The one thing that is turning the world upside down

What happened in the span of three weeks that enabled the market to lose its confidence in a global recovery? For some months there, things were going well – numbers out of the US and Europe were promising, they did not give a clear cut date for when things will be back to normal, but they did leave many with a glimmer of hope that it will be soon.

I know I have been mocking all of those optimists in the past, and I am – but really? What is the turning point on the market sentiment, that has caused things to go south in Forex land?

It is not the Jobs numbers out of Europe and the US, if it were, then there would have been no hope in May or April either as jobs still fell hard – just not as hard as in June. It could not be the constant ramblings out of the BRIC’s about a new reserve currency for global consumption - this story has been playing out for six months and has been etched on every Forex online trader’s mind ever since – simply, it has been traded out already.

It cannot be the yapping from ECB president Trichet about how things are getting better later than expected – he did this twice and people expect it already from him.

So what can it be? The easiest answer is buried thousands of feet below us – the black gold, oil. I read an article on Sunday in the New York Times that spoke of how the ups and downs in the price of oil has really hurt the financial sector and its ability to stabilize.
As oil prices fluctuate up and down, losing more than 2/3rds of its highest value and then doubling from there and then dropping off 10% in a week, we see the lack of a pattern and hence - the problem.

Most thriving economies rely on energy to move, when the price of the primary energy source is uncertain from day-day, it makes planning for the future quite difficult. Forex traders and those in the Online Forex arena are not too familiar with this level of volatility.

While currency prices do fluctuate up and down, there are never these massive swings – but lately things have been changing, and I am not so sure this is a good thing for the overall Forex market.

One of the things that made the Forex great was the relative stability, and now it seems as if this era is over. Perhaps China, Brazil, India and Russia can make black gold their new reserve, perhaps this will help stabilize the price.

The idea that something like grease can affect change all over the world is humorous – I just don’t know if I should laugh or cry about it.

US Dollar on a See-saw Ride

The US Dollar jumped higher against most currencies on Friday after a data release showed that the rate of job losses in the US slowed more than expected last month.

The data capped a week filled with very strong data that suggested the US economy will recover before other economies, and that will lead to higher interest rates and boost the value of Dollar related assets.

This Forex trading pattern was a turn for the Dollar which has been trading down on good news during this crisis. This appears to mark a return to simple fundamentals where trades are made based on economic growth and interest rate speculation.

At the close, the Dollar was up 1.3% to the Euro to 1.4181, up 1.5% to the Japanese Yen to 97.54 up .92% to the British Pound to 1.6681, up .34% to the Canadian Dollar to 1.0811, up .6% to the Australian Dollar to .0837 and up 1.2% to the Swiss Franc to 1.0808. The Dollar did lose .3% to the New Zealand Dollar to .672 - it's only loss of the day.

Years of Colonialism is the Sterling's Saving Grace

Moody’s came back yesterday to haunt the British Treasury. Nearly six months after the rating agency lowered the rating on the sovereign nations debt, they came back yesterday with a warning that the country will be in negative territory for the next year to year and a half.

With all the whispering about the true state of the UK economy, publicly seen as stabilizing while privately seen as fledgling, the independent auditors at Moody’s has seemingly undermined political efforts to paint a brighter picture.

The result of this effort was a drop across the board in the Sterling, which has not performed as bad as it could have been after the parliamentary corruption scandal of the early summer. In fact, British lawmakers have been scarcely seen on television or the newspapers for that matter, keeping a low profile to avoid any further scrutiny that could bring back the calls for a House of Commons overhaul.

To this end, even the Exchequer, Alistair Darling and Prime Minister Gordon Brown have been less than visible since the scandal – only talking when necessary and not really saying much when they do.

It should not come as a surprise that Moody’s found the British economy in bad shape and is forecasting a bleak immediate future. With record unemployment, manufacturing and exports down to 50 year lows, cost of basic goods rising considerably and increasing poverty at the middle class level, it is a given that they are in trouble.

However, the opinion I hold on the fate of the Sterling in relationship to the current economic climate is bold, by any accounts, and contradictory to the Moody’s report. Here is why:

I believe that the Sterling is one of the most fairly valued currencies in the Forex online market at this moment because of Gold. The UK spent hundreds of years pillaging and plundering the nations of the world for every natural resource it could find, especially Gold.

So the past 60 years has seen the Brits give back the land they occupied, the deals did not include the treasures. The UK has by far one of the largest collections of Gold reserves, next to the Vatican of course, and the price of this precious metal has been on the rise topping $1,000 per ounce last week.

Even if the economy spends another two years in depression, the value of the Sterling can be stable based on their reserves. I am not a fan of the British economic policies and I do believe that the ease in which they have gone about spending citizen funds on bailouts has contributed to their situation, but I must respect the almighty Sterling – it has for a long time, and will for a long time to come, be worth every penny (or should I say quid?).

Impact of General Motors News on Forex Market

GM did it, they went bankrupt and left the US taxpayers with a 60% stake in a car company. If you consider the money they put into it before – ergo 20 Billion Dollars, they actually own more than 70%, but no matter, the deed was done and the affect on the mood and currency of the US is set. The dollar fell hard yesterday to new long time lows against a bunch of currencies – and in my opinion the pressure will be on it for some time.

You see while the street revels in the stock market gains from the past three months, up over 30%, many attribute that success to the light at the end of the tunnel. There is no real recovery yet, just glimpses of hope that there will be one soon and as an established investor would know, that is all the market needs.

The markets tend to exaggerate their movements, when things might be bleak they panic and sell and when the situation appears to have an end – even though it is not close – they buy. But the Forex Online Market is different; Forex markets cannot hide behind estimates and soft numbers, the market deals with reality mixed in with a little bit of fear. The truth about the US is that they are spending money like crazy, money their president admitted they don’t have, money that the entire world does not own – and as a result the interest rates on their debt instruments are raising. Inflation will hit the US – and most probably England for the same reason. How bad it gets depends upon how both governments handle crises like the GM bankruptcy in the future.

I am a capitalist. Company’s come and company’s go. If the US let them go before they interfered and committed so much money into it, the vacuum that is created will be filled by someone else. The land of opportunity is now stifling that, and it is the change from that value which might come back to bite them in the long run.

Exchange rate

In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency.

For example an exchange rate of 102 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 102 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 3.2 trillion USD worth of currency changes hands every day.

The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date

Quotations

An exchange system quotation is given by stating the number of units of "term currency" (or "price currency" or "quote currency") that can be bought in terms of 1 "unit currency" (also called "base currency"). For example, in a quotation that says the EURUSD exchange rate is 1.4320 (1.4320 USD per EUR), the term currency is USD and the base currency is EUR.

There is a market convention that determines which is the base currency and which is the term currency. In most parts of the world, the order is: EUR – GBP – AUD – NZD – USD – others. Thus if you are doing a conversion from EUR into AUD, EUR is the base currency, AUD is the term currency and the exchange rate tells you how many Australian dollars you would pay or receive for 1 euro. Cyprus and Malta which were quoted as the base to the USD and others were recently removed from this list when they joined the euro. In some areas of Europe and in the non-professional market in the UK, EUR and GBP are reversed so that GBP is quoted as the base currency to the euro. In order to determine which is the base currency where both currencies are not listed (i.e. both are "other"), market convention is to use the base currency which gives an exchange rate greater than 1.000. This avoids rounding issues and exchange rates being quoted to more than 4 decimal places. There are some exceptions to this rule e.g. the Japanese often quote their currency as the base to other currencies.

Currency Band

The currency band is a system of exchange rates by which a floating currency is backed by hard money.

A country selects a range, or "band", of values at which to set their currency, and returns to a fixed exchange rate if the value of their currency shifts outside this band. This allows for some revaluation, but tends to stabilize the currency's value within the band. In this sense, it is a compromise between a fixed (or "pegged") exchange rate and a floating exchange rate. For example, the exchange rate of the renminbi of the mainland of the People's Republic of China has recently been based upon a currency band.

Foreign Exchange Hedge

A way for companies to eliminate foreign exchange (FOREX) risk when dealing in foreign currencies. This can be done using either the cash flow or the fair value method. The accounting rules for this are addressed by both the International Financial Reporting Standards (IFRS) and by the US Generally Accepted Accounting Principles (US GAAP).

Foreign Exchange Risk

When companies conduct business across borders, they must deal in foreign currencies . Companies must exchange foreign currencies for home currencies when dealing with receivables, and vice versa for payables. This is done at the current exchange rate between the two countries. Foreign exchange risk is the risk that the exchange rate will change unfavorably before the currency is exchanged.

Hedge

A hedge is a type of derivative, or a Financial instrument, that derives its value from an underlying asset. This concept is important and will be discussed later. Hedging is a way for a company to minimize or eliminate foreign exchange risk. Two common hedges are forwards and options. A Forward contract will lock in an exchange rate at which the transaction will occur in the future. An option sets a rate at which the company may choose to exchange currencies. If the current exchange rate is more favorable, then the company will not exercise this option.

Exchange Rate Regime

The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors.

The basic types are a floating exchange rate, where the market dictates the movements of the exchange rate, a pegged float, where the central bank keeps the rate from deviating too far from a target band or value, and the fixed exchange rate, which ties the currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro.
Types
Float

Main article: Floating exchange rate

Floating rates are the most common exchange rate regime today. For example, the dollar, euro, yen, and British pound all float. However, since central banks frequently intervene to avoid excessive appreciation/depreciation, these regimes are often called managed float or a dirty float.
Pegged float

Fixed Exchange Rate

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.

A fixed exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to. This facilitates trade and investments between the two countries, and is especially useful for small economies where external trade forms a large part of their GDP.

It is also used as a means to control inflation. However, as the reference value rises and falls, so does the currency pegged to it. In addition, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.
Overview

A former president of the Federal Reserve Bank of New York described fixed currencies as follows:

Fixing value of the domestic currency relative to that of a low-inflation country is one approach central banks have used to pursue price stability. The advantage of an exchange rate target is its clarity, which makes it easily understood by the public. In practice, it obliges the central bank to limit money creation to levels comparable to those of the country to whose currency it is pegged. When credibly maintained, an exchange rate target can lower inflation expectations to the level prevailing in the anchor country. Experiences with fixed exchange rates, however, point to a number of drawbacks. A country that fixes its exchange rate surrenders control of its domestic monetary policy.

Linked exchange rate

A linked exchange rate system is a type of exchange rate regime to link the exchange rate of a currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The Macao pataca (MOP) is similarly linked to the Hong Kong dollar.

Unlike a fixed exchange rate system, the government or central bank does not actively interfere in the foreign exchange market by controlling supply and demand of the currency in order to influence the exchange rate. The exchange rate is stabilised by a mechanism.

History

As a response to the Black Saturday crisis in 1983, the linked exchange rate system was adopted in Hong Kong on October 17, 1983 through the currency board system[1]. The redemption of certificates of indebtedness (for backing the banknotes) were sent out by note-issuing banks to peg the domestic currency against the US dollar at an internal fixed rate of HKD $7.80 = USD $1[2].

The Hong Kong Monetary Authority (HKMA), Hong Kong's de facto central bank, authorised note-issuing banks are to issue banknotes. These banks are required to have the same amount of USD to issue banknotes. The HKMA guarantees to exchange USD into HKD, or vice versa, at the rate of 7.80. When the market rate is below 7.80, the banks will convert USD for HKD from the HKMA, HKD supply will be increased, and the market rate will climb back to 7.80. The same mechanism also works when the market rate is above 7.80, and the banks will convert HKD for USD.

Foreign exchange reserves

Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions. This broader figure is more readily available, but it is more accurately termed official international reserves or international reserves. These are assets of the central bank held in different reserve currencies, such as the dollar, euro and yen, and used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions.

History

Official international reserves, the means of official international payments, formerly consisted only of gold, and occasionally silver. But under the Bretton Woods system, the US dollar functioned as a reserve currency, so it too became part of a nation's official international reserve assets. From 1944-1968, the US dollar was convertible into gold through the Federal Reserve System, but after 1968 only central banks could convert dollars into gold from official gold reserves, and after 1973 no individual or institution could convert US dollars into gold from official gold reserves. Since 1973, all major currencies have not been convertible into gold from official gold reserves. Individuals and institutions must now buy gold in private markets, just like other commodities. Even though US dollars and other currencies are no longer convertible into gold from official gold reserves, they still can function as official international reserves.

Foreign currency mortgage

A foreign currency mortgage is a mortgage which is repayable in a currency other than the currency of the country in which the borrower is a resident. Foreign currency mortgages can be used to finance both personal mortgages and corporate mortgages.

The interest rate charged on a Foreign currency mortgage is based on the interest rates applicable to the currency in which the mortgage is denominated and not the interest rates applicable to the borrower's own domestic currency. Therefore, a Foreign currency mortgage should only be considered when the interest rate on the foreign currency is significantly lower than the borrower can obtain on a mortgage taken out in his or her domestic currency.

Borrowers should bear in mind that ultimately they have a liability to repay the mortgage in another currency and currency exchange rates constantly change. This means that if the borrower's domestic currency was to strengthen against the currency in which the mortgage is denominated, then it would cost the borrower less in domestic currency to fully repay the mortgage. Therefore, in effect, the borrower makes a capital saving.

Conversely, if the exchange rate of borrowers domestic currency were to weaken against the currency in which the mortgage is denominated, then it would cost the borrower more in their domestic currency to repay the mortgage. Therefore, the borrower makes a capital loss.

World currency

In the foreign exchange market and international finance, a world currency or global currency refers to a currency in which the vast majority of international transactions take place and which serves as the world's primary reserve currency.

A world currency is at one extreme of a conceptual spectrum that has local currency at the other extreme.

Currencies have many forms depending on several properties: type of issuance, type of issuer and type of backing. The particular configuration of those properties leads to different types of money. The pros and cons of a currency are strongly influenced by the type proposed. Consider, for example, the properties of a complementary currency.

The euro and the United States dollar

Since the mid-20th century, the de facto world currency has been the United States dollar. According to Robert Gilpin in Global Political Economy: Understanding the International Economic Order (2001): "Somewhere between 40 and 60 percent of international financial transactions are denominated in dollars. For decades the dollar has also been the world's principal reserve currency; in 1996, the dollar accounted for approximately two-thirds of the world's foreign exchange reserves" (255).

Currency Pair

A currency pair depicts a quotation of two different currencies. The first currency in the pair is the base currency or transaction currency. The second currency in the pair is labelled quote currency, payment currency or counter currency. Such a quotation depicts how many units of the counter currency are needed to buy one unit of the base currency.

For example the quotation EUR/USD 1.2500 means that one euro is exchanged for 1.25 US dollar. If the quote moves from EUR/USD 1.2500 to EUR/USD 1.2510, the euro is getting stronger and the dollar weaker. On the other hand if the EUR/USD quote moves from 1.2500 to 1.2490 the euro is getting weaker while the dollar is getting stronger.

Majors

Majors are the most liquid and widely traded currency pairs in the world. Trades involving majors make up about 90% of total Forex trading.

The Majors are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.

Forex scam

A forex scam is any trading scheme used to defraud individual traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission.

But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times.

"The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal.

The North American Securities Administrators Association says that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."

“In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists.”


In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud.”

Forex swap

In finance, a forex swap (or FX swap) is a simultaneous purchase and sale, or vice versa, of identical amounts of one currency for another with two different value dates (normally spot to forward).

Structure

A forex swap consists of two legs:

* a spot foreign exchange transaction, and
* a forward foreign exchange transaction.

These two legs are executed simultaneously for the same quantity, and therefore offset each other.

It is also common to trade forward-forward, where both transactions are for (different) forward dates.
Uses

By far and away the most common use of FX swaps is for institutions to fund their foreign exchange balances.

Once a foreign exchange transaction settles, the holder is left with a positive (or long) position in one currency, and a negative (or short) position in another. In order to collect or pay any overnight interest due on these foreign balances, at the end of every day institutions will close out any foreign balances and re-institute them for the following day. To do this they typically use tom-next swaps, buying (selling) a foreign amount settling tomorrow, and selling (buying) it back settling the day after.

Retail forex

In financial markets, the retail forex (retail off-exchange currency trading or retail FX) market is a subset of the larger foreign exchange market. This "market has long been plagued by swindlers preying on the gullible," according to The New York Times.

Whilst there may be a number of fully regulated, reputable international companies that provide a highly transparent and honest service, it's commonly thought that about 90% of all retail FX traders lose money.

It is now possible to trade cash FX, or forex (short for Foreign Exchange (FX)) or currencies around the clock with hundreds of foreign exchange brokers through trading platforms. The reason that the business is so profitable is because in many cases brokers are taking the opposite side of the trade, and therefore turning client capital directly into broker profit as the average account loses money. Some brokers provide an a matching service, charging a commission instead of taking the opposite site of the trade and "netting the spread", as it is referred to within the forex "industry".

Recently forex brokers have become increasingly regulated. Minimum capital requirements of US$20m now apply in the US, as well as stringent requirements now in Germany and the United Kingdom. Switzlerand now requires forex brokers to become a bank before conducting fx brokerage business from Switzerland.

Algorythmic or machine based formula trading has become increasingly popular in the FX market,with a number of popular packages allowing the customer to program his own studies.

Futures exchange

A futures exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

History of futures exchanges

Though the origins of futures trading can supposedly be traced to Ancient Greek or Phoenician times,[citation needed] the first modern organized futures exchange began in 1710 at the Dojima Rice Exchange in Osaka, Japan.

The United States followed in the early 1800s. Chicago is located at the base of the Great Lakes, close to the farmlands and cattle country of the U.S. Midwest, making it a natural center for transportation, distribution and trading of agricultural produce. Gluts and shortages of these products caused chaotic fluctuations in price, and this led to the development of a market enabling grain merchants, processors, and agriculture companies to trade in "to arrive" or "cash forward" contracts to insulate them from the risk of adverse price change and enable them to hedge.

FOREX ?

The foreign exchange (currency, ForEx, or FX) market is where currency trading takes place. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.[1] Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.[2]

The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.

List of futures exchanges

This is a list of futures exchanges. Those stock exchanges that also offer trading in futures contracts besides trading in securities are listed both here and the list of stock exchanges.

Canada

* Montreal Exchange
* ICE Futures Canada

USA

* Chicago Board Options Exchange (CBOE)
* Chicago Mercantile Exchange (CME):
o Chicago Board of Trade (CBOT) [Merged, July 2007]
o International Monetary Market (IMM) [Merged]
o New York Mercantile Exchange (NYMEX) [Acquired, August 2008]
* Chicago Climate Exchange
* Intercontinental Exchange (ICE):
o New York Board of Trade (NYBOT)
* TradeSports [unregulated]
* Kansas City Board of Trade (KCBT)
* Minneapolis Grain Exchange (MGEX)
* OneChicago [Single-stock futures (SSF's) and Futures on ETFs]
* U.S. Futures Exchange (USFE)
* HedgeStreet

List of traded commodities

The following metals are not, at present (2008), traded on any exchange, such as the London Metal Exchange (LME), and, therefore, no spot or futures market, where producers, consumers and traders can fix an official or settlement price exists for these metals.[citation needed] The only price information that is available globally is published by, among others, the London Metal Bulletin and is based on information from producers, consumers and traders.[citation needed] Germanium, Cadmium, Cobalt, Chromium, Magnesium, Manganese, Molybdenum, Silicon, Rhodium, Selenium, Titanium, Vanadium, Wolframite, Niobium, Lithium, Indium, Gallium, Tantalum, Tellurium, and Beryllium.

Other Minerals and Materials

The following minerals and materials are not, at present (2008), traded on any exchange, and, therefore, no spot or futures market where producers, consumers and traders can fix an official or settlement price exists for these minerals.[citation needed] Generally the only price information that is available globally is published privately by, among others, the London Metal Bulletin and is based on information from producers, consumers and traders.[citation needed]

Commodity market

Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

This article focuses on the history and current debates regarding global commodity markets. It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity. Articles on reinsurance markets, stock markets, bond markets and currency markets cover those concerns separately and in more depth. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets.

See List of traded commodities for some commodities and their trading units and places.

History

The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets.[citation needed] For a commodity market to be established, there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another.

Stock market

A stock market, or equity market, is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market is estimated at about $36.6 trillion US at the beginning of October 2008 [1]. The world derivatives market has been estimated at about $480 trillion face or nominal value, 12 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States includes the trading of all securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges include the London Stock Exchange, the Deutsche Börse and the Paris Bourse, now part of Euronext.

Bond market

The bond market (also known as the debt, credit, or fixed income market) is a financial market where participants buy and sell debt securities, usually in the form of bonds. As of 2006, the size of the international bond market is an estimated $45 trillion, of which the size of the outstanding U.S. bond market debt was $25.2 trillion.

Nearly all of the $923 billion average daily trading volume (as of early 2007) in the U.S. bond market takes place between broker-dealers and large institutions in a decentralized, over-the-counter (OTC) market. However, a small number of bonds, primarily corporate, are listed on exchanges.

References to the "bond market" usually refer to the government bond market, because of its size, liquidity, lack of credit risk and, therefore, sensitivity to interest rates. Because of the inverse relationship between bond valuation and int
Market structure

Bond markets in most countries remain decentralized and lack common exchanges like stock, future and commodity markets. This has occurred, in part, because no two bond issues are exactly alike, and the number of different securities outstanding is far larger.

Trader

In finance, a trader is someone who buys and sells financial instruments such as stocks, bonds and derivatives.

Traders are either professionals working in a financial institution or a corporation, or individual investors, or day traders. They buy and sell financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the stock exchanges, derivatives exchanges and the commodities exchanges.

Several categories and designations for diverse kinds of traders are found in finance, these may include:

* stock trader
* day trader
* pattern day trader
* swing trader
* floor trader
* rogue trader

Paper trading

Paper trading (sometimes also called "virtual stock trading") is a simulated trading process in which would-be investors can 'practice' investing without committing real money.

This is done by the manipulation of imaginary money and investment positions that behave in a manner similar to the real markets. Before the widespread use of online trading for the general public, paper trading was considered too difficult by many new investors. Now that computers do most of the calculations, new investors can practice making fortunes time and time again before actually committing financially. Investors also use paper trading to test new and different investment strategies.

For example, investors can create several different positions simultaneously to compare the performance and payoff characteristics between multiple strategies. A textbook may state that writing a covered call is synthetically the same as writing a naked put, but in practice there are subtle differences. With a paper trading account, an investor can set up a bull credit spread and a bull debit spread simultaneously and watch how the payoff for each position changes as the market moves.

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Accuracy In EVERY SINGLE Market Condition

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A Great Forex Trading Indicator - Try This Strategy

Forex trading can be tough if you do not know what you are doing. That is why I have provided the following simple yet helpful forex trading strategy. The Simple Moving Average (SMA) is an extension of the trend line concept. The SMA is plotted on a graph by the charting program of the forex market data. The SMA takes the average of the close price of a given number of the last few periods. Any number of periods can be selected. You can have a SMA 5 or an SMA 20. An SMA 5 will take an average of the previous 5 close prices on the chart and will plot it on the chart along side the other price data. Each bar will use the previous 5 bars worth of data to calculate a point and plot it on the graph.

If the SMA is generated using a large number of periods (like an SMA 50 or SMA 75), you could interpret it similarly to the trend line. But if you select "faster" SMA's (like SMA5 or SMA20), you need to use a different strategy.

I am about to give you a strategy using the SMA. It is called the SMA Crossover Method. The SMA is one of the most commonly used indicators and can be found on almost any charting package. When you plot the SMA, you will be able to slect a line color to plot it. Make sure to use a different color than the actual prices on the chart.

Step 1: Plot an EMA5 using blue (or any color you like).

Step 2: Plot an EMA20 using red (or any color that is different than step one's color).

You now have two SMAs plotted on the chart. You also have two signals.

Buy Signal: When the SMA5 Crosses the SMA20 moving upward.

Sell Signal: When the SMA5 Crosses the SMA20 moving downward.

The beauty of this method is that the price of the currency pair cannot go up significantly without triggering the buy signal.

This was a very simple and practical indicator that should really improve your trading results as you implement the strategy outlined above.

Understanding The Forex Trading Market

If you’ve invested in the stock market you know what a rush it can be when you come out with profits. The currency markets are much different than the stock market but the rush is even bigger. You’ll want to understand the Forex trading market to help you ensure success.Forex is short for the Foreign Currency Exchange Market which is also referred to as FX. 

It is by far the largest market on the planet turning over more than a trillion US dollars a day. That’s thirty times more than the entire volume of all the equity markets in the United States.What makes the Forex trading market so unique is that it does not have an actual physical location, nor does it have a central exchange.

An over the counter market services banks, investors, corporations, and individuals whether they are buying or selling. This is a great example of a true 24 hour market.Each morning in Sydney the Forex trading market begins, moving around the planet as the business day opens in each of the financial centers – First it goes to Tokyo, then on to London, and then New York.When dealing on the Forex trading market you can analyze the currency market using either the technical analysis approach or the fundamental analysis.

The technical analysis is used when one wishes to attempt to predict what the future movement is going to be on a specific currency based on past performance. It entails studying specific factors that can influence a currency. These factors cold be changes in a Government, a war, a crisis, or several specifics that influence supply and demand which is reflected in the market price.Fundamental analysis is also referred to as current accounts.

They measure the net of imports and exports in any one country and the records the subsequent impact on the currency flows.When it comes to currency trading there is no doubt that Forex or FX is the largest market in the world. Just about every industry is somehow involved in currency trading – banks, multinational corporations, central banks, governments, financial institutes, retail traders, and a variety of institutions all in one way or another directly or indirectly play in the currency market.

Thanks to technology an individual can now set up a Forex trading account and begin to trade without any involvement with a bank or trading institute. There are several excellent online forex trading sites where you can get involved with the Forex trading market and begin trading on your own. The big question is are you ready for the rush when you sell high?

What is the Best Forex Trading Course Out There?

Every successful broker will tell you that knowledge is his or her key to profitable trading. A trader with Forex education has better experience in determining market movements and choosing profitable transactions. Without proper knowledge, you are risking everything you have in the dark. Although you may succeed in a few trades, the odds are that you are going to lose in the end. How do you avoid such losses?

The key is finding the best Forex trading course that will enable you to trade knowledgeably and avoid disastrous losses. Although tons of information is available online, on books and with plenty of schools, this is not something you should thank for because separating the best Forex trading course from the rest can be an overwhelming task. Imagine searching through hundreds of web sites and buying several books just to find out you lack the knowledge to step into the market.

Obviously, the best Forex trading course should teach you everything you need to know about the market with easy-to-understand terms and advices. If you're the type of person who learns easily even with self-learning, you can choose from e-books, guides and books to lead you through all the aspects. However, for people who are not used to self-learning, on-location courses and comprehensive online guides are the best Forex trading course for you.

For people who have extra time, they could surf the web and find plenty of Forex facts. However, the problem with online sources is that the information is usually unstructured. In choosing the best trading course online, ensure that the web site presents a step-by-step guide, so you can actually walk through beginners, immediate and expert phases, learn from your mistakes and master trading techniques.

Currency Trading System - Tips On Getting One for Profit

There are numerous currency trading systems for sale online but 95% of them are junk. There are some good ones out there and they can make you great profits, so follow the tips below and find the best currency systems.

1. Real Track Records

The first point to make is that you should if possible get a system that has a real track record that means real dollars, real trading and audited. This may not ensure future profitability but shows the logic is probably soundly based and that the vendor has had the confidence to trade it.

2. Simulated Hypothetical Track Records

Most currency trading systems don't come with a real track record but with a simulated or hypothetical one and you need to take these for what they are: Designed in hindsight knowing the closing prices - there is nothing wrong with back testing but you must ensure the testing was done correctly.

This is the subject of the next point:

3. Beware OF Curve Fitting

Of course it's easy to make profits if you know the forex price data already and many vendors simply make track records up and bend the system to fit the data. When you see a track record with huge gains and low drawdown the likelihood is the vendor has bent the system rules.

Foreign Exchange Reserves

Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits held by central banks and monetary authorities. However, the term foreign exchange reserves in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve position as this total figure is more readily available, however it is accurately deemed as official reserves or international reserves.

These are assets of the central banks which are held in different reserve currencies such as the dollar, euro and yen, and which are used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions.

Foreign exchange reserves are important indicators of ability to repay foreign debt and for currency defense, and are used to determine credit ratings of nations, however, other government funds that are counted as liquid assets that can be applied to liabilities in times of crisis include stabilization funds, otherwise known as Sovereign wealth funds.

If those were included, Norway and Persian Gulf States would rank higher on these lists, and UAE's $1.3 trillion Abu Dhabi Investment Authority would be second after China. Singapore also has significant government funds including Temasek Holdings and GIC. India is also planning to create its own investment firm from its foreign exchange reserves.

Choosing Forex Trading Software

If you plan to start trading with Forex online you will need the right software system to give you the ability to collect information on market prices and make Forex trades quickly and easily. There are two types of Forex software available. One is web based while the other is client based.

The Forex market is a high paced fast moving market and to make good trades you need good information and with the right software and a high speed internet connection everything you need is only mouse click away. 

You just need to decide on which software is best for you.Client based Forex trading software is downloaded and then installed on your computer. The biggest draw back to a client based system is that you can only access it from the computer on which it is installed. You also need to be concerned with the security on your system.

Web based software lets you login in with an internet connection and you can use any computer anywhere. Web based software tends to less vulnerable to viruses and hackers because of the high security implemented.Whether you use web based or client based it needs to provide you with real time quotes and the means to quickly buy and sell on the market.

If you choose client based software it pays to pay the fee that ensures you software updates because there are regular changes.Brokers house your client information on two servers in two different locations for security and safety of your data. So for example if a server has a power failure the data is automatically transferred to the other server and you won’t even realize there was an interruption. 

Brokers also back up their server using an ongoing system so nothing is ever lost.You may have found your calling with Forex. There is plenty of money to be made on the currency market. The first step is taking a little risk, the next step is choosing the right Forex trading software, and finally you’ll reap the rewards in profits.

Forex Brokers - The Perfect Service for Novice Traders

If you are considering trading with a forex broker, here is news of a service that is great for seeing if you have what it takes and is much more realistic than a demo account. If you are interested in trading and worried about the risk, then these accounts look a great way to get started.

A protected account introduces potential traders to the lucrative world of currency trading - but unlike a demo account, allows them to feel what trading is really like with limited risk.For a set period they get to trade as much as they like with a set leverage and can even trade with a negative balance at the end of the set period - any profits the trader keeps any losses the broker covers.

Low Initial Deposit

These accounts can be traded with a small amount and the only risk is the initial deposit and unlike a real trading account, if you go debit you still can trade for the period the account is set up for.

Leverage and Low Risk

At any point during the two-week period, a trader may control up to 100 times his initial deposit, regardless of the actual balance in the Protected Account. The trader may make as many trades as desired, 24 hours a day, using any currency pair.At The End of The Period - clients Takes Any Profits Broker Covers Any Losses.Positions are closed automatically at the end of a set period normally after two weeks.If there is a positive balance, it will be transferred to the forex trader's regular account.

If there is a negative balance, the broker covers it.Getting the Feel Of Trading With Limited Risk.A regular demo account, though a very useful tool, for learning a trading platform or the basics of trading does not simulate the feeling of trading real money.

Fundamental or Technical analysis: which one is for you?

The fundamental analyst in Forex attempts to draw overall conclusions concerning the economic health of a particular economy based on political, social and economic indicators. Based on these conclusions, fundamental analysts determine whether a particular currency is over or undervalued, and trade accordingly.

While fundamental analysis is useful in determining the overall health of an economy, the number of factors contributing to the health of an economy may condemn the fundamental trader to a life of constant analysis. And while, when a conclusion is drawn, a fundamental analyst can confidently hold a long term position, some might say they are missing out on other profitable opportunities.

Unlike the Fundamental analyst, Technical analysts believe that all the forces impacting currency price are instantly factored into the market. Eschewing news trading, the technical analyst attempts to construct forecast models for particular currencies based on previous market activity, as reflected in the charts.

There are certain patterns that continuously appear in online Forex movements, and if a particular pattern can be recognized before it is complete, online traders can make substantial profit.Beneath the sound and fury of seemingly arbitrary price fluctuations, the technical analysts locates identifiable patterns in the charts.

Certain patterns that continuously appear in currency movements—such as head and shoulders, ascending and descending triangles, and wedges, to name a few—and technical traders look for these in order to identify entry and exit points.Some brokerages provide complimentary advanced charting features, complete with dozens of indicators and tools used to aid in technical analysis.

Why trade on the Foreign Exchange?

There are tons of reasons!

-The high level of liquidity ensures instantaneous order executions in most market conditions.

-24 hour trading! The major Foreign Exchange centers are located in New York, London, and Hong Kong. The end of one trading day is the beginning of another. Traders are able to trade at any convenient time, no matter where their location. Furthermore, traders can always react quickly to any market altering news.

-Because of the immense size of the market, no single actor can substantially impact the market. Even multibillion dollar transactions are a relatively small percentage of the overall market, and can alter prices only slightly, and in the short term.

-Investors can trade on very high leverage, controlling large positions with relatively small amounts of money. Of course, while a movement in the trader’s favor results in large earnings relative to investment, movement against the position can result in the investment being wiped out. Using high leverages can be both risky and rewarding.

- Unlike, for instance, the stock market, in which traders must be familiar with hundreds of stocks, a online Forex trader need only be familiar with a few currencies.

-Whether a given currency is rising or falling, investors have the same profit potential. The Foreign Exchange is truly always a bull market.Experience the online Forex market for yourself! Give one of our reviewed brokers a test drive. Sign up for a demo account, and gain instant access to the world’s largest market.

Tips For Global Forex Trading

You’ve decided to become a trader on the Forex market but since you’ve never played on the currency market you aren’t sure where to start. Not to worry – we’ve got some great tips for global Forex trading,Forex is the foreign exchange market where currencies are bought and sold. It began back in the 1970’s with the introduction of free exchange rates and floating currencies. 

Thanks to the internet more and more people are able to reap the profits of the currency market with global Forex trading.This is a market that trades as over US$1 trillion a day. It trades more than any other market. 

There are some distinct differences in the currency market compared to the stock market. Money moves much faster so no single investor has the ability to actually affect market price and trades are able to open and close within seconds which is not possible on the stock market.To start your global Forex trading you need to open a Forex account. Just fill in the application and the sign the margin agreement which let’s the broker intervene at any time. That makes sense since it’s the broker’s money that just makes sense.

You need to choose a trading strategy that works for you. Different strategies work for different traders to don’t try to makes something work, instead find the right trading strategy for you.It’s important to understand that trends move prices so a smart investor will make trends their friend and even go so far as to examine historical trends.The top five currency pairs are USD/Yen, Euro/Yen, Swiss franc/USD, Pound USD/ and the Euro/USD. Make sure you know and understand them.Examine the charts at 1 hour, 4 hour, and daily. 

This will give you the daily trends and plenty of opportunity to trade. Sure you can trade every 15 minutes if you like but that’s not really practical.Now that you’ve got all your global Forex trading tips you’re ready to see some profits.

History of the Foreign Exchange

Until the mid-seventies, major industrial economies were governed by the Bretton Woods agreement of 1944. The Bretton Woods agreement—which was named after the location of the international conference establishing this new monetary order—obliged participating international economies to peg their currencies to the dollar, which itself remained within a 1% standard deviation from the prevailing gold rate.

The architects of the Bretton Woods agreement hoped to prevent countries from artificially devaluating currencies, in order to make goods more attractive in the international marketplace, which led, in part, to a disastrous shrinking of the world economy in the 30s.

The system they established lasted for the next three decades. Shrinking confidence in the dollar, however, lead to a new international monetary system of floating rates, meaning that regular market forces, rather than governmental intervention, would determine the value of currencies. It was from this new system that the modern Forex market arose.

In a floating exchange rate system, market demand determines the relative value of currencies. Such a system is thought of as self-correcting, as any inefficiency is hammered out in the market. If, for instance, global demand for a particular currency falls, goods will become cheaper, and thus the value will begin to rise with the newly created demand.In a floating exchange system, traders can exploit inefficiencies before the market corrects itself. These traders are called arbitrageurs, and they are able to utilize online brokers to execute their trades. If you are interested in beginning to trade in the Foreign Exchange, please visit our broker’s page to find a broker suitable for you.

How Not To Exit A Forex Trade

Too many times I hear about new traders opening a trade using the 5-minute chart (not my favorite approach) and when the market moves against them, they move to the 15-minute chart to justify staying in a little longer, hoping that the market will turn around.

Then if the market continues to move against them, they move out to the hourly chart to look for a reason to stay in the trade. As the market continues to move against them, they shift to the daily chart to hope to find a reason to stay in the trade. The next step is to get a margin call because they have no funds left to maintain their position.

Of course, the main issue here is that they were looking for a way to stay in a losing trade rather than closing it out at a small loss. Taking a loss does not mean that you do not know what you are doing. Too many new traders think that losing a trade means that they are losers or that they aren't smart enough to trade. Nothing could be further from the truth though.

Professional traders understand that if they trade, they will have losing trades. That is really the only guarantee in the field of speculation. How you handle those losing trades has as much to do with your success as a trader as any other factor. You don't have to like losing, but you must accept the fact that all trades cannot be winning trades. You have to keep those losing trades small enough to be able to make up for them with your winning trades.

Switching time frames to justify staying in a trade is not how you keep your losses small. Identify your exit point before you get into the trade and stick to it. Judge yourself from month to month rather than on every pip move in the market. Be consistent in your approach and stay in one time frame from the beginning of the trade to the end of the trade.

How To Avoid Losing Your Hard-Earned Money in Forex Trading

Because of the immense opportunities that forex trading offers, more and more people are turning to it by the day. And the number of success stories in Forex keeps on increasing by the day. However, not everyone is succeeding in the market. Quite a number of people are making losses in the market.

This can be traced to a number of mistakes that starters and even old hands make in trading. The mistakes are all too common, and often repeated by many, to their own detriment. Here some reasons why people have been losing their hard earned money in the Forex market.

1. A Get Rich Quick mentality.

You have probably seen the many adverts here and there, telling you how easy and profitable it is to trade Forex. Well, it is easy to actually trade, but difficult to trade successfully. Opening and funding an account can be done in as little as 24 hours and you can be up and trading afterwards. People will open up a broker account, fund it and start trading without knowing exactly what they are doing.

2. Trading for the wrong reasons.

Yes, there is a high feeling associated with making a huge profit from one trade. However, do not treat Forex trading like a day at the football stadium watching your favourite team or at the pools house. You should not trade just for the excitement of trading. Not to mention that oftentimes, there is a lot of time to be spent just waiting for the correct trade to come along.

How do I get started in Forex?

Do you see the profit potential in trading currencies, but learning to trade just seems too daunting? Have you watched with excitement the recent crashing of the value of the USD, but simply don’t know how to get started trading?

While it is simple to begin trading Forex online, maintaining profitability in the long term is no easy task. You have probably heard that 90% of Forex traders lose their money in the long term. If indeed this is true, it is the result of a couple of different factors.

Overtrading: Each trade costs you a couple of pips—Consider your trades well before you make them. Each faulty trade, even if exited quickly, drains equity.

Bad money management: One bad trade can wipe out a year of patient, smart trading. Manage your risk using stop loss orders, so that you never risk too high a percentage of your equity on any one single trade.

Lack of knowledge: If you have never traded Forex before, educate yourself! Successful traders are not born that way. The difference between success and failure in the Forex market depends in no small part on the knowledge and education of a trader. For the beginning trader, a proper education is essential before investing in the Foreign Exchange. Find a program you are comfortable with, and begin practicing on a demo account.

Trading on the foreign exchange offers unparalleled opportunities for profit, but it is also extremely risky. Make sure you know what you are getting into before you start trading, and start trading only when you are comfortable in your knowledge and ability.

Carry Trading

The carry trade is a popular online Forex strategy which takes advantage of the different interest rates between two currencies. If one currency has a relatively low interest rate it can be sold against a currency with a high interest rate and the trader may pocket the interest rate differential. Speculators are guaranteed rollover interest deposits in their account at the end of each trading day. This can provide a significant boost to trader’s profit. If, for instance, an investor buys the NZD against the JPY, which have interest rates of 7.25 and .25 respectively, the trader can make a profit of 7% provided the market doesn’t move.

However, even when exploiting interest rate differentials, there are still significant risks to a trader. Obviously, the market can still move against the trader’s position, though the rollover interest adjustments do help mitigate potential losses. Considering that most carryover traders use exceptionally high leverages to exploit interest rate differentials, even a small move against a position can lead to very high losses.

The Foreign Exchange

The Foreign Exchange is the largest financial market in the world, with trillions of dollars traded each and every day. Initially utilized just by large banks, multinational corporations and extremely wealthy currency speculators, the influx of online brokerages tailored to the retail market has created a vibrant retail foreign exchange market!

Now, with a relatively small initial investment, anyone with an internet connection can take advantage of the online Forex market.While banks and large multinational corporations generally execute foreign exchange transactions simply as a function of doing international business or to hedge their base currency to protect against devaluation, currency speculators exploit fluctuations in the foreign exchange market exclusively for profit.

While trading currencies is a bit riskier than trading other instruments, like stocks and commodities, the potential for profit is unparalleled. For example George Soros, perhaps the most successful Forex trader, made $1 billion in a single day when he sold the pound against the dollar in 1992.

The major currencies traded on the foreign exchange are the US dollar, the Eurodollar, the Japanese Yen, the Swiss Franc, and the British Pound. These different currencies are expressed as pairs. When these pairs are traded, one of the currencies is bought and the other currency is sold concurrently. Today, anyone with an internet connection can trade these pairs under the same conditions once reserved for high value individuals and corporations. Most retail brokerages offer real time currency prices, instant execution, advanced charting features and extensive real time news and analysis feeds.

If you are interested in trying out the foreign exchange, we have assembled a list of quality brokerages that offer free “fake money” accounts where one may trade in real market conditions. Not only is their immense profit potential in the Foreign Exchange market, it is quite exhilarating as well. Why not give it a shot?

WHAT IS FOREX CURRENCY TRADING?

If you read about investing, you've seen the word forex trading. But because forex doesn't get much publicity in the major publications and websites, many investors don't know that forex is just short for "foreign exchange". So trading the forex market is simply trading foreign currencies.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex trading game. Recently, however, technology has developed to the point that any individual investor can hop right in and trade with one of the many online platforms.

When buying and selling in the forex currency trading system market, you'll see that there are four "currency pairs" that dominate the percentage of trades. Those four are the Euro vs U.S. Dollar, US Dollar vs Japanese Yen, US Dollar vs Swiss Franc, and US Dollar vs British Pound.

The goal when investing in currency is to be holding a currency that appreciates in value in relation to the other currencies. To use an overly simplistic example, if you bought 50 British Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds increased in relation to US Dollars, you could then convert those Pounds back into dollars for, say, $120.

Unlike the domestic stock markets, the forex currency trading is open for trades 24 hours a day. Much like the phrase "it's always noon somewhere," it's always business hours at some region of the globe. Since every country trades on the FX market, and it's open all day, the daily volume is roughly $1.2 trillion, which dwarfs that of the NYSE. Another comparison to make in order to truly realize the magnitude of the forex market is with the currency futures market (which has around 1% of the daily volume).

One other important distinction to make is that forex currency trading is not centered on an exchange like the NYSE or NASDAQ. There is no central body or organization required to act as middleman. Trading circulates between major banking centers around the world.

Until recently, there were strict financial requirements and massive minimum transaction sizes which prevented individual investors from trading. But with the advent of the internet came the FX brokers. A forex currency broker is similar to an online stock trading account such as etrade.

Anybody can open an account and buy and sell in any quantity. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors.

Although it is now easy to start trading forex, it is a complicated and complex market. While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry. Before trading forex, do your homework and read as much as you can find before investing your hard earned money.

The Main Principles of Trading

In contrast to exchange transactions with real supply or real currency the participants of FOREX use trading with a margin deposit; i.e. marginal or leverage trading. In marginal trading, each transaction has two obligatory stages (they can be divided by period of time, which can be as long as you like): buying (selling) of currency at one price, and then selling (buying) it at another (or at the same) price. The first transaction is called opening the position, the second one, closing the position.Opening a position, a trader furnishes a deposit sum from 0.5 to 4 per cent of the credit line, granted for the transaction. So, in order to buy or sell 100,000 US dollars for Japanese yens, you will not need the whole sum, but only from 500 to 2000 US dollars depending on your policy of controlling risks. When the position is closed, the deposit sum returns, and calculation of profits or losses is done. All the profit or losses caused by the change of currency rates is credited on your account.

Let’s take a concrete example of getting a profit from the changing the rate of the Euro, from 0,9162 to 0,9292. If you have anticipated this change by using technical or fundamental analysis, you can buy the Euro cheaper for dollars, and then sell it back at a higher price. For example, if you choose leverage 1:100, then 99,000 dollars of the credit line, granted by the Internet broker, is added to 1000 dollars, and you buy the Euro at the price of 0.9162. As a result of this transaction we get: $ 100,000 / 0.9162 = Euro 109.146, 47.

When the rate changes (an average daily change of Euro is about 70 to 100 pips), you close the position and sell the Euro for dollars, but at the rate of 0.9292. You get 109,146. 47*0.9292 =101,418.89 dollars. Your profit is $ 1,418.89. The same transaction with leverage 1:200 would give you $2, 837.78 of profit, with leverage 1:50 the profit would be 709.45, with leverage 1:25 - 354.72.

We’d like to remind you that the higher the credit leverage, the higher is your profit if the fluctuation of the currency rate was anticipated correctly. However, if your anticipation was wrong, your losses will be bigger.

One cannot feel confident in the FOREX market without a thorough knowledge of the terms used there.

Foreign exchange quotes are a relation between currencies.

USDCHF - the cost of $1 in Swiss Francs.
USDJPY - the cost of $1 in Japanese yens.
EURUSD - the cost of Euro 1 in US dollars.
GBPUSD - the cost of 1 GBP in US dollars.

That is, quotes are expressed in the units of the second currency for a unit of the first one. For example, quote USDJPY 108,91 shows that $1 costs 108,91 Japanese yens. Quote EURUSD 0.9561 shows that 1 Euro costs 0.9561 US dollars.The last figure in the quote is called “pip”. The cost of the pip is different for every currency, and depends on the leverage and current quote.

The formula for calculating 1 pip is:
100,000/current quote without commas * K
where К=1 at leverage 1:100,
К=2 at leverage 1:200,
К=0,5 at leverage 1:50,
K=0,25 at leverage 1:25.

Examples:

USDJPY = 108.91 leverage 1:100100.000 / 10891 х 1 = 9,18 USDEURUSD = 0.9561 leverage1:200100.000 / 9561 х 2 =20,92 USDGBPUSD and EURUSD are direct quotes, i.e. when the chart goes up, GBP and EUR become more expensive, and when it goes down, the currencies become cheaper. USDCHF and USDJPY are backward quotes, and when the chart grows, prices on CHF and JPY fall, and when the chart goes down, the prices grow.On direct quotes you buy according to ASK and sell according to BID. With backward quotes, you buy according to BID and sell according to ASK .Trading in the FOREX market is realized in lots. When you open a position, you can choose the number of lots you want from 1 to 10. One lot equals $ 100,000. The deposit sum for one lot will vary from $500 to $2000, depending on the credit leverage you choose. Leverage is a financial mechanism that allows crediting speculative transactions with a small deposit. We give you an opportunity to choose a credit leverage in the range of 1:200 to 1:25.In the course of trading you can fix your profit or cut off your losses according to the commands LIMIT and STOP that have been set up.LIMIT is set up higher than the current meaning of the price.STOP is set up lower than the current meaning of the price.With these commands the positions is closed without additional orders when the price reaches the agreed level.In the process of trading you can create pending positions, that will be activated when the price reaches the agreed level (open price). When creating and closing orders, a temporary delay occurs, and lasts for about 30 to 40 seconds. When you make an inquiry, you are given a real market price, which is the current price at the moment of proposal, not at the moment of inquiry.

Why trade Forex

The FX markets are open 24 hours per day during the FX business week.

Individuals looking to profit from market movements can act any time of the day or night during the FX trading week to take advantage of changing market conditions. Many institution offers electronic access to its entire range of FX futures, virtually 24 hours per day during the FX trading week.

Advantages of the Forex Market

o Forex is open 24-hours a day

o Forex is the most liquid market in the world

o High leverage reduces the need for large amounts of capital

o Narrow bid/ask price spreads

o Instantaneous Execution under normal market conditions

Trading in the FX markets offers diversification.

In today’s equity market environment, diversification is a critical factor in individual portfolio management. FX can offer valuable market risk diversification for an investment portfolio that has equity market risk.

Exchange rates march to their own beat. On a historical basis, changes in exchange rates have had very low correlations with price movements in stock market values and interest rates. This lack of any systematic relationship can be exploited to lower portfolio risk and generate positive returns when other markets are in a depressed state.

When a trader initiates a position in a currency, it is either a bullish or bearish outlook versus other currencies. If the outlook is bullish, a trader can profit by purchasing that currency against other currencies. However, if an outlook is bearish, a trader can profit by selling that currency against other currencies.

Online Forex Trading Reviews

Online Forex trading is a business of risk. It is only wise to choose your online Forex platform providers and brokers with utmost care. You can read books, magazines, or surf online for the corporate profiles and investment portfolios of the brokers you are considering, but oftentimes, this is not enough.

What you need to do is consult online Forex trading reviews. Here, you will have access to actual assessments from small investors themselves, accurate evaluations from expert financial institutions, and helpful comparisons based on key market indicators.

Benefits of Consulting Reviews

Online Forex trading reviews allow you to read technical analysis of different brokers' performances over the past months or years, either as a whole or in terms of specific currencies. Many reviews are written by veterans in the currency trading industry - people who have traded successfully for years. More often than not, these technical data are rewritten in laymen's terms so that you can understand them completely.

Online Forex trading reviews allow you to compare and contrast brokers, so that you can find one that is willing to handle your investment the way you want it handled. The information from these reviews will help you zoom in on a company whose policies are well-matched to your behavior as an investor - your willingness to take risks, your level of conservatism, etc.

Finally, online Forex trading reviews give you access to the opinions of investors themselves, big or small. The assessments of others who share the same viewpoint and context as you can often prove to be more indispensable than the opinions of trading experts. These people speak your language, share the same concerns as you, and probably have the same questions. Their reviews can give you enough market intelligence to intuitively manage your own portfolio.

FXCM Forex Review

Online forex trading is become a hot market, with many companies stepping in and offering their services. The myriad of websites that have entered the market has created some stiff competition, and the resulting hit on commission and trading rates has been felt across the industry. Many people, such as myself, have had a hard time finding a reputable and reliable brokerage to use when investing on the forex market.

FXCM comes at the recommendation of many people, citing their extremely low commission rates and their 24 hour trading. However, when dealing with a commodity like Forex, the user needs to know that they can trust their online brokerage to be fast, reliable, and truthful.

Extending Their Trust

FXCM recognizes the need for trust between themselves and their users, and they have many services set up within their website to help a new user develop that trust. For new Forex traders, they offer a $50,000 practice account that simulates live market situations- a great tool for anyone looking to brush up on the basics, or learn how all of this is done! Users of the practice account can place stop payments, holds, minimum trades, as well as all of the other standard Forex tools and commands.

Any users, be they new or experienced, can log on and join one of FXCM's webinars or watch one of their training videos.

For the more experienced Forex trader, FXCM offers many helpful tools and market analysis's, making it easier to determine what is a good trade, and what is not. They offer daily currency statistics, forcasted economic trends, as well as in depth dissections of some of the most lucrative markets and currencies to be in right now.

About FXCM

FXCM is a multi-national Forex brokerage that is independently regulated in three different continents. Operating as a registered Futures Commission Merchant, FXCM adheres to strict policies regarding conduct, professionalism, and honesty. They have four offices, located in Canada, United States, Hong Kong, and England.

FXCM is a strong advocate of Forex regulation and improved investor protection, and was one of the first to adhere to new regulatory processes when they were introduced in the year 2000

Online Forex Trading Made Easy

There was a time when online forex trading was limited mostly to banks and big financial institutions and they were the ones benefiting from it. But times changed and the availability of internet and online forex trading made it accessible to thousands of individuals, brokers, brokerage firms, banks and governments. Now, the benefit is for anyone to reap who deals in it.

This mind boggling increase in online forex trading was brought by a lot of factors. One can trade round the clock irrespective of geographical location and that has been the single most important factor contributing to its exponential growth. Estimates claim that the daily transactions have scaled almost two-trillion dollars! In addition to this, there are a number of other factors.

A trader is gets to trade in different currencies in different markets all at once. It is all because of web based Forex trading. What has this done is that it has allowed the infusion of a lot of liquidity and flexibility in online forex trading. What is more, a trader can easily access quotes and make trades in real time with online Forex transactions.

The biggest benefit of online forex trading is that it has done away with bulls and bears. So, this is the only market without any bulls and bears. Value or ratio of value of the currency or the direction of its movement has relatively no overall impact on the world of online Forex trading. To make it more simple; any trader can buy and sell at the same time in different currencies without any problems.

Another defining feature of online forex trading is its transparency. Nothing is hidden. It is comparatively easier to spot trends and decide the best time to sell or purchase. This is possible because all the information is there in real time from all over the globe.

Everything is out there for anyone and everyone to look at. Online forex trading involves no hidden costs, no exchange fees, no commission and nothing like that. All of this has made online forex trading very easy.
Another remarkable feature of online forex trading is the speed with which everything happens. There is nothing like delays here. You need virtually seconds to execute any trade and to fill and confirm it. All the information is provided by brokers and trading companies in real time and that is really crucial for making important decisions.

I would like to end this discussion by giving a look at the flip side of online forex trading. It might seem the best way to put your money but not everyone who invested money in online forex trading made money. There are reasons behind it.

Online forex trading is in reality risky where split second decisions are needed which could make or mar your investment. It is therefore essential for anyone who is interested in this field to understand it well before making any decision.

Learn Online Forex Currency Trading

Online Forex currency trading is a fast business, and if you do not have the proper training, it can be very easy to lose your money in it. Make sure you have all the right information and skills before you even begin buying and selling currencies. Where and how do you get the right education? Here are some ideas.

Learn Online

Taking online currency trading courses is the most cost-effective and convenient way to learn the ropes of the industry. Many currency trading websites offer potential traders like you free tutorials and demos on how to get started in online Forex trading. Some websites ask for a minimum membership or tuition fee before they grant you access to full-scale tutorials.

What will you learn, exactly? Most courses let you in on basics such as day trading, position trading, and swing trading. You will also learn fundamental investment theories specifically for currencies. Some sites even offer tailor-fit, one-on-one trader mentoring. Instruction is still remote, but you are usually assigned a mentor (a proven successful trader) who will give you customized training materials and simulations.

Buy CDs or Books

There are many "complete home study" CDs and books that deal particularly with currency trading. These materials usually cover all essential aspects of trading and taxes, and give valuable insight on making a living as an online trader.

Read the Newspaper

The value of a country's currency is greatly affected by its political and economic situations. You need to know the latest country-specific developments in order to make sound trading decisions. Staying on top of world news by reading the newspaper, watching cable television, or subscribing to an online news portal immediately gives you a trading advantage. Get the latest on inflation rates, changes in government, and tax laws in the countries of the currency you are trading so you can make intelligent moves.