage provided by the brokerage firms, which up to 1: 400 (will be explained later)
The Forex market is the largest financial market in the world with an average daily circulation of more than 2 trillion (2000 billion U.S. dollars)
In contrast to other financial markets, the foreign exchange market has no physical location or central exchange. The Forex market operates 24 hours a day through an electronic network of banks, institutions and individual traders. Forex trading begins each day in Sydney, then moves to Tokyo, followed by London and then New York
Who are the participants in this market?
1 - international banks: The banks, the largest and most important players in the arena of global currency trading. They make thousands of transactions daily around the clock, they exchange among themselves, or with a broker or ordinary investors, through their Permanent Representatives in this area. It is no secret that the greatest influence in moving the market and to identify and exclusively in the hands of top global banks, as the daily transactions of billions of dollars.
2 - Central Banks: Central banks are transactions in this market commissioned by the government, a move often to influence the course of the direction taken by their own currencies, according to the interest that is consistent with monetary policy, and therefore protect its economic interests.
3 - Investment Funds: It was due mostly to institutional investors, Aosnadik retirement, or insurance companies, interfere in the market, according to the dictates of their interests.
4 - Forex Trading clients: These are the important permanent link between buyers and sellers. In other words, they move on the intermediaries between the various banks, on the other hand between the banks and private investors. In return for their work that you see them blow for a commission.
5 - Persons Independent: We These are ordinary people who make huge Iumiaamilit switch between currencies to finance their trips planned, or to secure access to their salaries, or at retirement, etc..
Today, after the revolution made by the online operations of global communications, and after successive collapses in the stock markets, there is growing little by little the role of independent dealers who have modest amounts of money in buying and selling daily fast (speculators) growing influence and grow in the foreign exchange market,
Is profitable when it changes prices of these currencies, you buy the euro, such as August 1 dollar increased the price and became 1 dollar and fifteen cents to get the difference the gain, and this will require capital of a relatively large, because the brokerage companies provide you with leverage of up to 100 times your capital or 400 times your capital
In order to understand the meaning of Forex you should understand the meaning of the Stock
Exchange first,
Bourse is a commercial market has a lot of traffickers, the most important of these traders are investors, banks and investment funds, brokerage firms and speculators, and there are many, many things that are traded in accordance with the type of stock, there is a stock exchange and bonds (which is the exchange of stocks and bonds) , and commodity exchanges (such as wheat and oil), and the stock exchange in which they are buying and selling major currencies
So is Forex: Foreign Currency Trading market through the purchase of one currency and selling of foreign currency against which the other is an abbreviation of the word ForeignExchange (which means the exchange of foreign currencies)
Example is the purchase of U.S. dollar to pay the single European currency (euro), or vice versa any purchase to pay the U.S. dollar Euro interview.
Or buy the U.S. dollar to pay the Japanese yen, or vice versa.
Or buy the U.S. dollar to pay the pound sterling, or vice versa.
And obtained a profit of exploiting the differences minor between the price of currencies, which spreads a simple majority of the time, but it can turn into huge profits when they are buying and selling large amounts of money, using the leverage provided by the brokerage firms, which up to 1: 400 (will be explained later)
The Forex market is the largest financial market in the world with an average daily circulation of more than 2 trillion (2000 billion U.S. dollars)
In contrast to other financial markets, the foreign exchange market has no physical location or central exchange. The Forex market operates 24 hours a day through an electronic network of banks, institutions and individual traders. Forex trading begins each day in Sydney, then moves to Tokyo, followed by London and then New York
Who are the participants in this market?
1 - international banks: The banks, the largest and most important players in the arena of global currency trading. They make thousands of transactions daily around the clock, they exchange among themselves, or with a broker or ordinary investors, through their Permanent Representatives in this area. It is no secret that the greatest influence in moving the market and to identify and exclusively in the hands of top global banks, as the daily transactions of billions of dollars.
2 - Central Banks: Central banks are transactions in this market commissioned by the government, a move often to influence the course of the direction taken by their own currencies, according to the interest that is consistent with monetary policy, and therefore protect its economic interests.
3 - Investment Funds: It was due mostly to institutional investors, Aosnadik retirement, or insurance companies, interfere in the market, according to the dictates of their interests.
4 - Forex Trading clients: These are the important permanent link between buyers and sellers. In other words, they move on the intermediaries between the various banks, on the other hand between the banks and private investors. In return for their work that you see them blow for a commission.
5 - Persons Independent: We These are ordinary people who make huge Iumiaamilit switch between currencies to finance their trips planned, or to secure access to their salaries, or at retirement, etc..
Today, after the revolution made by the online operations of global communications, and after successive collapses in the stock markets, there is growing little by little the role of independent dealers who have modest amounts of money in buying and selling daily fast (speculators) growing influence and grow in the foreign exchange market,
Is profitable when it changes prices of these currencies, you buy the euro, such as August 1 dollar increased the price and became 1 dollar and fifteen cents to get the difference the gain, and this will require capital of a relatively large, because the brokerage companies provide you with leverage of up to 100 times your capital or 400 times your capital
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forex Definintion - what is the meaning of forex
An over-the-counter market where buyers and sellers conduct foreign exchange transactions.
The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation.
Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small.
It is estimated that around $4 trillion goes through the Forex market each day. also called foreign exchange market
The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation.
Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small.
It is estimated that around $4 trillion goes through the Forex market each day. also called foreign exchange market
What does Pip Mean In Forex Trading?
To understand pips on the forex market you must understand how the market works. If you are new to forex trading there are many worthwhile, free offers and software online to help you learn and practise before risking your money.
Forex is an abbreviation of foreign exchange, the buying and selling of one foreign currency for another. As one currency strengthens so another weakens and knowing when to buy and sell is how money is made on the Forex markets. The Forex market is similar to the buying and selling of stocks but in many ways it is much more difficult. On the stock market you may spot a company that has potential, buy shares and hopefully make a profit, but on the money market there may be long term trends where a currency strengthens and weakens, but much of the trading is based upon daily fluctuations that change by the minute.
A pip is the smallest unit of price that is traded for a currency. Most currencies are traded to four decimal points, so that a pip is 0.0001 or 1/100 of a cent. This may seem a minuscule amount until you realise that on a standard trade of $100,000 that is $10. The exception to the four decimal points is the Japanese yen which is normally traded to two decimal points.
Obviously if you are buying a currency you must also be selling another and therefore prices are always quoted in pairs, the USD/EUR being the most active. The more active a pair the narrower the difference between the bid/ask price is likely to be, with a possible spread of just two pips for the most actively traded.
Unlike the stock market there are no broker fees to pay, but as each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. Therefore, as a buyer, the pip spread is very important to you. When you buy you have to accept an immediate loss. The value of the currency you have bought must rise by the extent of the pip spread before you break even and the value rise again to make a profit. The lower the spread the easier it is to make a profit.
Active markets tend to have a lower pip spread, for example 2-3 pips. Currencies that are bought and sold less frequently may have a far higher spread. However, before you go to a broker offering a very narrow spread, do check that they are reputable. You should also remember that pip spreads are not guaranteed, they can change if the market fluctuates widely. It is wise to check a broker's spread policy before trading.
Unlike the stock market there are no broker fees to pay, but as each trade involves both selling one currency and buying another, the difference in the spread is the cost of the transaction and must be taken into account when calculating profit. Therefore, as a buyer, the pip spread is very important to you. When you buy you have to accept an immediate loss. The value of the currency you have bought must rise by the extent of the pip spread before you break even and the value rise again to make a profit. The lower the spread the easier it is to make a profit.
Active markets tend to have a lower pip spread, for example 2-3 pips. Currencies that are bought and sold less frequently may have a far higher spread. However, before you go to a broker offering a very narrow spread, do check that they are reputable. You should also remember that pip spreads are not guaranteed, they can change if the market fluctuates widely. It is wise to check a broker's spread policy before trading.
What Does Forex Mean Anyway?
I see a lot of ads for Forex trading here and there, but I’ve never really known what it is. It’s clearly a hot topic on the web, and many blogs seem to be discussing various tips and techniques. But I still didn’t know what the hell ‘Forex’ meant.
Then I got an email from Investopedia titled: “Forex Training“.
Hmmm… I thought, this might give me a clue. But then again, maybe not. When I followed the link, this is what I got:
So, I did a little more digging, and eventually found this:
Then I got an email from Investopedia titled: “Forex Training“.
Hmmm… I thought, this might give me a clue. But then again, maybe not. When I followed the link, this is what I got:
“What Does Forex Training Mean?Wow! That seems more like a definition of training as it applies to Forex trading, but what is Forex Trading?
A form of instruction or mentorship that provides information on forex trading tactics, methods and successful practices. Forex training acts as a guide for the retail forex trader, providing insight into successful strategies, signals and systems as well as other general information on Forex trading.”
So, I did a little more digging, and eventually found this:
“What Does Forex – FX Mean?It all makes sense to me now. It’s a bet on whether a given currency’s value will rise or fall. This is what George Soros made his billions in. I just don’t understand how it can be such a common term, and yet so narrow in its understanding. I guess if you don’t know what Forex means, you don’t need to know?
The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.”
Forex
The foreign exchange (currency or forex or FX) market refers to the market for currencies. Transactions in this market typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The FX market is the largest and most liquid financial market in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global forex and related markets is continously growing and was last reported to be over US$ 4 trillion in April 2007 by the Bank for International Settlement.
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
* 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
* An enormous liquid market making it easy to trade most currencies.
* Volatile markets offering profit opportunities.
* Standard instruments for controlling risk exposure.
* The ability to profit in rising or falling markets.
* Leveraged trading with low margin requirements.
* Many options for zero commission trading.
Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:
* 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
* An enormous liquid market making it easy to trade most currencies.
* Volatile markets offering profit opportunities.
* Standard instruments for controlling risk exposure.
* The ability to profit in rising or falling markets.
* Leveraged trading with low margin requirements.
* Many options for zero commission trading.
Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.