Todays current futures market is quite unlike the futures of the 19th century. Todays future market is a worldwide one that includes manufactured goods, financial currencies and treasury bonds, and agricultural products.
When you speculate on futures it is not the actual good that is speculated upon rather it is the contract for the goods that is traded as value. Every futures contract includes a buyer and a seller. The following is an example of a futures speculation: A farmer agrees to deliver 1000 bushels of corn to a baker at a price of $5.00 a bushel. If the daily price of corn futures falls to $4.00 a bushel, the farmer's account is credited with $1000 ($5.00 — $4.00 X 1000 bushels) and the baker's account is debited by the same amount. Futures accounts are settled every day.
Using the above as an example this is how the contract settlement would play out: If the price of corn futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost an equal amount. However, the baker can now purchase corn on the open market at $4.00 a bushel — $1000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of corn. Also, the farmer must sell his corn on the open market for $4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.
Speculators profit by daily fluctuations in the futures market by choosing to buy from the seller (buying short) or from the buyer (buying long).
The FOREX market has advantages over the futures market. FOREX is the largest financial market in the world. It is a liquid market and stop orders can be executed more easily and with less slippage than in other markets. The FOREX market is open 5 days a week, 24 hours a day. Traders can take advantages of opportunities as they become available. FOREX transactions are usually instantly executed. FOREX transactions are commission free. Brokers earn money on the spread.
Some investors feel that due to built in safeguards that FOREX trading is safer than futures trading.
Wednesday, September 30, 2009
Forex Trading — Understanding Commissions, Spreads and Trading Costs
The forex market is quickly becoming one of the most popular markets for trading.
Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex market — just as they do stocks and futures.
More and more individuals are seeing Forex not only as a new way to diversify their portfolio, but are also finding that it is becoming the most profitable component of their investments.
And that's because of the many advantages Forex offers over other markets like stocks or commodities. Here's what you will typically see advertized about Forex:
— Unparallelled liquidity. It is the largest financial market in the world by far. Almost $2 trillion being traded daily!
— Excellent leverage potential. Individual investors have access to leverage of 100:1 and even 200:1
— No Commissions (more on this later on)
— Low trading costs.
And yes, the Forex market really does offer all these advantages.
But the last two points above talk about costs, and that's what we'd like to focus on in this article.
Like any trading, there are costs involved, and, while these may be much lower than they used to be, it is important to understand what those are.
Let's start by looking at stock trading, something that most of us investors are pretty familiar with.
When trading stocks, most investors will have a trading account with a broker somewhere and will have investment funds deposited in that account.
The broker will then execute the trades on behalf of the account holder, and of course, in return for providing that service, the broker will want to be compensated.
With stocks, typically, the broker will earn a commission for executing the trade. They will charge either a fixed dollar amount per trade, or a dollar amount per share, or (most commonly) a scaled commission based on how big your trade is.
And, they will charge it on both sides of the transaction. That is to say, when you buy the stock you get charged commission, AND then when you sell that same stock you get charged another commission.
With Forex trading, the brokers constantly advertise "no commission". And, of course that's true — except for a few brokers, who do charge a commission similar to stocks.
But also, of course, the brokers aren't performing their trading services for free. They too make money.
The way they do that is by charging the investor a "spread". Simply put, the spread is the difference between the bid price and the ask price for the currency being traded.
The broker will add this spread onto the price of the trade and keep it as their fee for trading.
So, while it isn't a commission per se, it behaves in practically the same way. It is just a little more hidden.
The good news though is that typically this spread is only charged on one side of the transaction. In other words, you don't pay the spread when you buy AND then again when you sell. It is usually only charged on the "buy" side of the trades.
So the spread really is your primary cost of trading the Forex and you should pay attention to the details of what the different brokers offer.
The spreads offered can vary pretty dramatically from broker to broker. And while it may not seem like much of a difference to be trading with a 5 pip spread vs a 4 pip spread, it actually can add up very quickly when you multiply it out by how many trades you make and how much money you're trading. Think about it, 4 pips vs 5 pips is a difference of 25% on your trading costs.
The other thing to recognize is that spreads can vary based on what currencies you're trading and what type of account you open.
Most brokers will give you different spreads for different currencies. The most popular currency pairs like the EURUSD or GBPUSD will typically have the lowest spreads, while currencies that have less demand will likely be traded with higher spreads.
Be sure to think about what currencies you are most likely to be trading and find out what your spreads will be for those currencies.
Also, some brokers will offer different spreads for different types of accounts. A mini account, for example may be subject to higher spreads than a full contract account.
And finally, because the spreads really are the difference between bid prices and ask prices as determined by the free market, it is important to recognize that they are not "guaranteed". Most brokers will tell you that there may be times during periods of low demand, or very active trading when the spreads widen and you will be charged that wider spread.
These do tend to be rarer situations because the Forex market really is so large and demand and supply are generally quite predictable, but they do occur, especially with some of the lesser traded currencies. So it's important to be aware of that.
In summary then, when trading Forex, understand that the "spread" is truly your most important consideration for trading costs.
Spreads can vary significantly between brokers, account types and currencies traded. And small differences in the spread can really add up to thousands of dollars in trading costs over even just a few months.
So be sure to understand what currencies you are going to be trading, how frequently, and in what type of account and use those factors to help decide which broker can offer you the best trading costs.
Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex market — just as they do stocks and futures.
More and more individuals are seeing Forex not only as a new way to diversify their portfolio, but are also finding that it is becoming the most profitable component of their investments.
And that's because of the many advantages Forex offers over other markets like stocks or commodities. Here's what you will typically see advertized about Forex:
— Unparallelled liquidity. It is the largest financial market in the world by far. Almost $2 trillion being traded daily!
— Excellent leverage potential. Individual investors have access to leverage of 100:1 and even 200:1
— No Commissions (more on this later on)
— Low trading costs.
And yes, the Forex market really does offer all these advantages.
But the last two points above talk about costs, and that's what we'd like to focus on in this article.
Like any trading, there are costs involved, and, while these may be much lower than they used to be, it is important to understand what those are.
Let's start by looking at stock trading, something that most of us investors are pretty familiar with.
When trading stocks, most investors will have a trading account with a broker somewhere and will have investment funds deposited in that account.
The broker will then execute the trades on behalf of the account holder, and of course, in return for providing that service, the broker will want to be compensated.
With stocks, typically, the broker will earn a commission for executing the trade. They will charge either a fixed dollar amount per trade, or a dollar amount per share, or (most commonly) a scaled commission based on how big your trade is.
And, they will charge it on both sides of the transaction. That is to say, when you buy the stock you get charged commission, AND then when you sell that same stock you get charged another commission.
With Forex trading, the brokers constantly advertise "no commission". And, of course that's true — except for a few brokers, who do charge a commission similar to stocks.
But also, of course, the brokers aren't performing their trading services for free. They too make money.
The way they do that is by charging the investor a "spread". Simply put, the spread is the difference between the bid price and the ask price for the currency being traded.
The broker will add this spread onto the price of the trade and keep it as their fee for trading.
So, while it isn't a commission per se, it behaves in practically the same way. It is just a little more hidden.
The good news though is that typically this spread is only charged on one side of the transaction. In other words, you don't pay the spread when you buy AND then again when you sell. It is usually only charged on the "buy" side of the trades.
So the spread really is your primary cost of trading the Forex and you should pay attention to the details of what the different brokers offer.
The spreads offered can vary pretty dramatically from broker to broker. And while it may not seem like much of a difference to be trading with a 5 pip spread vs a 4 pip spread, it actually can add up very quickly when you multiply it out by how many trades you make and how much money you're trading. Think about it, 4 pips vs 5 pips is a difference of 25% on your trading costs.
The other thing to recognize is that spreads can vary based on what currencies you're trading and what type of account you open.
Most brokers will give you different spreads for different currencies. The most popular currency pairs like the EURUSD or GBPUSD will typically have the lowest spreads, while currencies that have less demand will likely be traded with higher spreads.
Be sure to think about what currencies you are most likely to be trading and find out what your spreads will be for those currencies.
Also, some brokers will offer different spreads for different types of accounts. A mini account, for example may be subject to higher spreads than a full contract account.
And finally, because the spreads really are the difference between bid prices and ask prices as determined by the free market, it is important to recognize that they are not "guaranteed". Most brokers will tell you that there may be times during periods of low demand, or very active trading when the spreads widen and you will be charged that wider spread.
These do tend to be rarer situations because the Forex market really is so large and demand and supply are generally quite predictable, but they do occur, especially with some of the lesser traded currencies. So it's important to be aware of that.
In summary then, when trading Forex, understand that the "spread" is truly your most important consideration for trading costs.
Spreads can vary significantly between brokers, account types and currencies traded. And small differences in the spread can really add up to thousands of dollars in trading costs over even just a few months.
So be sure to understand what currencies you are going to be trading, how frequently, and in what type of account and use those factors to help decide which broker can offer you the best trading costs.
Forex Glossary
Here are some of the most common terms used in FOREX trading.
Ask Price — Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote — e.g. EUR/USD 1.1965 / 68 — means that one euro can be bought for 1.1968 UD dollars.
Bar Chart — A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information — the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency — is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote — USD/JPY 112.13 — US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price — is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote — e.g. EUR/USD 1.1965 / 68 — means that one euro can be sold for 1.1965 UD dollars.
Bid/Ask Spread — is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Broker — the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.
Candlestick Chart — A type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick — a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.
Cross Currency — A currency pair that does not include US dollars — e.g. EUR/GBP.
Currency Pair — Two currencies involved in a FOREX transaction — e.g. EUR/USD.
Economic Indicator — A statistical report issued by governments or academic institutions indicating economic conditions within a country.
First In First Out (FIFO) — refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (FOREX, FX) — Simultaneously buying one currency and selling another.
Fundamental Analysis — Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin — The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 — you can trade currency worth 100 times the amount of your deposit.
Limit Order — An order to buy or sell when the price reaches a specified level.
Lot — The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency — The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Minor Currency — The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
One Cancels the Other (OCO) — Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position — An active trade that has not been closed.
Pips or Points — The smallest unit a currency can be traded in.
Quote Currency — The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rollover — Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis — Analysis of historical market data to predict future movements in the market.
Tick — The minimum change in price.
Transaction Cost — The cost of a FOREX transaction — typically the spread between bid and ask prices.
Volatility — A statistical measure indicating the tendency of sharp price movements within a period of time.
Ask Price — Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote — e.g. EUR/USD 1.1965 / 68 — means that one euro can be bought for 1.1968 UD dollars.
Bar Chart — A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information — the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency — is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote — USD/JPY 112.13 — US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price — is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote — e.g. EUR/USD 1.1965 / 68 — means that one euro can be sold for 1.1965 UD dollars.
Bid/Ask Spread — is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Broker — the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.
Candlestick Chart — A type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick — a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.
Cross Currency — A currency pair that does not include US dollars — e.g. EUR/GBP.
Currency Pair — Two currencies involved in a FOREX transaction — e.g. EUR/USD.
Economic Indicator — A statistical report issued by governments or academic institutions indicating economic conditions within a country.
First In First Out (FIFO) — refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (FOREX, FX) — Simultaneously buying one currency and selling another.
Fundamental Analysis — Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin — The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 — you can trade currency worth 100 times the amount of your deposit.
Limit Order — An order to buy or sell when the price reaches a specified level.
Lot — The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency — The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Minor Currency — The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
One Cancels the Other (OCO) — Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position — An active trade that has not been closed.
Pips or Points — The smallest unit a currency can be traded in.
Quote Currency — The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rollover — Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis — Analysis of historical market data to predict future movements in the market.
Tick — The minimum change in price.
Transaction Cost — The cost of a FOREX transaction — typically the spread between bid and ask prices.
Volatility — A statistical measure indicating the tendency of sharp price movements within a period of time.
Reality of Online Forex Trading
Foreign exchange trading is the trading of currencies. Most currencies can be traded. Huge amounts of currencies are traded 24 hours a day, 5 days a week. On average $1.9 trillion is traded a day. The most traded are United States Dollar, Japanese Yen, Euro, Canadian Dollar, British Pound Sterling, Australian Dollar and Swiss Franc.
Many brokers will let you open an account with a starting balance of just $250. Though that may seem small, remember you will be trading on margin. Your $250 investment may let you control $25,000. As with all investments there are risks so make sure you take the time to study the markets and your exposure before making your first trades. I highly recommend that you do some paper trades first to make sure you have understood how the markets work. No risk training, just write down the trades you would have done for real and chart the prices. Buy and sell and see if you have the right strategy before making real trades.
A fast internet connection will allow you to do forex trading online. Your broker will give you many online tools to allow you to study the markets: Real time quotes, news feeds:
Visit different broker's websites and compare the services they offer. Some brokers give you the possibility to open demo accounts. Do so, to test their software and find the one you like best.
Before you start trading make sure that you have learnt the terminology: Market Order, Limit Order, Stop Order. You may find the definitions of these terms and more information at http://www.forex.value-guides.com/calc-forex.html Calculating Forex Profits And Losses.
All currencies have standard identifying code used worldwide, some examples are: EUR (European euros), GBP (United Kingdom pounds), AUD (Australian dollars). Of course you don't have to know them all but it may be good to be able to recognize all the major currencies codes so that you will be able to make quick decisions.
To make sound evaluations, you need information. Follow carefully the world's current events, economic and political news. You will be surprised to see how, what may seem to you as insignificant will cause the currencies markets to fluctuate wildly.
Many brokers will let you open an account with a starting balance of just $250. Though that may seem small, remember you will be trading on margin. Your $250 investment may let you control $25,000. As with all investments there are risks so make sure you take the time to study the markets and your exposure before making your first trades. I highly recommend that you do some paper trades first to make sure you have understood how the markets work. No risk training, just write down the trades you would have done for real and chart the prices. Buy and sell and see if you have the right strategy before making real trades.
A fast internet connection will allow you to do forex trading online. Your broker will give you many online tools to allow you to study the markets: Real time quotes, news feeds:
Visit different broker's websites and compare the services they offer. Some brokers give you the possibility to open demo accounts. Do so, to test their software and find the one you like best.
Before you start trading make sure that you have learnt the terminology: Market Order, Limit Order, Stop Order. You may find the definitions of these terms and more information at http://www.forex.value-guides.com/calc-forex.html Calculating Forex Profits And Losses.
All currencies have standard identifying code used worldwide, some examples are: EUR (European euros), GBP (United Kingdom pounds), AUD (Australian dollars). Of course you don't have to know them all but it may be good to be able to recognize all the major currencies codes so that you will be able to make quick decisions.
To make sound evaluations, you need information. Follow carefully the world's current events, economic and political news. You will be surprised to see how, what may seem to you as insignificant will cause the currencies markets to fluctuate wildly.
Forex Brokers
Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor's decisions. Brokers earn money by charging a commission or a fee for their services.
A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the funds necessary for margin trading. In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Before trading FOREX you need to set up an account with a FOREX broker. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers.
The best advertising is word-of-mouth advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or difficulties in dealing with a particular broker.
You could try selecting a few online brokers and contact their Internet help desks to see how quickly they respond to enquiries and whether or not they answer questions to your satisfaction. Keep in mind, however, that pre-sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers.
Customer satisfaction and safety are just part of the story. You want to find a broker who executes orders quickly and with minimum slippage. All online brokers should offer automatic execution and have clear policies regarding slippage. They should be able to tell you how much slippage can be expected in both normal and fast-moving markets.
Next you want to know the fees involved. What is the spread? Is spread fixed or variable according to the type of account? Are mini accounts subject to wider spreads? Are there any other charges? Smaller spreads mean more profit for the trader, but there may be a trade-off between spread and service. Look at the overall picture before deciding to go with a particular broker.
Margin accounts are the lifeblood of FOREX trading, so be sure you understand the broker's margin terms before setting up an account. You need to know the margin requirements and how margin is calculated. Does margin change according to the currency traded? Is it the same every day of the week? Some brokers may offer different margins for mini and standard accounts.
Trading software is very important for the online FOREX trader. Get a feel for the options that are available by trying out a demo account at a few online brokers. Above all, you are looking for reliability and the ability to perform well in fast-moving markets. The software should offer automatic trading and may have special features such as trailing stops and trading from the chart. Some features may only be available at an extra cost, so be sure you understand what your trading needs are and how much the broker charges to provide them.
Other information to find out about includes the broker's policy regarding minimum account balances, interest payments on account balances, which currencies can be traded and whether or not non-standard sized lots can be traded. You should also find out whether clients' funds are insured and the extent of that insurance.
A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the funds necessary for margin trading. In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Before trading FOREX you need to set up an account with a FOREX broker. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers.
The best advertising is word-of-mouth advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or difficulties in dealing with a particular broker.
You could try selecting a few online brokers and contact their Internet help desks to see how quickly they respond to enquiries and whether or not they answer questions to your satisfaction. Keep in mind, however, that pre-sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers.
Customer satisfaction and safety are just part of the story. You want to find a broker who executes orders quickly and with minimum slippage. All online brokers should offer automatic execution and have clear policies regarding slippage. They should be able to tell you how much slippage can be expected in both normal and fast-moving markets.
Next you want to know the fees involved. What is the spread? Is spread fixed or variable according to the type of account? Are mini accounts subject to wider spreads? Are there any other charges? Smaller spreads mean more profit for the trader, but there may be a trade-off between spread and service. Look at the overall picture before deciding to go with a particular broker.
Margin accounts are the lifeblood of FOREX trading, so be sure you understand the broker's margin terms before setting up an account. You need to know the margin requirements and how margin is calculated. Does margin change according to the currency traded? Is it the same every day of the week? Some brokers may offer different margins for mini and standard accounts.
Trading software is very important for the online FOREX trader. Get a feel for the options that are available by trying out a demo account at a few online brokers. Above all, you are looking for reliability and the ability to perform well in fast-moving markets. The software should offer automatic trading and may have special features such as trailing stops and trading from the chart. Some features may only be available at an extra cost, so be sure you understand what your trading needs are and how much the broker charges to provide them.
Other information to find out about includes the broker's policy regarding minimum account balances, interest payments on account balances, which currencies can be traded and whether or not non-standard sized lots can be traded. You should also find out whether clients' funds are insured and the extent of that insurance.
Monday, September 28, 2009
Books about Advanced Forex Trading
Here you will find the Forex e-books that contain more advanced information than the average popular book about financial trading. In some cases, understanding these books is impossible without a lot of experience in Forex and sometimes the extended knowledge of mathematics.
Almost all Forex e-books are in .pdf format. You'll need Adobe Acrobat Reader to open these e-books. Some of the e-books (those that are in parts) are zipped.
If you are the copyright owner of any of these e-books and don't want me to share them, please, contact me and I will gladly remove them.
A New Interpretation of Information Rate — by J. L. Kelly Jr.
CCI Manual — by James L. O'Connell.
Nicktrader and Jeff Explaining Reverse and Regular Divers — from Woodies CCI Club Discussion From January 15,16 2004.
NickTrader on No Price CCI Divergence Trading — by Nicktrader.
Are Supply and Demand Driving Stock Prices? — by Carl Hopman.
The Sharpe Ratio — by William F. Sharpe.
The Interaction Between the Frequency of Market Quotes, Spread and Volatility in Forex — by Antonis A. Demos and Charles A. E. Goodhart, a scientific article from the Applied Economics.
Trend Determination — by John Hayden, a quick, accurate and effective methodology for trend determination on the financial markets.
Trend vs. No Trend — by Brian Dolan an article from TRADERS' Magazine July 2005 issue, which deals with the trend/no trend paradox encountered by many traders who think that "the trend is your friend".
A Six-Part Study Guide to Market Profile — by CBOT professionals — it describes the concept of the market profile in the smallest details.
How George Soros Knows What He Knows — by Flavia Cymbalista — the study of George Soros' market reflexivity.
Core Point and Figure Chart Patterns — by BlueChipOptions.com — a set of point-and-figure chart patterns and explanations of their application.
Almost all Forex e-books are in .pdf format. You'll need Adobe Acrobat Reader to open these e-books. Some of the e-books (those that are in parts) are zipped.
If you are the copyright owner of any of these e-books and don't want me to share them, please, contact me and I will gladly remove them.
A New Interpretation of Information Rate — by J. L. Kelly Jr.
CCI Manual — by James L. O'Connell.
Nicktrader and Jeff Explaining Reverse and Regular Divers — from Woodies CCI Club Discussion From January 15,16 2004.
NickTrader on No Price CCI Divergence Trading — by Nicktrader.
Are Supply and Demand Driving Stock Prices? — by Carl Hopman.
The Sharpe Ratio — by William F. Sharpe.
The Interaction Between the Frequency of Market Quotes, Spread and Volatility in Forex — by Antonis A. Demos and Charles A. E. Goodhart, a scientific article from the Applied Economics.
Trend Determination — by John Hayden, a quick, accurate and effective methodology for trend determination on the financial markets.
Trend vs. No Trend — by Brian Dolan an article from TRADERS' Magazine July 2005 issue, which deals with the trend/no trend paradox encountered by many traders who think that "the trend is your friend".
A Six-Part Study Guide to Market Profile — by CBOT professionals — it describes the concept of the market profile in the smallest details.
How George Soros Knows What He Knows — by Flavia Cymbalista — the study of George Soros' market reflexivity.
Core Point and Figure Chart Patterns — by BlueChipOptions.com — a set of point-and-figure chart patterns and explanations of their application.
Sunday, September 27, 2009
Foreign Exchange Market
The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The trade happening in the forex markets across the globe exceeds $3.2 trillion/day (on an average) presently. Retail traders (small speculators) are a small part of this market.
According to the BIS study Triennial Central Bank Survey 2007, 30% of transactions were strictly interdealer (ie interbank); 43% involved a dealer (i.e. a bank) and a fund manager or some other non-bank financial institution; and 27% were between a dealer and a non-financial company.
Trading characteristics
There is no single unified foreign exchange market. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currency instruments are traded. This implies that there is no such thing as a single dollar rate - but rather a number of different rates (prices), depending on what bank or market maker is trading. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs.
The main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns. Traders can react to news when it breaks, rather than waiting for the market to open.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. Thus, forex trading may be perceived as a competition of minds.
According to the BIS study Triennial Central Bank Survey 2007, 30% of transactions were strictly interdealer (ie interbank); 43% involved a dealer (i.e. a bank) and a fund manager or some other non-bank financial institution; and 27% were between a dealer and a non-financial company.
Trading characteristics
There is no single unified foreign exchange market. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currency instruments are traded. This implies that there is no such thing as a single dollar rate - but rather a number of different rates (prices), depending on what bank or market maker is trading. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs.
The main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns. Traders can react to news when it breaks, rather than waiting for the market to open.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. Thus, forex trading may be perceived as a competition of minds.
Some Great Ways to Learn Easy Forex Trading
For those who are interested in online trading, Forex trading is very popular. It is said to be perfect for those traders who wants to make some gains by using their PCs. With the help of constantly change in currency trading market, traders can make a lot within few minutes. For those who have just started Forex trading but are not how to earn gains, easy Forex trading is very helpful. There are a number of ways to learn easy Forex. These can be:
Easy Forex trading Courses
Easy Forex trading softwares
Easy Forex trading guides
Easy Forex softwares are said to be one an easiest and effective method for Forex trading. Not much learning is required for the software. All you need to do is setup and rest will be taken care by it. These softwares are not only speedy but effective as well.
Alternatively, you can go for easy Forex trading courses as well. These courses can be joined online as well and will give you a good idea of how to become successful in Forex trading. Here are few tips for how to choose a Forex course:
Join a business course for Forex being offered in a nearby college or university. You will find a number of courses specifically targeted at Forex.
Online courses are also another option if you want to learn easy Forex. The flexibility of online Forex courses is that you can study from anywhere and anytime as well as get a 24-hour email correspondence and assistance.
Ensure that you join a credible course. You can ask for testimonies and the details of the course as well.
There are a number of easy Forex trading guides available online that will guide you in making money successfully. Simply search online and follow simple guides and strategies that will help you in making high gains.
Given are some Easy Forex tips to help you:
Buy when currency is low: It is recommended to buy a currency when the
Invest wisely: Making a lot of money easily is tempting but ensures that you do not invest in Forex trading more than the amount you can afford losing.
Keep details: You should keep details and logs of the bad as well as good trade. This will help you later on as you will avoid making erroneous decisions.
Familiarize yourself: You should get yourself familiar with the currency, the terms used in Forex trading, the rules of Forex market, understand the patterns and much more.
You can go for Forex Broker as well for easy Forex. Forex brokers will help you in becoming successful in Forex Trading by advising you to how much effectively invest. Forex brokers have experience in the Forex market and will rightly guide and advice you in return of a fee. When hiring a Forex broker, make sure that it is a credible one with experience and knowledge.
Easy Forex can be achieved if you have the right knowledge. You should also devise strategies in order to go for easy Forex along with following tips to help you in gaining successfully.
Easy Forex trading Courses
Easy Forex trading softwares
Easy Forex trading guides
Easy Forex softwares are said to be one an easiest and effective method for Forex trading. Not much learning is required for the software. All you need to do is setup and rest will be taken care by it. These softwares are not only speedy but effective as well.
Alternatively, you can go for easy Forex trading courses as well. These courses can be joined online as well and will give you a good idea of how to become successful in Forex trading. Here are few tips for how to choose a Forex course:
Join a business course for Forex being offered in a nearby college or university. You will find a number of courses specifically targeted at Forex.
Online courses are also another option if you want to learn easy Forex. The flexibility of online Forex courses is that you can study from anywhere and anytime as well as get a 24-hour email correspondence and assistance.
Ensure that you join a credible course. You can ask for testimonies and the details of the course as well.
There are a number of easy Forex trading guides available online that will guide you in making money successfully. Simply search online and follow simple guides and strategies that will help you in making high gains.
Given are some Easy Forex tips to help you:
Buy when currency is low: It is recommended to buy a currency when the
Invest wisely: Making a lot of money easily is tempting but ensures that you do not invest in Forex trading more than the amount you can afford losing.
Keep details: You should keep details and logs of the bad as well as good trade. This will help you later on as you will avoid making erroneous decisions.
Familiarize yourself: You should get yourself familiar with the currency, the terms used in Forex trading, the rules of Forex market, understand the patterns and much more.
You can go for Forex Broker as well for easy Forex. Forex brokers will help you in becoming successful in Forex Trading by advising you to how much effectively invest. Forex brokers have experience in the Forex market and will rightly guide and advice you in return of a fee. When hiring a Forex broker, make sure that it is a credible one with experience and knowledge.
Easy Forex can be achieved if you have the right knowledge. You should also devise strategies in order to go for easy Forex along with following tips to help you in gaining successfully.
Why should I learn forex?
If you hear from anyone that making money in Forex is easy, do not believe. It is a myth. The truth is – being profitable in Forex requires a lot of work, dedication, learn, practice, more than a good discipline, sharp knowledge of money management and understanding of the psychology of the currency market. Learn Forex before you start Trading, because to Earn you should Learn Forex.
If you are ready to Learn Forex / start Forex Trading, then this blog is for you. Here you will learn all details about forex / forex trading,
1) You will learn what is Forex and how to trade forex.
2) You will learn forex strategy / forex trading technique / forex trick.
3) You will learn how to draw forex trendline.
4) You will learn how to determine support and resistance.
5) You will learn how to use forex chart / forex indicator for entry & exit in forex market.
6) You will learn about risk management & money management.
7) You will learn how to calculate forex profit / losses and MORE.
Learn Forex: What Is It And How Does It Work? -
The currency (foreign exchange) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or "FOREX" or "FX" market for short. It is the biggest and most liquid market in the world with daily average turnover of US$1.9 trillion, and it is traded mainly through the 24 hour-a-day inter-bank currency market - the primary market for currencies.
Foreign Exchange simply means the buying of one currency and selling another at the same time. In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs
There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency.
The other 95% is trading for profit, or what you call speculation. Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted by the market.
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange. Forex literally follows the sun around the world. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
Currency Symbol / Currency Pair
EUR/USD = Euro / US Dollar
GBP/USD = Pounds Sterling/ US Dollar
USD/JPY = US Dollar / Japanese Yen
USD/CHF = US Dollar / Swiss Franc
USD/CAD = US Dollar / Canadian Dollar
AUD/USD = Australian Dollar / US Dollar
NZD/USD = New Zealand Dollar / US Dollar
Etc.
In excess of 85 percent of all daily transactions involve trading of the major currencies - Australian Dollar, British Pound, Canadian Dollar, Japanese Yen, Swiss Franc, and the U.S. Dollar.
Currencies are traded in pairs, meaning that you are really trading one currency for another. A simple way to understand this is to consider what you do when you go on foreign vacations. If you are an USA, and you plan to travel to another country, say Canada, then you might take say $10,000 USD to the bank to change it for Canadian dollars. Let’s say the exchange rate is 1.4000, then for your $10,000 USD they would give you $14,000 CAD. Now let’s say you didn’t spend the money and upon coming home you decide to change it back to USD currency. Now let’s say the exchange rate is 1.3700 (a change of 300 pips that could happen in a week), so your $14,000 CAD would convert back to $10,218.97 US. Therefore you just made $218.97, a 2.19% increase in funds.
Reading a FOREX quote may seem a bit confusing at first. However, it's really quite simple, when you see Forex quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer/ask. If we use the USD/JPY as example 115.37/115.40 the first number 115.37 is the bid price and is the price traders are prepared to buy USD against the JPY. The second number 115.40 is the offer price and is the price traders are prepared to sell the USD against the JPY.
Here in USD/JPY the currency listed first (USD) is the base currency and & the value of the base currency is always 1. A quote of USD/JPY 115 means that one U.S. dollar is equal to 115 Japanese yen. When this currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote increases from 115 to 117, it indicate dollar is stronger because it will now buy more yen than before.
What Next
Well now we have a basic understanding of how Forex market works what next? Now you are going to decide best way to trade the Forex market. The most common approaches are Forex fundamental analysis and Forex technical analysis.
Forex Fundamental analysis: Usually everyday, and often more than once a day, the currency pair will be moving along slowly (sideways movement, consolidation) and then all of a sudden it JUMPS! It very quickly moves up ten or more pips, usually in just a minute, and often continues to move strongly for another hour or so.
This is due to the release of a “Fundamental Announcement”, and of course any experienced trader should understand that they usually create a market movement.
Forex Technical Analysis: It is technique to learn Forex market using chart and indicator to predict the future price of a security.
WHAT YOU NEED
**BROKER:
A broker that provide good platform to trade Forex. MARKETIVA provide very good platform for Forex trading and also give $5 free to open an account.
**Learn Forex Money Management and Risk Analysis:
However, it is common that one afraid of being involved in Forex market because of high risk in this trading field. Although every capital market involves certain level of risk, the risk of loss in foreign currency trading market can be extensive. It would be wise to learn about the potential risk (and managing it) if you wish to trade in Forex market.
If you are ready to Learn Forex / start Forex Trading, then this blog is for you. Here you will learn all details about forex / forex trading,
1) You will learn what is Forex and how to trade forex.
2) You will learn forex strategy / forex trading technique / forex trick.
3) You will learn how to draw forex trendline.
4) You will learn how to determine support and resistance.
5) You will learn how to use forex chart / forex indicator for entry & exit in forex market.
6) You will learn about risk management & money management.
7) You will learn how to calculate forex profit / losses and MORE.
Learn Forex: What Is It And How Does It Work? -
The currency (foreign exchange) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or "FOREX" or "FX" market for short. It is the biggest and most liquid market in the world with daily average turnover of US$1.9 trillion, and it is traded mainly through the 24 hour-a-day inter-bank currency market - the primary market for currencies.
Foreign Exchange simply means the buying of one currency and selling another at the same time. In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs
There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency.
The other 95% is trading for profit, or what you call speculation. Investors frequently trade on information they believe to be superior and relevant, when in fact it is not and is fully discounted by the market.
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange. Forex literally follows the sun around the world. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
Currency Symbol / Currency Pair
EUR/USD = Euro / US Dollar
GBP/USD = Pounds Sterling/ US Dollar
USD/JPY = US Dollar / Japanese Yen
USD/CHF = US Dollar / Swiss Franc
USD/CAD = US Dollar / Canadian Dollar
AUD/USD = Australian Dollar / US Dollar
NZD/USD = New Zealand Dollar / US Dollar
Etc.
In excess of 85 percent of all daily transactions involve trading of the major currencies - Australian Dollar, British Pound, Canadian Dollar, Japanese Yen, Swiss Franc, and the U.S. Dollar.
Currencies are traded in pairs, meaning that you are really trading one currency for another. A simple way to understand this is to consider what you do when you go on foreign vacations. If you are an USA, and you plan to travel to another country, say Canada, then you might take say $10,000 USD to the bank to change it for Canadian dollars. Let’s say the exchange rate is 1.4000, then for your $10,000 USD they would give you $14,000 CAD. Now let’s say you didn’t spend the money and upon coming home you decide to change it back to USD currency. Now let’s say the exchange rate is 1.3700 (a change of 300 pips that could happen in a week), so your $14,000 CAD would convert back to $10,218.97 US. Therefore you just made $218.97, a 2.19% increase in funds.
Reading a FOREX quote may seem a bit confusing at first. However, it's really quite simple, when you see Forex quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer/ask. If we use the USD/JPY as example 115.37/115.40 the first number 115.37 is the bid price and is the price traders are prepared to buy USD against the JPY. The second number 115.40 is the offer price and is the price traders are prepared to sell the USD against the JPY.
Here in USD/JPY the currency listed first (USD) is the base currency and & the value of the base currency is always 1. A quote of USD/JPY 115 means that one U.S. dollar is equal to 115 Japanese yen. When this currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote increases from 115 to 117, it indicate dollar is stronger because it will now buy more yen than before.
What Next
Well now we have a basic understanding of how Forex market works what next? Now you are going to decide best way to trade the Forex market. The most common approaches are Forex fundamental analysis and Forex technical analysis.
Forex Fundamental analysis: Usually everyday, and often more than once a day, the currency pair will be moving along slowly (sideways movement, consolidation) and then all of a sudden it JUMPS! It very quickly moves up ten or more pips, usually in just a minute, and often continues to move strongly for another hour or so.
This is due to the release of a “Fundamental Announcement”, and of course any experienced trader should understand that they usually create a market movement.
Forex Technical Analysis: It is technique to learn Forex market using chart and indicator to predict the future price of a security.
WHAT YOU NEED
**BROKER:
A broker that provide good platform to trade Forex. MARKETIVA provide very good platform for Forex trading and also give $5 free to open an account.
**Learn Forex Money Management and Risk Analysis:
However, it is common that one afraid of being involved in Forex market because of high risk in this trading field. Although every capital market involves certain level of risk, the risk of loss in foreign currency trading market can be extensive. It would be wise to learn about the potential risk (and managing it) if you wish to trade in Forex market.
Forex Mini Trading
If you are just starting out in foreign currency trading then you will almost certainly want to start by trying your hand with a mini Forex trading account.
Although it varies from one broker to the next, a Forex trading account can usually be opened with $2,500 or more. However, for those who are new to the world of currency trading then a Forex mini trading account can often be opened for as little as just $250.
A standard account will usually be operated in trading lots of 100,000 (meaning that you have to purchase 100,000 dollars, euros, yen etc.) whereas a mini Forex account you will normally allow you to trade in lots of just 10,000.
A mini Forex trading account operates by allowing you to use leverage in trading so that you are effectively trading with more money than you actually have in your account. The leverage available will vary between brokers, but is typically in the region of 200 to 1.
So, what does this mean?
If we assume that the minimum required to trade a lot is $10,000 then, with a leverage of 200 to 1, you would be able to trade with as little as $50 ($50 X 200 = $10,000) and so, with an initial deposit of $250, you would be able to trade up to 5 lots.
This is of course a very simple introduction to online mini account Forex trading and there is a little bit more to it than portrayed here.
Nevertheless, the principle behind Forex mini trading is simply to allow those who are just starting out in the world of foreign exchange trading to learn the ropes without investing too much money or taking too high a risk.
Just look for Forex mini online or a Forex managed mini account and find a broker who offers a Forex mini demo and the best mini Forex fully automated trading.
Although it varies from one broker to the next, a Forex trading account can usually be opened with $2,500 or more. However, for those who are new to the world of currency trading then a Forex mini trading account can often be opened for as little as just $250.
A standard account will usually be operated in trading lots of 100,000 (meaning that you have to purchase 100,000 dollars, euros, yen etc.) whereas a mini Forex account you will normally allow you to trade in lots of just 10,000.
A mini Forex trading account operates by allowing you to use leverage in trading so that you are effectively trading with more money than you actually have in your account. The leverage available will vary between brokers, but is typically in the region of 200 to 1.
So, what does this mean?
If we assume that the minimum required to trade a lot is $10,000 then, with a leverage of 200 to 1, you would be able to trade with as little as $50 ($50 X 200 = $10,000) and so, with an initial deposit of $250, you would be able to trade up to 5 lots.
This is of course a very simple introduction to online mini account Forex trading and there is a little bit more to it than portrayed here.
Nevertheless, the principle behind Forex mini trading is simply to allow those who are just starting out in the world of foreign exchange trading to learn the ropes without investing too much money or taking too high a risk.
Just look for Forex mini online or a Forex managed mini account and find a broker who offers a Forex mini demo and the best mini Forex fully automated trading.
Forex Runner
Learn how to day trade the forex market and consistently nail $200, $300 or $400 trades over and over again. Forex Runner is simply one of the best day trading systems I have ever traded. And, being one of my unique PDFT strategies, you will not use any tools or indicators to trade it, the ONLY thing you will need is the price of the currency pair.Forex Runner let's you trade 100% emotion-free since it is completely mechanical. It's rules are incredibly easy to understand, it will not take you more than one hour to learn how to trade it.
One of the amazing characteristics of Forex Runner is that it let's you trade when ever you have time. Since the forex market is a 24 hour market, you have the luxury to decide exactly when it is best for you to put Forex Runner to work.
If you have been around for some time in the trading business you know how hard it is to find a consistently profitable day trading strategy. Forex Runner was built to be consistent. Small stop losses, large profit objectives and a large percentage of winning trades makes Forex Runner one of the top performing forex trading systems.Here are some of the many benefits Forex Runner traders have:A revolutionary Price Driven Forex Trading (PDFT) strategy.
You will not use any type of indicators, identify any vague patterns, or use support or resistance levels etc. You will only use the price of the currency pair to identify, enter and profit from the trade.You will learn how to exploit the daily range of the major currency pairs.How to enter "hit and run" trades; i.e. Identify fast, enter fast and profit fast!Fully disclosed system: no need to buy, rent or subscribe to any service. You control your trading, you decide when to trade, you decide how much to trade.
So easy to learn that most of my traders (many who are completely new to forex trading) put Forex Runner to work only 1 day after learning it.
No stress, no emotions: Since Forex Runner is 100% mechanical you will only follow strict rules to identify, enter and exit trades. No interpretation or judgment what so ever (if you trade already, you most likely know the value of 100% mechanical trading)!Cheat most daytradres! While 90% of traders will identify trades only after the market started moving (and trust me, most enter as the move is ending!), you will have already identified and entered trades BEFORE the market started moving.
Be your own boss, chose when to trade. Since the forex market is active 24 hours a day, no matter what part of the world you live in you can put Forex Runner to work for you!Profit objective is pre-set. This means you do not have to think and speculate where to place it. Once you enter the trade you will simply enter a "take profit" order and forget about it.
One of the amazing characteristics of Forex Runner is that it let's you trade when ever you have time. Since the forex market is a 24 hour market, you have the luxury to decide exactly when it is best for you to put Forex Runner to work.
If you have been around for some time in the trading business you know how hard it is to find a consistently profitable day trading strategy. Forex Runner was built to be consistent. Small stop losses, large profit objectives and a large percentage of winning trades makes Forex Runner one of the top performing forex trading systems.Here are some of the many benefits Forex Runner traders have:A revolutionary Price Driven Forex Trading (PDFT) strategy.
You will not use any type of indicators, identify any vague patterns, or use support or resistance levels etc. You will only use the price of the currency pair to identify, enter and profit from the trade.You will learn how to exploit the daily range of the major currency pairs.How to enter "hit and run" trades; i.e. Identify fast, enter fast and profit fast!Fully disclosed system: no need to buy, rent or subscribe to any service. You control your trading, you decide when to trade, you decide how much to trade.
So easy to learn that most of my traders (many who are completely new to forex trading) put Forex Runner to work only 1 day after learning it.
No stress, no emotions: Since Forex Runner is 100% mechanical you will only follow strict rules to identify, enter and exit trades. No interpretation or judgment what so ever (if you trade already, you most likely know the value of 100% mechanical trading)!Cheat most daytradres! While 90% of traders will identify trades only after the market started moving (and trust me, most enter as the move is ending!), you will have already identified and entered trades BEFORE the market started moving.
Be your own boss, chose when to trade. Since the forex market is active 24 hours a day, no matter what part of the world you live in you can put Forex Runner to work for you!Profit objective is pre-set. This means you do not have to think and speculate where to place it. Once you enter the trade you will simply enter a "take profit" order and forget about it.
Why trade in foreign currency exchange market?
Why trade Forex instead of stocks, futures, commodities, or options? Why more and more people nowadays started trading Forex at home? Perhaps the list of advantages in Forex trading has the answer.
In this chapter of Forex 101 Classroom, we will take a look on advantages in Forex trading.
Advantages in Forex currency trading
Equal Prospective in Rising or Falling Market Trend
There is no structural bias to the market and there are no restrictions on short selling in FX market. Trading in Forex gives you an equal prospective in rising and falling market.
As trades are always done in pair of currency pairs, Forex traders can always find chance to make money in anytime, regardless on the fall or rise period of one single country currency.
Trade Forex 24 hours a day
Forex market never sleeps. In Forex trading, you do not need to wait the market to open, you can always response to world latest movement and news immediately.
Every Sunday 5.00pm in New York, Forex market starts its week from Sydney, followed by Tokyo, Singapore, Hong Kong, London, and New York. In Forex tradng, you can always response to the market trend a lot faster than in any other trading market.
In this chapter of Forex 101 Classroom, we will take a look on advantages in Forex trading.
Advantages in Forex currency trading
Equal Prospective in Rising or Falling Market Trend
There is no structural bias to the market and there are no restrictions on short selling in FX market. Trading in Forex gives you an equal prospective in rising and falling market.
As trades are always done in pair of currency pairs, Forex traders can always find chance to make money in anytime, regardless on the fall or rise period of one single country currency.
Trade Forex 24 hours a day
Forex market never sleeps. In Forex trading, you do not need to wait the market to open, you can always response to world latest movement and news immediately.
Every Sunday 5.00pm in New York, Forex market starts its week from Sydney, followed by Tokyo, Singapore, Hong Kong, London, and New York. In Forex tradng, you can always response to the market trend a lot faster than in any other trading market.
What is Auto Forex Trading Software?
Auto Forex Trading or Forex robot does not require you to compromise on your work and sit for hours in front of the computer. Its intelligent design scans and identifies the best trading options and even performs the trade for you. So eat, sleep, and relax and allow your auto forex trading software to earn money for you.
If you want to do auto forex trading and simply follow clear signals, then the system enclosed is for you. Your Forex robot will scan the Forex market round the clock, analyze all trading options, identify the most profitable ones, and perform the trade for you. Yes, now all your dreams of making fast money can finally come true with this auto forex trading software.
Auto Forex Trading software provides a lot of benefits.
• Affordable price and easy installation: forex software system trading comes at a pretty affordable price and can be installed on your computer in two minutes.
• 60-day money back guarantee: You can always ask for a refund of your money if you feel that the forex software system trading is not beneficial for you.
• Meticulous and precise analysis of the forex market trading: Auto forex trading software is capable of making complicated mathematical and scientific calculations to figure out the most forex trading profitable.
Of course you can buy a forex trading system from a vendor - but normally there a waste of money, as they never have a track record that real - it's a paper back test, knowing all the facts!
Forex market trading exhibit big trends and these trends normally start and carry on from new market lows and highs, so essentially it's a long term breakout methodology which works and will continue to work.
Either way it makes money long term but the filter smoothes the short term equity curve. The other problem traders have is executing a long term trend following system with discipline and holding big moves. If on the other hand you have discipline and patience and look long term, this system can make huge gains. Surprised! You can now literally double your money in a month by trading in the Forex market trading. This foreign exchange market deals with the buying and selling of currencies of different nations and prides itself as being the world's biggest and the most liquid financial trade market.
If you want to do auto forex trading and simply follow clear signals, then the system enclosed is for you. Your Forex robot will scan the Forex market round the clock, analyze all trading options, identify the most profitable ones, and perform the trade for you. Yes, now all your dreams of making fast money can finally come true with this auto forex trading software.
Auto Forex Trading software provides a lot of benefits.
• Affordable price and easy installation: forex software system trading comes at a pretty affordable price and can be installed on your computer in two minutes.
• 60-day money back guarantee: You can always ask for a refund of your money if you feel that the forex software system trading is not beneficial for you.
• Meticulous and precise analysis of the forex market trading: Auto forex trading software is capable of making complicated mathematical and scientific calculations to figure out the most forex trading profitable.
Of course you can buy a forex trading system from a vendor - but normally there a waste of money, as they never have a track record that real - it's a paper back test, knowing all the facts!
Forex market trading exhibit big trends and these trends normally start and carry on from new market lows and highs, so essentially it's a long term breakout methodology which works and will continue to work.
Either way it makes money long term but the filter smoothes the short term equity curve. The other problem traders have is executing a long term trend following system with discipline and holding big moves. If on the other hand you have discipline and patience and look long term, this system can make huge gains. Surprised! You can now literally double your money in a month by trading in the Forex market trading. This foreign exchange market deals with the buying and selling of currencies of different nations and prides itself as being the world's biggest and the most liquid financial trade market.
Friday, September 25, 2009
-Futures Versus Forex (Foreign Exchange Market)
Todays current futures market is quite unlike the futures of the 19th century. Todays future market is a worldwide one that includes manufactured goods, financial currencies and treasury bonds, and agricultural products.
When you speculate on futures it is not the actual good that is speculated upon rather it is the contract for the goods that is traded as value. Every futures contract includes a buyer and a seller. The following is an example of a futures speculation: A farmer agrees to deliver 1000 bushels of corn to a baker at a price of $5.00 a bushel. If the daily price of corn futures falls to $4.00 a bushel, the farmer's account is credited with $1000 ($5.00 — $4.00 X 1000 bushels) and the baker's account is debited by the same amount. Futures accounts are settled every day.
Using the above as an example this is how the contract settlement would play out: If the price of corn futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost an equal amount. However, the baker can now purchase corn on the open market at $4.00 a bushel — $1000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of corn. Also, the farmer must sell his corn on the open market for $4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.
The FOREX market has advantages over the futures market. FOREX is the largest financial market in the world. It is a liquid market and stop orders can be executed more easily and with less slippage than in other markets. The FOREX market is open 5 days a week, 24 hours a day. Traders can take advantages of opportunities as they become available. FOREX transactions are usually instantly executed. FOREX transactions are commission free. Brokers earn money on the spread. Some investors feel that due to built in safeguards that FOREX trading is safer than futures trading.
When you speculate on futures it is not the actual good that is speculated upon rather it is the contract for the goods that is traded as value. Every futures contract includes a buyer and a seller. The following is an example of a futures speculation: A farmer agrees to deliver 1000 bushels of corn to a baker at a price of $5.00 a bushel. If the daily price of corn futures falls to $4.00 a bushel, the farmer's account is credited with $1000 ($5.00 — $4.00 X 1000 bushels) and the baker's account is debited by the same amount. Futures accounts are settled every day.
Using the above as an example this is how the contract settlement would play out: If the price of corn futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost an equal amount. However, the baker can now purchase corn on the open market at $4.00 a bushel — $1000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of corn. Also, the farmer must sell his corn on the open market for $4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.
The FOREX market has advantages over the futures market. FOREX is the largest financial market in the world. It is a liquid market and stop orders can be executed more easily and with less slippage than in other markets. The FOREX market is open 5 days a week, 24 hours a day. Traders can take advantages of opportunities as they become available. FOREX transactions are usually instantly executed. FOREX transactions are commission free. Brokers earn money on the spread. Some investors feel that due to built in safeguards that FOREX trading is safer than futures trading.
-Reality of Online Forex Trading
Foreign exchange trading is the trading of currencies. Most currencies can be traded. Huge amounts of currencies are traded 24 hours a day, 5 days a week. On average $1.9 trillion is traded a day. The most traded are United States Dollar, Japanese Yen, Euro, Canadian Dollar, British Pound Sterling, Australian Dollar and Swiss Franc.
Many brokers will let you open an account with a starting balance of just $250. Though that may seem small, remember you will be trading on margin. Your $250 investment may let you control $25,000. As with all investments there are risks so make sure you take the time to study the markets and your exposure before making your first trades. I highly recommend that you do some paper trades first to make sure you have understood how the markets work. No risk training, just write down the trades you would have done for real and chart the prices. Buy and sell and see if you have the right strategy before making real trades.
A fast internet connection will allow you to do forex trading online. Your broker will give you many online tools to allow you to study the markets: Real time quotes, news feeds:
Visit different broker's websites and compare the services they offer. Some brokers give you the possibility to open demo accounts. Do so, to test their software and find the one you like best.
Before you start trading make sure that you have learnt the terminology: Market Order, Limit Order, Stop Order. You may find the definitions of these terms and more information at http://www.forex.value-guides.com/calc-forex.html Calculating Forex Profits And Losses.
All currencies have standard identifying code used worldwide, some examples are: EUR (European euros), GBP (United Kingdom pounds), AUD (Australian dollars). Of course you don't have to know them all but it may be good to be able to recognize all the major currencies codes so that you will be able to make quick decisions.
To make sound evaluations, you need information. Follow carefully the world's current events, economic and political news. You will be surprised to see how, what may seem to you as insignificant will cause the currencies markets to fluctuate wildly.
Many brokers will let you open an account with a starting balance of just $250. Though that may seem small, remember you will be trading on margin. Your $250 investment may let you control $25,000. As with all investments there are risks so make sure you take the time to study the markets and your exposure before making your first trades. I highly recommend that you do some paper trades first to make sure you have understood how the markets work. No risk training, just write down the trades you would have done for real and chart the prices. Buy and sell and see if you have the right strategy before making real trades.
A fast internet connection will allow you to do forex trading online. Your broker will give you many online tools to allow you to study the markets: Real time quotes, news feeds:
Visit different broker's websites and compare the services they offer. Some brokers give you the possibility to open demo accounts. Do so, to test their software and find the one you like best.
Before you start trading make sure that you have learnt the terminology: Market Order, Limit Order, Stop Order. You may find the definitions of these terms and more information at http://www.forex.value-guides.com/calc-forex.html Calculating Forex Profits And Losses.
All currencies have standard identifying code used worldwide, some examples are: EUR (European euros), GBP (United Kingdom pounds), AUD (Australian dollars). Of course you don't have to know them all but it may be good to be able to recognize all the major currencies codes so that you will be able to make quick decisions.
To make sound evaluations, you need information. Follow carefully the world's current events, economic and political news. You will be surprised to see how, what may seem to you as insignificant will cause the currencies markets to fluctuate wildly.
Tuesday, September 15, 2009
Welcome To The World Of Forex
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. 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.
Forex is becoming more and more popular due to its availability over the internet and current high speed internet. Some people have made a living out of forex trading. Its not easy but we all have to start somewhere. Here there will be infomation on forex trading, forex brokers, forex signal, forex chart, technical study and fundamental study of forex and lots more.
There will be other posters, other forex traders that will contribute article here. Come and learn to trade forex. See how easy it is actually to make money and to lose money as well.
Forex is becoming more and more popular due to its availability over the internet and current high speed internet. Some people have made a living out of forex trading. Its not easy but we all have to start somewhere. Here there will be infomation on forex trading, forex brokers, forex signal, forex chart, technical study and fundamental study of forex and lots more.
There will be other posters, other forex traders that will contribute article here. Come and learn to trade forex. See how easy it is actually to make money and to lose money as well.
How To Create Your Own Forex System
Everyone must start from scratch in Forex. Some people may have the advantage in certain way but we are all equal in the land of forex.
In the beginning, most of you will try out different system and indicators. This is the process of learning. Some people may have up to 20 indicators on screen but in the end those indicators will be cut down to maybe just 3-5.
This happen because the human brain is the best processor there is. With experience we will learn the behaviour of forex and reduce the need for indicators. I have a few friends that finally develop their own trading system and they are profitable up till today. How do i know they are in profit? That is because they have been trading forex for more than a year now.
In forex there a lot of indicators available on the internet. In order for you to create your own trading system, you must understand that less is more. The less indicators you use the easier it is to trade. Lets start on how I created my own trade system.
Of all the indicators that you have tested, take the best 5 and list them down from the best to the worst. Load all the indicators on screen. Look at how the interect with each other. The best indicator is your main signal. This where your buy or sell decision comes from. Your 2nd best indicator is your filter. 3rd your target entry or exit. 4th trend indicator.
Personally nowdays i need only 1 indicator if im scalping. The most simple system is the best. In order to do long term trade i need a few indicators since finding the best entry point is a bit tricky. Below are the list of indicators im using. Maybe could give you some ideas:
1. William %R
2. MACD
3. EMA
4. Kijun Sen
Those are my indicators. Only 4 listed from best to worst. Btw William %R is a really good one if you know how to use it. Happy trading....
In the beginning, most of you will try out different system and indicators. This is the process of learning. Some people may have up to 20 indicators on screen but in the end those indicators will be cut down to maybe just 3-5.
This happen because the human brain is the best processor there is. With experience we will learn the behaviour of forex and reduce the need for indicators. I have a few friends that finally develop their own trading system and they are profitable up till today. How do i know they are in profit? That is because they have been trading forex for more than a year now.
In forex there a lot of indicators available on the internet. In order for you to create your own trading system, you must understand that less is more. The less indicators you use the easier it is to trade. Lets start on how I created my own trade system.
Of all the indicators that you have tested, take the best 5 and list them down from the best to the worst. Load all the indicators on screen. Look at how the interect with each other. The best indicator is your main signal. This where your buy or sell decision comes from. Your 2nd best indicator is your filter. 3rd your target entry or exit. 4th trend indicator.
Personally nowdays i need only 1 indicator if im scalping. The most simple system is the best. In order to do long term trade i need a few indicators since finding the best entry point is a bit tricky. Below are the list of indicators im using. Maybe could give you some ideas:
1. William %R
2. MACD
3. EMA
4. Kijun Sen
Those are my indicators. Only 4 listed from best to worst. Btw William %R is a really good one if you know how to use it. Happy trading....
ITS NOT THE SYSTEM
After more than 2 years of trading, I can tell you a story about forex system. Forex system is a way to trade to have higher chances of profit. Unfortunately not all forex system works. This is because its not the system that is not working. It is you.
What if I tell you that I have a system that consist of Moving Average only. The system can make profit and will minimize you loses or even give you a chance to break even during hard times.
You would be thirll to test it out only to find out that in the end you are losing money and you say the system is crap. The truth is if one person is making money using the exact same system yet you are losing money. So where do you think the fault is? Is it with the system or is it with yourself?
You can never gain profit in Forex until you figure out what is wrong with you. Most of the time when you are losing money you would blame it on the market, news, system etc but never on yourself. Until you figure out what you did wrong, any system no matter how good will fail in your hands. After you realize what you did wrong, then you can make money, seriously.
When you know what not to do, you can trade without any indicator. I myself is trading using only MA now. Took me a while to understand but once you see it, you no longer depending on any indicator. It is your judgement that counts.
I never know what I would learn the further I go in this world or Forex. Right now I am starting to understand why some traders trade without any indicator. The best indicator is in your brain. You just need to develope it. It will take some time. No hurry
What if I tell you that I have a system that consist of Moving Average only. The system can make profit and will minimize you loses or even give you a chance to break even during hard times.
You would be thirll to test it out only to find out that in the end you are losing money and you say the system is crap. The truth is if one person is making money using the exact same system yet you are losing money. So where do you think the fault is? Is it with the system or is it with yourself?
You can never gain profit in Forex until you figure out what is wrong with you. Most of the time when you are losing money you would blame it on the market, news, system etc but never on yourself. Until you figure out what you did wrong, any system no matter how good will fail in your hands. After you realize what you did wrong, then you can make money, seriously.
When you know what not to do, you can trade without any indicator. I myself is trading using only MA now. Took me a while to understand but once you see it, you no longer depending on any indicator. It is your judgement that counts.
I never know what I would learn the further I go in this world or Forex. Right now I am starting to understand why some traders trade without any indicator. The best indicator is in your brain. You just need to develope it. It will take some time. No hurry
TRADING ONLY WITH MOVING AVERAGE
At the moment I am rather busy. Moving to a new place and house. The house still needs a lot of work. As a result, I do not have time to update this blog. Trading is still going on but on a shorter timeframe. Result is consistent now. AudUsd is very kind at the moment with no sudden movement.
In the next few weeks I will show you how to trade using only MA. As usual what works for me may not work for you. This is because some of you may not be able to follow the rules of the game.
RULES OF THE GAME
1. Trade based on your capital and the time that you have. The bigger your capital the longer the TF. The more time you have the longer the TF. Vice versa.
2. Only trade at the direction pointed by the MA pairs. If the MA pairs is showing mixed direction, do not trade. The MA pairs must be pointing at the same direction.
3. If a trade suddenly change direction, do not hesitate to close it at a loss and turn the trade. This is the hardest part where most of you failed. Free your mind or become a loser all your life.
4. Keep in mind, there is no such thing as winning all the time. Just make sure you win a lot more than you lose. In the end your profit will grow along with your confident.
Simple system with simple rules. I like to keep it simple. No point of having the most complex system when simple system can have the same result. With this system you will be out of the market most of the time. This is because you will only be taking the big move and avoiding the small move and market noise.
Last advise. Do not anticipate. Forex is not a game of inteligence eventhough this system at full swing will show you possible turning point. I am having a possible turning point for audusd at 0.7200 but I will not take it coz there will be market swing before the actual turn. Why wast time waiting for the big move when you can actually see when its going to move.
In the mean time, good luck for all of you. I will be back once my pc is online again. At the moment I am posting this on a laptop. I dont like laptop, too small keypad, makes it hard to do speed typing.
In the next few weeks I will show you how to trade using only MA. As usual what works for me may not work for you. This is because some of you may not be able to follow the rules of the game.
RULES OF THE GAME
1. Trade based on your capital and the time that you have. The bigger your capital the longer the TF. The more time you have the longer the TF. Vice versa.
2. Only trade at the direction pointed by the MA pairs. If the MA pairs is showing mixed direction, do not trade. The MA pairs must be pointing at the same direction.
3. If a trade suddenly change direction, do not hesitate to close it at a loss and turn the trade. This is the hardest part where most of you failed. Free your mind or become a loser all your life.
4. Keep in mind, there is no such thing as winning all the time. Just make sure you win a lot more than you lose. In the end your profit will grow along with your confident.
Simple system with simple rules. I like to keep it simple. No point of having the most complex system when simple system can have the same result. With this system you will be out of the market most of the time. This is because you will only be taking the big move and avoiding the small move and market noise.
Last advise. Do not anticipate. Forex is not a game of inteligence eventhough this system at full swing will show you possible turning point. I am having a possible turning point for audusd at 0.7200 but I will not take it coz there will be market swing before the actual turn. Why wast time waiting for the big move when you can actually see when its going to move.
In the mean time, good luck for all of you. I will be back once my pc is online again. At the moment I am posting this on a laptop. I dont like laptop, too small keypad, makes it hard to do speed typing.
Fundamentals of a Good Web Host
Finding a web host is easy, but finding a good one is hard. Really, all you need to do to find one is to Google the words 'web host' and you will be overcome by thousands of hits, from hundreds of different companies who will be offering you their brand of the best web hosting solution out there. What you need to understand is that anyone can offer you this service, but only a select few can have the services and the resources to give you a good web hosting service.
What this article is going to do is to just list down some of the features that you might want to look out for when talking about web hosts that will be able to support your needs and then some. These are just some general guidelines and some of the basics that these hosts must live up to. Depending on the nature of why you need a web host, you might want to look at other more advanced features. One of the things you need to look out for is the digital disk space that will be allotted to you when you sign up with their service. The thing is, one of the main problems that people encounter when getting a good web host is that they do not get enough disk space.
Make sure that you get more than you need when you are signing up with a host, because the whole point of getting a website is to be able to expand at a later date. One of the more common sizes to look out for is above 100 megs, and some may consider in excess of 500 megs depending on the type of website and the sort of volume that you may be expecting. Another thing you need to look out for is the type of bandwidth and the sort of network technology that they are using. 56K is not going to cut it, but you get the idea. Normally a server would at least run something like a T1 or faster connection on multiple ports to support domain names.
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
http://secure.hostgator.com/cgi-bin/affiliates/clickthru.cgi?id=atinder
What this article is going to do is to just list down some of the features that you might want to look out for when talking about web hosts that will be able to support your needs and then some. These are just some general guidelines and some of the basics that these hosts must live up to. Depending on the nature of why you need a web host, you might want to look at other more advanced features. One of the things you need to look out for is the digital disk space that will be allotted to you when you sign up with their service. The thing is, one of the main problems that people encounter when getting a good web host is that they do not get enough disk space.
Make sure that you get more than you need when you are signing up with a host, because the whole point of getting a website is to be able to expand at a later date. One of the more common sizes to look out for is above 100 megs, and some may consider in excess of 500 megs depending on the type of website and the sort of volume that you may be expecting. Another thing you need to look out for is the type of bandwidth and the sort of network technology that they are using. 56K is not going to cut it, but you get the idea. Normally a server would at least run something like a T1 or faster connection on multiple ports to support domain names.
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
http://secure.hostgator.com/cgi-bin/affiliates/clickthru.cgi?id=atinder
Web Hosting, Reseller Hosting, and Dedicated Hosting
Now hosting over 1,800,000 domains!
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
Host Gator provides Shared, Reseller and Dedicated web hosting solutions. Our services are designed for both beginners and professionals. All of our shared plans include a 99.9% uptime guarantee, 24/7 support and a 45-day money back guarantee.
Determinants of FX Rates
The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions which seldom hold true in the real world.
(b) Balance of payments model. This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
* Government budget deficits or surpluses
* The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends
* The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
(a) International parity conditions viz; purchasing power parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions which seldom hold true in the real world.
(b) Balance of payments model. This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include:
* Government budget deficits or surpluses
* The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends
* The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Today's Currency World
In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
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