Forex Market Analysis
Morning Forex Overview // 09-24-2008
Market Overview
On Tuesday, lower oil prices and weak economic data in Europe helped the dollar make a partial recovery against the euro after the greenback's sharp losses a day earlier.
Comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson did little to soothe investors' jitters. They both warned Congress of serious economic risks if lawmakers failed to hustle to approve the plan, which may carry a price tag for taxpayers of USD700 billion.
The euro slipped against the US dollar as data out of Europe proved to be exceptionally weak. Indeed, the Euro-zone purchasing managers' index (PMI) for both the manufacturing and services sectors fell below 50 - signaling contracting business conditions - for the fourth consecutive month.
The British pounds did little but consolidate between 1.85 and 1.86 during Tuesday's trading session. GDPUSD traded with a low of 1.8472 and a high of 1.8638 before closing the day at 1.8540.
Dollar fell 0.1 percent to 105.20 versus the Japanese yen due to some unwinding in carry trades on risk aversion as U.S. stock markets turned from positive to negative on the day.
The Canadian dollar strengthened slightly against the dollar with uncertainty about the US government bailout plan.
Resurgent fears in global financial markets weighed on the Australian dollar in Asia late Wednesday, as doubts about the effectiveness of the U.S. government's financial markets rescue package mounted.
Market expectation
EURUSD reported offers between USD1.4700/10 able to cap the early strong demand into European trade, a major German name and a major Asian account noted buyers in the rally from below USD1.4680. Rate traded to a high of USD1.4705 but gets shoved back to USD1.4685. A break above USD1.4710 now is needed to boost upside potential, traders suggested. Above USD1.4710 can open a move toward USD1.4720/25 ahead of USD1.4750. Bids noted at USD1.4680, more toward USD1.4660.
The euro is holding steady on Wednesday as the market waits for the key German Ifo data. Any unexpected weakness could undermine sentiment toward the euro, while investors wait for more developments on the U.S. rescue plan.
For Pound bids are placed at USD1.8500 (76.4% USD1.8472/1.8593), and break below can open a deeper move toward USD1.8480/70 ahead of USD1.8450. Offers USD1.8590/00.
Analysts are generally confident legislators will approve the bailout plan, but serious risks - including the chance of more substantial dollar losses - will exist even if the bailout goes through
Wednesday, September 24, 2008
About Exto Capital
Exto Capital, a division of Exto Financials SA, is an independent asset manager and Forex brokerage firm based in Switzerland. Founded by professional asset managers, forex traders and software developers, it is as a result able to identify investor's needs.
State of the art and easy-to-use software, secure trading environment, and superior trading conditions has made Exto Capital the 1st choice of many institutions and Hedge funds in the world. Exto Capital, strives to serve the emerging retail segment of the Forex community. Its commitment to providing innovative currency trading technology, fair dealing practices, and excellent customer service establishes Exto Capital as a major force that traders look to for advanced Forex charting, Forex news, and fund safety. In order to better service its clients, Exto Capital offers a multilingual support service operating 24 hours a day and is trained to assist the clients in every question relating to the use of the system.
Why Exto?
The name Exto is derived from the Latin Esto meaning to stand out, to survive, to last, to excel.
We believe this name reflects our mission statement:
To ensure that client's needs and expectations are not only met, but surpassed.
To excel in quality of service, to create relationships that last.
To stand out from our competitors.
At Exto Capital every decision we make is measured against our mission statement to ensure that our aims are realized
Exto Capital, a division of Exto Financials SA, is an independent asset manager and Forex brokerage firm based in Switzerland. Founded by professional asset managers, forex traders and software developers, it is as a result able to identify investor's needs.
State of the art and easy-to-use software, secure trading environment, and superior trading conditions has made Exto Capital the 1st choice of many institutions and Hedge funds in the world. Exto Capital, strives to serve the emerging retail segment of the Forex community. Its commitment to providing innovative currency trading technology, fair dealing practices, and excellent customer service establishes Exto Capital as a major force that traders look to for advanced Forex charting, Forex news, and fund safety. In order to better service its clients, Exto Capital offers a multilingual support service operating 24 hours a day and is trained to assist the clients in every question relating to the use of the system.
Why Exto?
The name Exto is derived from the Latin Esto meaning to stand out, to survive, to last, to excel.
We believe this name reflects our mission statement:
To ensure that client's needs and expectations are not only met, but surpassed.
To excel in quality of service, to create relationships that last.
To stand out from our competitors.
At Exto Capital every decision we make is measured against our mission statement to ensure that our aims are realized
How do I choose my FOREX broker
There are so many Forex brokers and services out there, that it is quite overwhelming to try and choose one.
The trick is to understand what is most important to you while trading, and then to find the broker that best matches your demands.
Your demands are probably comprise of several factors, financial, technological and even psychological, feeling you must trust the broker you choose to deal with.
To help lay out all these factors we generated our comparison table, which includes, what are in our opinion, the key questions you have to ask when choosing a broker. More importantly, this table supplies the answers.
We bring to the table our own experience with these brokers, making it possible for us to say how easy their systems are to use, what was needed from us to open an account, what we were offered back in return, how satisfied we were from their customer support, and how serious a company they actually are.
Once you feel that your main demands have been answered, and you are able to narrow down your choice to 2 or 3 brokers from the list, you should go on to reading the full reviews of our experience with them. The reviews will tell you more about WHAT these brokers have to offer and HOW they offer it to you.
Another powerful tool is reading what other traders have to say about their experiences. Always check out their opinions in our forum discussion rooms, and feel free to ask questions you feel you do not have answers to yet.
To help narrow down the selection, we prepared the list of our featured sites. Again, this is based on our own experience with these brokers, and these are the brokers we feel we can recommend to others to choose.
While this site is based on our own experience, we realize that at times others may encounter different experiences with the same brokers or service providers. If your experience was different than ours, please share it with us, so we can go on sharing objective information with all our users.
Good luck, and good profits!
There are so many Forex brokers and services out there, that it is quite overwhelming to try and choose one.
The trick is to understand what is most important to you while trading, and then to find the broker that best matches your demands.
Your demands are probably comprise of several factors, financial, technological and even psychological, feeling you must trust the broker you choose to deal with.
To help lay out all these factors we generated our comparison table, which includes, what are in our opinion, the key questions you have to ask when choosing a broker. More importantly, this table supplies the answers.
We bring to the table our own experience with these brokers, making it possible for us to say how easy their systems are to use, what was needed from us to open an account, what we were offered back in return, how satisfied we were from their customer support, and how serious a company they actually are.
Once you feel that your main demands have been answered, and you are able to narrow down your choice to 2 or 3 brokers from the list, you should go on to reading the full reviews of our experience with them. The reviews will tell you more about WHAT these brokers have to offer and HOW they offer it to you.
Another powerful tool is reading what other traders have to say about their experiences. Always check out their opinions in our forum discussion rooms, and feel free to ask questions you feel you do not have answers to yet.
To help narrow down the selection, we prepared the list of our featured sites. Again, this is based on our own experience with these brokers, and these are the brokers we feel we can recommend to others to choose.
While this site is based on our own experience, we realize that at times others may encounter different experiences with the same brokers or service providers. If your experience was different than ours, please share it with us, so we can go on sharing objective information with all our users.
Good luck, and good profits!
How do I make money in FOREX?
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments.
Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments.
Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.
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What is FOREX?
The FOREX Market (Foreign Exchange) is the biggest market in the world, where the average daily trading is over $1.9Trillion.
This is a world wide market in which currencies are exchanged by various participants, such as world banks, multinational corporations, financial markets and most importantly – individual traders!
YOU can be part of the excitement in the biggest trading market in the world, and share some of those $1.9 Trillion being exchanged daily! You can buy or sell Dollars, Euros, Yens, Pounds, and more, at a click of a button.
All that’s needed is to chose a broker, sign up, and start trading Now! Join at any time - the FOREX market is always open, encompassing all time zones around the world (excluding Friday 10:00 pm GMT till Sunday 00:00 GMT). Most brokers offer web based trading platform, making it easy for you to trade anytime anywhere.
If you are new to FOREX, many brokers will provide you with demo accounts, where you can practice trading with virtual money. Once you feel ready to start earning money, you can go ahead and open a real money account. Many brokers provide mini-accounts too, in which the initial deposits are lower than in the standard account.
There is an abundance of educational tools out there, to help you learn the trade. Anything from books, land based classrooms, online guides, and even interactive simulators.
While learning, it is advised to read users' forums to get the daily insight of what experienced traders are doing, until one day – you become one of the experts on the forum.
The trick in FOREX is to trade on margin, meaning you are trading with capital borrowed from your broker. When choosing your broker you want the one who offers you the best terms. You also want to be aware of any risks involved in trading.
Like everything else in life – practice makes perfect! It will take time to be an expert trader, but the liquidity is out there and the trading tools are easy to use, so you can start making money NOW
| Forum
| Blog
| Glossary
| News
| About Us | Contact Us |
What is FOREX?
The FOREX Market (Foreign Exchange) is the biggest market in the world, where the average daily trading is over $1.9Trillion.
This is a world wide market in which currencies are exchanged by various participants, such as world banks, multinational corporations, financial markets and most importantly – individual traders!
YOU can be part of the excitement in the biggest trading market in the world, and share some of those $1.9 Trillion being exchanged daily! You can buy or sell Dollars, Euros, Yens, Pounds, and more, at a click of a button.
All that’s needed is to chose a broker, sign up, and start trading Now! Join at any time - the FOREX market is always open, encompassing all time zones around the world (excluding Friday 10:00 pm GMT till Sunday 00:00 GMT). Most brokers offer web based trading platform, making it easy for you to trade anytime anywhere.
If you are new to FOREX, many brokers will provide you with demo accounts, where you can practice trading with virtual money. Once you feel ready to start earning money, you can go ahead and open a real money account. Many brokers provide mini-accounts too, in which the initial deposits are lower than in the standard account.
There is an abundance of educational tools out there, to help you learn the trade. Anything from books, land based classrooms, online guides, and even interactive simulators.
While learning, it is advised to read users' forums to get the daily insight of what experienced traders are doing, until one day – you become one of the experts on the forum.
The trick in FOREX is to trade on margin, meaning you are trading with capital borrowed from your broker. When choosing your broker you want the one who offers you the best terms. You also want to be aware of any risks involved in trading.
Like everything else in life – practice makes perfect! It will take time to be an expert trader, but the liquidity is out there and the trading tools are easy to use, so you can start making money NOW
The Importance of Identifying Favorable Stock Chart Patterns
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The Importance of Identifying Favorable Stock Chart Patterns
To be a successful investor it’s important to look for those stocks which are forming a favorable chart pattern such as a "Cup and Handle", "Double Bottom" or "Flat Base". In 2002 some of the best performing stocks exhibited the above mentioned chart patterns before breaking out and undergoing significant price appreciation.
Here are a few stocks that exhibited a "Cup and Handle" pattern before breaking above their Pivot Points on strong volume. CBZ formed a 7 month Cup from July of 2001 until February of 2002 and then developed 3 week Handle (H) before breaking above its Pivot Point in early April on strong volume. After breaking out of its Handle CBZ appreciated nearly 155%.
FSTW formed a 1 year Cup from January of 2001 until January of 2002 and then developed a 9 week Handle. FSTW then broke out of its Handle and above its Pivot Point in April accompanied by strong volume. After breaking out of its Handle FSTW appreciated nearly 225% over the next few months.
HL formed a shallow 9 month Cup from May of 2001 until February of 2002 and then developed a 4 week Handle (H). It then broke out of its Handle and above its Pivot Point in late March on good volume. After breaking out of its Handle HL gained nearly 275% over the next few months.
MWRK formed a 5 month Cup from September of 2001 into the early part of 2002 and then formed a 4 week Handle (H). MWRK then broke out of its Handle and above its Pivot Point in early March. After breaking out of its Handle MWRK gained nearly 200% over the next several months.
Another chart pattern to look for is the "Double Bottom" which looks like the letter "W". Here is a stock (CFI) that formed a Double Bottom pattern from May of 2000 into the early part of 2002 and then developed a small 3 week Handle (H) before breaking out in March accompanied by strong volume. After breaking out in March CFI gained nearly 170% over the next four months.
The third type of chart pattern to look for is called a "Flat Base". Flat Bases form as a stock basically trades sideways for several weeks or months. CVU formed a Flat Base for nearly 6 months before breaking out in April on good volume and appreciated over 300% over the next few months.
TENT is another example of a stock which formed a Flat Base for 10 months before breaking out in the early part of 2002. After breaking out TENT appreciated nearly 450% over the next 6 months.
These are some of the chart patterns you should be looking for when deciding which stocks to invest in. Investing in a stock which doesn’t have a favorable looking chart pattern can lead to poor performance while other stocks which are breaking out of a favorable chart pattern ("Cup and Handle", "Double Bottom" and "Flat Base") undergo significant price appreciation. Also if you examine the stocks mentioned above they all broke out of a favorable chart pattern on strong volume as well
--------------------------------------------------------------------------------
The Importance of Identifying Favorable Stock Chart Patterns
To be a successful investor it’s important to look for those stocks which are forming a favorable chart pattern such as a "Cup and Handle", "Double Bottom" or "Flat Base". In 2002 some of the best performing stocks exhibited the above mentioned chart patterns before breaking out and undergoing significant price appreciation.
Here are a few stocks that exhibited a "Cup and Handle" pattern before breaking above their Pivot Points on strong volume. CBZ formed a 7 month Cup from July of 2001 until February of 2002 and then developed 3 week Handle (H) before breaking above its Pivot Point in early April on strong volume. After breaking out of its Handle CBZ appreciated nearly 155%.
FSTW formed a 1 year Cup from January of 2001 until January of 2002 and then developed a 9 week Handle. FSTW then broke out of its Handle and above its Pivot Point in April accompanied by strong volume. After breaking out of its Handle FSTW appreciated nearly 225% over the next few months.
HL formed a shallow 9 month Cup from May of 2001 until February of 2002 and then developed a 4 week Handle (H). It then broke out of its Handle and above its Pivot Point in late March on good volume. After breaking out of its Handle HL gained nearly 275% over the next few months.
MWRK formed a 5 month Cup from September of 2001 into the early part of 2002 and then formed a 4 week Handle (H). MWRK then broke out of its Handle and above its Pivot Point in early March. After breaking out of its Handle MWRK gained nearly 200% over the next several months.
Another chart pattern to look for is the "Double Bottom" which looks like the letter "W". Here is a stock (CFI) that formed a Double Bottom pattern from May of 2000 into the early part of 2002 and then developed a small 3 week Handle (H) before breaking out in March accompanied by strong volume. After breaking out in March CFI gained nearly 170% over the next four months.
The third type of chart pattern to look for is called a "Flat Base". Flat Bases form as a stock basically trades sideways for several weeks or months. CVU formed a Flat Base for nearly 6 months before breaking out in April on good volume and appreciated over 300% over the next few months.
TENT is another example of a stock which formed a Flat Base for 10 months before breaking out in the early part of 2002. After breaking out TENT appreciated nearly 450% over the next 6 months.
These are some of the chart patterns you should be looking for when deciding which stocks to invest in. Investing in a stock which doesn’t have a favorable looking chart pattern can lead to poor performance while other stocks which are breaking out of a favorable chart pattern ("Cup and Handle", "Double Bottom" and "Flat Base") undergo significant price appreciation. Also if you examine the stocks mentioned above they all broke out of a favorable chart pattern on strong volume as well
What is Foreign Exchange?
The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.
Where is the central location of the FX Market?
FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or ’Interbank’ market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
Who are the participants in the FX Market?
The Forex market is called an ’Interbank’ market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.
When is the FX market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
What are the most commonly traded currencies in the FX markets?
The most often traded or ’liquid’ currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar.
Is Forex trading capital intensive?
No. FXA requires a minimum deposit of $250. FXA allows customers to execute margin trades at up to 200:1 leverage. This means that investors can execute trades of $10,000 with an initial margin requirement of $50. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. A more pragmatic margin trade for someone new to the FX markets would be 20:1 but ultimately depends on the investor’s appetite for risk.
What is Margin?
Margin is essentially collateral for a position. If the market moves against a customer’s position, FXA will request additional funds through a "margin call." If there are insufficient available funds, FXA will immediately close out the customer’s open positions.
What does it mean have a ’long’ or ’short’ position?
In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every FX position requires an investor to go long in one currency and short the other.
What about terms like "bid/ask", "spread", and "rollover"?
FXA has an extensive Glossary that provides detailed definitions of all Forex related terms.
What is the difference between an "intraday" and "overnight position"?
Intraday positions are all positions opened anytime during the 24 hour period AFTER the close of FXA’s normal trading hours at 4:30pm EST. Overnight positions are positions that are still on at the end of normal trading hours (4:30pm EST), which are automatically rolled by FXA at competitive rates (based on the currencies interest rate differentials) to the next day’s price.
How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.
How do I manage risk?
The most common risk management tools in FX trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor’s position. The liquidity of the Forex market ensures that limit order and stop loss orders can be easily executed.
What kind of trading strategy should I use?
Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.
How often are trades made?
Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day. Most importantly, by not charging commission, FXA customers can take positions as often as necessary without worrying about excessive transaction costs.
How long are positions maintained?
As a general rule, a position is kept open until one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and you need these funds.
I am interested in foreign exchange trading, but would like some additional information. Any suggestions?
In The Forex Market section we describe the foreign exchange market in some detail. In order to gain a practical understanding of foreign exchange trading, there is no better way than to open a demo account, where you can experience what it’s like to trade the Forex market without risking any capital
The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.
Where is the central location of the FX Market?
FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or ’Interbank’ market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.
Who are the participants in the FX Market?
The Forex market is called an ’Interbank’ market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.
When is the FX market open for trading?
A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.
What are the most commonly traded currencies in the FX markets?
The most often traded or ’liquid’ currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar.
Is Forex trading capital intensive?
No. FXA requires a minimum deposit of $250. FXA allows customers to execute margin trades at up to 200:1 leverage. This means that investors can execute trades of $10,000 with an initial margin requirement of $50. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. A more pragmatic margin trade for someone new to the FX markets would be 20:1 but ultimately depends on the investor’s appetite for risk.
What is Margin?
Margin is essentially collateral for a position. If the market moves against a customer’s position, FXA will request additional funds through a "margin call." If there are insufficient available funds, FXA will immediately close out the customer’s open positions.
What does it mean have a ’long’ or ’short’ position?
In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every FX position requires an investor to go long in one currency and short the other.
What about terms like "bid/ask", "spread", and "rollover"?
FXA has an extensive Glossary that provides detailed definitions of all Forex related terms.
What is the difference between an "intraday" and "overnight position"?
Intraday positions are all positions opened anytime during the 24 hour period AFTER the close of FXA’s normal trading hours at 4:30pm EST. Overnight positions are positions that are still on at the end of normal trading hours (4:30pm EST), which are automatically rolled by FXA at competitive rates (based on the currencies interest rate differentials) to the next day’s price.
How are currency prices determined?
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.
How do I manage risk?
The most common risk management tools in FX trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor’s position. The liquidity of the Forex market ensures that limit order and stop loss orders can be easily executed.
What kind of trading strategy should I use?
Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.
How often are trades made?
Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day. Most importantly, by not charging commission, FXA customers can take positions as often as necessary without worrying about excessive transaction costs.
How long are positions maintained?
As a general rule, a position is kept open until one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and you need these funds.
I am interested in foreign exchange trading, but would like some additional information. Any suggestions?
In The Forex Market section we describe the foreign exchange market in some detail. In order to gain a practical understanding of foreign exchange trading, there is no better way than to open a demo account, where you can experience what it’s like to trade the Forex market without risking any capital
What are Your Options Regarding Forex Options Brokers?
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Forex option brokers can generally be divided into two separate categories: forex brokers who offer online forex option trading platforms and forex brokers who only broker forex option trading via telephone trades placed through a dealing/brokerage desk. A few forex option brokers offer both online forex option trading as well a dealing/brokerage desk for investors who prefer to place orders through a live forex option broker.
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don’t want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific’s investor’s needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won’t spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO’s"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader’s needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms
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Forex option brokers can generally be divided into two separate categories: forex brokers who offer online forex option trading platforms and forex brokers who only broker forex option trading via telephone trades placed through a dealing/brokerage desk. A few forex option brokers offer both online forex option trading as well a dealing/brokerage desk for investors who prefer to place orders through a live forex option broker.
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don’t want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific’s investor’s needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won’t spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO’s"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader’s needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms
How to choose a Forex Broker?
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Forex brokers need 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 forex brokers who offer their services online. Deciding on a broker requires lots of research on your part. There are several areas to examine before you sign on the dotted line with any broker. Here are some things that you need to look for in making your choice:
Safety of Funds
Is the broker regulated? Are client funds insured?
Order execution
How fast is the broker’s order execution?
Will they place you on manual execution?
Do they offer automatic execution?
How much can you trade before having to request a quote?
Do they offset all clients orders?
Do they trade against their clients?
Spread
Is it fixed or variable?
How tight is the spread?
Is it larger for mini accounts?
Slippage
How much slippage can be expected in normal and fast moving market conditions?
Margin requirements
What are the margin requirements and how are they calculated? Does the margin change with currency traded? Is it the same for mini accounts and standard accounts?
Forex Trading Platform
Is it reliable during fast moving markets and news announcements?
How many different currency pairs can you trade?
Do they offer an Application Programming Interface (API) for automated systems trading?
What other features does it offer? (One click trading from the chart, trailing stops, mobile trading etc.)
Account Size
What is the minimum account balance?
Can you trade mini accounts?
Do you earn interest on the unused equity in your account?
Can you adjust the standard lot size traded?
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Forex brokers need 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 forex brokers who offer their services online. Deciding on a broker requires lots of research on your part. There are several areas to examine before you sign on the dotted line with any broker. Here are some things that you need to look for in making your choice:
Safety of Funds
Is the broker regulated? Are client funds insured?
Order execution
How fast is the broker’s order execution?
Will they place you on manual execution?
Do they offer automatic execution?
How much can you trade before having to request a quote?
Do they offset all clients orders?
Do they trade against their clients?
Spread
Is it fixed or variable?
How tight is the spread?
Is it larger for mini accounts?
Slippage
How much slippage can be expected in normal and fast moving market conditions?
Margin requirements
What are the margin requirements and how are they calculated? Does the margin change with currency traded? Is it the same for mini accounts and standard accounts?
Forex Trading Platform
Is it reliable during fast moving markets and news announcements?
How many different currency pairs can you trade?
Do they offer an Application Programming Interface (API) for automated systems trading?
What other features does it offer? (One click trading from the chart, trailing stops, mobile trading etc.)
Account Size
What is the minimum account balance?
Can you trade mini accounts?
Do you earn interest on the unused equity in your account?
Can you adjust the standard lot size traded?
Forex trading basics
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Forex Market Basics
The Foreign Exchange market (also referred to as the Forex, FX market, "Cash" Forex or Spot Forex market ) is the largest financial market in the world, with more than $1.5 trillion changing hands every day — 30 times larger than the combined volume of all U.S. equity markets. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
What to trade in Forex Market?
In the forex market, currency trading is always done in currency pairs, such as EUR/USD or GBP/USD. Accordingly, all trades result in the simultaneous buying of one currency and the selling of another. The base currency is the "basis" for the buy or the sell. It is useful to consider the currency pair as an instrument, which can be bought or sold.
Understanding Forex quote
Base currency: The first currency in the pair.
Counter Currency: The second currency in the pair. Also known as the terms currency.
The US dollar is the centerpiece of the Forex market and is normally considered the ’base’ currency for quotes. This includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/CAD 1.1302 means that one U.S. dollar is equal to 1.1302 Canadian dollar.
BID and ASK Prices
When trading forex you will often see a two-sided quote, consisting of a ’bid’ and ’ask’. The ’bid’ is the price at which you can sell the base currency (at the same time buying the counter currency). The ’ask’ is the price at which you can buy the base currency (at the same time selling the counter currency).
Commission-free, but with spreads
Most Forex brokers offer commission-free Forex trading. Spread - The difference between the bid and ask price of a currency. Normally 3-5 pips on the Majors.
Rollover - What happens to my open positions at the end of the trading day?
Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies. Most brokers will automatically roll over your open positions, allowing you to hold a position for an indefinite period of time.
Leverage & Margin
The leverage available in forex trading is one of main attractions for many traders. Leveraged trading, or trading on margin, simply means that you are not required to put up the full value of the position. Forex brokers provide more leverage than stocks or futures. In forex trading, the amount of leverage available can be up to 400 times the value of your account.
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Forex Market Basics
The Foreign Exchange market (also referred to as the Forex, FX market, "Cash" Forex or Spot Forex market ) is the largest financial market in the world, with more than $1.5 trillion changing hands every day — 30 times larger than the combined volume of all U.S. equity markets. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
What to trade in Forex Market?
In the forex market, currency trading is always done in currency pairs, such as EUR/USD or GBP/USD. Accordingly, all trades result in the simultaneous buying of one currency and the selling of another. The base currency is the "basis" for the buy or the sell. It is useful to consider the currency pair as an instrument, which can be bought or sold.
Understanding Forex quote
Base currency: The first currency in the pair.
Counter Currency: The second currency in the pair. Also known as the terms currency.
The US dollar is the centerpiece of the Forex market and is normally considered the ’base’ currency for quotes. This includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/CAD 1.1302 means that one U.S. dollar is equal to 1.1302 Canadian dollar.
BID and ASK Prices
When trading forex you will often see a two-sided quote, consisting of a ’bid’ and ’ask’. The ’bid’ is the price at which you can sell the base currency (at the same time buying the counter currency). The ’ask’ is the price at which you can buy the base currency (at the same time selling the counter currency).
Commission-free, but with spreads
Most Forex brokers offer commission-free Forex trading. Spread - The difference between the bid and ask price of a currency. Normally 3-5 pips on the Majors.
Rollover - What happens to my open positions at the end of the trading day?
Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies. Most brokers will automatically roll over your open positions, allowing you to hold a position for an indefinite period of time.
Leverage & Margin
The leverage available in forex trading is one of main attractions for many traders. Leveraged trading, or trading on margin, simply means that you are not required to put up the full value of the position. Forex brokers provide more leverage than stocks or futures. In forex trading, the amount of leverage available can be up to 400 times the value of your account.
Forex Trading Systems
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You should build your own trading system
A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.
Why you need a forex trading system?
It’s easy to trade with a system.
A good system provides consistent result.
What makes a good trading system?
It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.
A trading system with profitable expectation.
It provides good ratio of reward/risk.
A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.
Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one.
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You should build your own trading system
A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.
Why you need a forex trading system?
It’s easy to trade with a system.
A good system provides consistent result.
What makes a good trading system?
It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.
A trading system with profitable expectation.
It provides good ratio of reward/risk.
A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.
Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one.
What makes a good Trading Strategy?
--------------------------------------------------------------------------------
Ask most NEW traders, and they will tell you about some moving average or combination of indicators or a chart pattern that they use. This is, as the more experienced trader knows, an entry point and not a strategy.
Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.
BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.
In my view: You absolutely MUST specialise.
I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".
So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.
What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
What "personality" does that share, index etc have?
What entry system is the most reliable for that share?
What stop loss system is the most effective for that share?
What average risk will a typical trade carry?
What exit system works well for that share?
What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
What timescale do you want to trade? (Using intra-day or end of day data)
How much data do you keep on past trades to help identify strategy weaknesses?
How does all this fit with your trading objectives?
Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.
It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.
THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.
But if it were easy, everyone would be doing it right?
Good luck and enjoy your trading
--------------------------------------------------------------------------------
Ask most NEW traders, and they will tell you about some moving average or combination of indicators or a chart pattern that they use. This is, as the more experienced trader knows, an entry point and not a strategy.
Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.
BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.
In my view: You absolutely MUST specialise.
I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".
So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.
What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
What "personality" does that share, index etc have?
What entry system is the most reliable for that share?
What stop loss system is the most effective for that share?
What average risk will a typical trade carry?
What exit system works well for that share?
What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
What timescale do you want to trade? (Using intra-day or end of day data)
How much data do you keep on past trades to help identify strategy weaknesses?
How does all this fit with your trading objectives?
Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.
It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.
THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.
But if it were easy, everyone would be doing it right?
Good luck and enjoy your trading
What is Forex ?
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The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.
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The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.
How professional traders optimize profits
Futures spread trading is probably the most profitable, yet safest way to trade futures. Almost every professional trader uses spreads to optimize his profits. Trading spreads offers many advantages which make it the perfect trading instrument, especially for beginners and traders with small accounts (less than $10,000).
The following example of a Soybean-Spread shows the advantages of futures spread trading:
Example: Long May Soybeans (SK3) and Short November Soybeans (SX3)
Four Advantages of Futures Spread Trading
Advantage 1: Easy to trade
Do you see how nicely this spread starts trending in mid February? Whether you are a beginner or an experienced trader, whether you use chart formations or indicators, the existence of a trend is obvious. (If you are looking for a concept of how to identify a trend, we strongly recommend visiting http://www.tradingeducators.com/?source=Tradejuicetrading_philosophy.htm). Spreads tend to trend much more dramatically than outright futures contracts. They trend without the interference and noise caused by computerized trading, scalpers, and market movers.
Advantage 2: Low Margin requirements
Many spreads have reduced margin requirements, which means that you can afford to put on more positions. While the margin on an outright futures position in corn is $540, a spread trade in corn requires only $135 — 25% as much. That’s a great advantage for traders with a small account. With a $10,000 trading account risking 8% of your account, you can enter 6 corn spreads, instead of only 1-2 outright corn futures trade. How’s that for leverage?
Advantage 3: Higher return on margin
Each point in the spread carries the same value ($50) as each point in the outright futures ($50). That means that on a 3 point favorable move in corn futures or a 3 point favorable move in the spread, you would earn $150. However, the difference in return on margin is extraordinary:
Corn futures - $150/$540 = 27.8% return
Corn spread - $150/$135 = 111% return
And keep in mind that you can trade 6 times as many spread contracts as you can outright futures contracts. In our example you would achieve a 24 times higher return on you margin.
Advantage 4: Low time requirements
You don’t have to watch a spread all day long. You do not need real-time data. The most effective way to trade spreads is using end-of-day data. Therefore, spread trading is the best way to trade if you do not want to watch or cannot watch your computer all day long (i.e. because you have a daytime job). And you can save all the money you would have had to spend for real-time data systems (up to $600 per month).
So where is the catch?
If futures spread trading is so fantastic, why does it seems that hardly anybody trades spreads? Well, it is not true that hardly anybody trades spreads: the professional traders do, every day. But either by accident or design, the whole truth of spread trading has been hidden from the public over the years.
The purpose of this website is to inform you about futures spread trading. In the following we will answer the four frequently asked questions:
What is a spread?
Why trade spreads?
What can you expect when trading spreads?
What Is a Spread?
A spread is defined as the sale of one or more futures contracts and the purchase of one or more offsetting futures contracts. You can turn that around to state that a spread is the purchase of one or more futures contracts and the sale of one or more offsetting futures contracts. A spread is also created when a trader owns (is long) the physical vehicle and offsets by selling (going short) futures. Furthermore, a spread is defined as the purchase and sale of one or more offsetting futures contracts normally recognized as a spread by the fact that the two sides of the spread are actually related in some way. This explicitly excludes those exotic spreads put forth by some vendors, which are nothing more than computer generated coincidences which are not in any way related. Such exotic spreads as Long Bond futures and Short Bean Oil futures may show up as reliable computer generated spreads, but bean oil and bonds are not really related. Such spreads fall into the same category as believing the annual performance of the U.S. stock market is somehow related to the outcome of the Super Bowl sporting event. In any case, for tactical reasons in carrying out a particular strategy, you want to end up with:
simultaneously long futures of one kind in one month, and short futures of the same kind in another month. (Intramarket Calendar Spread)
simultaneously long futures of one kind, and short futures of another kind. (Intermarket Spread)
long futures at one exchange, and short a related futures at another exchange. (Inter-exchange Spread)
long an underlying physical commodity, and short a futures contract. (Hedge)
long an underlying equity position, and short a futures contract. (Hedge)
long financial instruments, and short financial futures. (Hedge)
long a single stock futures and short a sector index.
The primary ways in which this can be accomplished are:
Via an Intramarket spread.
Via an Intermarket spread.
Via an Inter-exchange spread.
By ownership of the underlying and offsetting with a futures contract.
Intramarket Spreads
Officially, Intramarket spreads are created only as calendar spreads. You are long and short futures in the same market, but in different months. An example of an Intramarket spread is that you are Long July Corn and simultaneously Short December Corn.
Intermarket Spreads
An Intermarket spread can be accomplished by going long futures in one market, and short futures of the same month in another market. For example: Short May Wheat and Long May Soybeans.
Intermarket spreads can become calendar spreads by using long and short futures in different markets and in different months.
Inter-Exchange Spreads
A less commonly known method of creating spreads is via the use of contracts in similar markets, but on different exchanges. These spreads can be calendar spreads using different months, or they can be spreads in which the same month is used. Although the markets are similar, because the contracts occur on different exchanges they are able to be spread. An example of an Inter-exchange calendar spread would be simultaneously Long July Chicago Board of Trade (CBOT) Wheat, and Short an equal amount of May Kansas City Board of Trade (KCBOT) Wheat. An example of using the same month might be Long December CBOT Wheat and Short December KCBOT Wheat.
Why Spreads?
The rationale behind spread trading is one of the best-kept secrets of the insiders of the futures markets. While spreading is commonly done by the market "insiders," much effort is made to conceal this technique and all of its benefits from "outsiders," you and me. After all, why would the insiders want to give away their edge? By keeping us from knowing about spreading, they retain a distinct advantage.
Spreading is one of the most conservative forms of trading. It is much safer than the trading of outright (naked) futures contracts. Let’s take a quick look at some of the benefits of using spreads:
Intramarket, and some Intermarket, spreads require considerably less margin, typically around 25% - 75% of the margin needed for outright futures positions.
Intramarket, and some Intermarket, spreads offer a far greater return on investment than is possible with outright futures positions. Why? Because you are posting less margin for the same amount of possible return.
Spreads, in general, trend more often than do outright futures.
Spreads often trend when outright futures are flat.
Spreads can be filtered by virtue of seasonality, backwardation, and carrying charge differentials, in addition to any other filters you might be using in your trading.
Spreads can be used to create partial futures positions. In fact, virtually anything that can be done with options on futures can be accomplished via spread trading.
Spreads allow you to take less risk than is available with outright futures positions. The amount of risk between two Intramarket futures positions is usually less than the risk in an outright futures position. The risk between owning the underlying and holding a futures contract involves the least risk of all. Spreads make it possible to hedge any position you might have in the market. Whether you are hedging between physical ownership and futures, or between two futures positions, the risk is lower than that of outright futures. In that sense, every spread is a hedge.
Spread order entry enables you to enter or exit a trade using an actual spread order, or by independently entering each side of the spread (legging in/out).
Spreads are one of the few ways to obtain decent fills by legging in/out during the market Closing.
Live data is not needed for spread trading, saving you $$ in exchange fees.
You will not be the victim of stop running when using Intramarket spreads.
What Can You Expect?
Here is an example of what you can expect from Intramarket spread trading. We think you may be pleasantly surprised!!
This spread was entered not only on the basis of seasonality, but also by virtue of the formation known as a Ross hook (Rh). The spread moved from -69.0 to -7.5 = $3,075 per contract. The margin required to put on this spread was only $608, thus the return on margin is more than 500%.
Here is an example of an Intermarket spread. Look at the the following chart: Would you want to have been long live cattle from December until February?
But, what about a spread between Live Cattle and Feeder Cattle?
The spread moved from -10,200 to -7,200 = $3,000 per contract. The margin required to put on this spread was only $540. The return on margin is more than 550%.
Lastly, we show you another intermarket spread. This one was made between Euro and British Pound. Although you might have made money on a Euro trade, you would have suffered from serious whipsaw during the entire length of the trade.
What about a spread between the Euro and the British Pound?
You didn’t have to be in this spread for very long in order to take some fat profits: During February the spread moved from $32,500 to $36,187.50 = $3,687.50 per contract.
How do I start trading spreads?
We can barely scratch the surface of what is available in the almost lost art of spread trading. There are times when seasonal spreads, coupled with chart formations, make a lot of sense. Backwardation in any market often provides an excellent signal for entry into a spread.
All the best in your trading,
Joe Ross
Thursday, September 18, 2008
In Focus: Nightmare on Wall Street 'could hit small business'
The collapse of investment bank Lehman Brothers could hit small businesses across the US, as the shockwaves from its demise could squeeze credit further and tighten access to lending, analysts have warned.
The fallout of the past weekend has shaken markets worldwide and with only two of Wall Street's Big Five investment houses still standing, there are concerns that a shortage of money will now prompt lenders to cut off the loans that entrepreneurs often rely on to expand their businesses.
Jonathan Rosenthal, a partner with investment firm Saybrook Capital, told the Los Angeles Times: "There's lots of companies that want money but not a lot of providers who want to lend money."
Many small and medium-sized firms were already facing tough borrowing conditions, with the credit crunch constricting the flow of funds for everything from internal growth to going public, it added.
Figures from Renaissance Capital show that 36 companies completed first-time initial public offerings in the first six months of 2008, compared to 133 during the same period of last year.
Nevertheless, some experts believe the current turbulence could actually be good news for small businesses - and the economy - in the long-term, as it will eradicate "rampant speculation" and usher in more disciplined lending
The collapse of investment bank Lehman Brothers could hit small businesses across the US, as the shockwaves from its demise could squeeze credit further and tighten access to lending, analysts have warned.
The fallout of the past weekend has shaken markets worldwide and with only two of Wall Street's Big Five investment houses still standing, there are concerns that a shortage of money will now prompt lenders to cut off the loans that entrepreneurs often rely on to expand their businesses.
Jonathan Rosenthal, a partner with investment firm Saybrook Capital, told the Los Angeles Times: "There's lots of companies that want money but not a lot of providers who want to lend money."
Many small and medium-sized firms were already facing tough borrowing conditions, with the credit crunch constricting the flow of funds for everything from internal growth to going public, it added.
Figures from Renaissance Capital show that 36 companies completed first-time initial public offerings in the first six months of 2008, compared to 133 during the same period of last year.
Nevertheless, some experts believe the current turbulence could actually be good news for small businesses - and the economy - in the long-term, as it will eradicate "rampant speculation" and usher in more disciplined lending
About the Pre-Market Trading Page
Pre-Market trading activity is shown on the site from 8:00 - 9:30 AM (actual trading starts at 8:00 AM EST) every trading day. Extended trading data from The Nasdaq Stock Market is shown on a 15 minute delayed basis.
Pre-Market trading is only shown if the stock if it is a component of the Nasdaq-100 Index.
Data Definitions
Pre-Market Timethe time of the pre-market trade Eastern Standard Time. Pre-Market Pricethe trade price of the pre-market trade. Pre-Market Share Volumethe number of shares traded in each recorded premarket trade. Why Investors Care
Investors find that pre-market Nasdaq-100 trading provides a leading indicator for regular hours trading. Investors may use the data to judge the strength of buying in the stock at the time of regular market open. They may also use information gathered for the pre-market activity to judge the opening price of the stock and how long that price will generally be supported by the market.
Data Provider
Data is provided by The NASDAQ OMX Group, Inc.
Update Schedule
Every trading day during pre-market trading hours on a 15 minute delay.
Pre-Market Trading | Premarket Stock Quotes - NASDAQ.com
Pre-Market trading activity is shown on the site from 8:00 - 9:30 AM (actual trading starts at 8:00 AM EST) every trading day. Extended trading data from The Nasdaq Stock Market is shown on a 15 minute delayed basis.
Pre-Market trading is only shown if the stock if it is a component of the Nasdaq-100 Index.
Data Definitions
Pre-Market Timethe time of the pre-market trade Eastern Standard Time. Pre-Market Pricethe trade price of the pre-market trade. Pre-Market Share Volumethe number of shares traded in each recorded premarket trade. Why Investors Care
Investors find that pre-market Nasdaq-100 trading provides a leading indicator for regular hours trading. Investors may use the data to judge the strength of buying in the stock at the time of regular market open. They may also use information gathered for the pre-market activity to judge the opening price of the stock and how long that price will generally be supported by the market.
Data Provider
Data is provided by The NASDAQ OMX Group, Inc.
Update Schedule
Every trading day during pre-market trading hours on a 15 minute delay.
Pre-Market Trading | Premarket Stock Quotes - NASDAQ.com
InfoQuote
Summary Quote
News
Charting
Extended Trading
Company Financials
InfoQuote
Summary Quote
News
Charting
Extended Trading
Company Financials
NASDAQ Pre-Market Most Active – Pre-Market / After Hours
NASDAQ-100 PMI Pre-Market Quotes Heat Map 5 Day Volume Chart
September 18, 2008 - Pre-Market Closed
Total Pre-Market Share Volume: 14,173,661
NASDAQ - Pre-Market Ten Most Active Share Volume
Advanced Declined
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
QQQQ
PowerShares QQQ Trust, Series 1 $40.21 $41.07 2.14% 9,108,404
AAPL
Apple Inc. $127.83 $130.57 2.14% 343,332
MSFT
Microsoft Corporation $24.57 $24.75 0.73% 341,863
ORCL
Oracle Corporation $18.10 $18.38 1.55% 194,173
SHPGY
Shire Limited $48.50 $48.37 0.27% 162,092
ERIC
LM Ericsson Telephone Company $9.63 $9.80 1.77% 141,392
RIMM
Research in Motion Limited $93 $95.89 3.11% 129,412
INTC
Intel Corporation $18.55 $18.77 1.19% 108,400
ETFC
E*TRADE Financial Corporation $2.69 $2.79 3.72% 79,245
LVLT
Level 3 Communications, Inc. $2.69 $2.92 8.55% 77,434
As of 9/18/2008 9:30:02 AM
--------------------------------------------------------------------------------
NASDAQ - Pre-Market Ten Most Advanced
Active Share Volume Declined
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
PGICD
Progressive Gaming International Corporation $4.25 $6 41.18% 9,100
ACGY
Acergy S.A. $10.18 $11.30 11.00% 4,600
LVLT
Level 3 Communications, Inc. $2.69 $2.92 8.55% 77,434
SSRI
Silver Standard Resources, Inc $18.09 $19.58 8.24% 27,295
RYAAY
Ryanair Holdings plc $24.36 $26.33 8.09% 5,963
BEXP
Brigham Exploration Company $12.09 $13 7.53% 4,000
GLNG
Golar LNG Limited $12.62 $13.55 7.37% 5,200
GFIG
GFI Group Inc. $4.20 $4.50 7.14% 11,500
VMED
Virgin Media Inc. $8.29 $8.88 7.12% 4,530
ARMH
ARM Holdings, plc $5.94 $6.32 6.40% 10,186
As of 9/18/2008 9:30:03 AM
--------------------------------------------------------------------------------
NASDAQ - Pre-Market Ten Most Declined
Active Share Volume Advanced
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
SRDX
SurModics, Inc. $39.11 $29.55 24.44% 47,161
UAUA
UAL Corporation $12.53 $11.61 7.34% 48,929
DBRN
Dress Barn, Inc. (The) $15.36 $14.65 4.62% 4,500
ACTS
Actions Semiconductor Co., Ltd. $2.66 $2.55 4.14% 10,740
ILMN
Illumina, Inc. $79.88 $77.08 3.51% 4,802
PRGS
Progress Software Corporation $25.37 $24.50 3.43% 5,128
VRTX
Vertex Pharmaceuticals Incorporated $26.57 $25.81 2.86% 65,660
PBIP
Prudential Bancorp, Inc. of Pennsylvania $10.25 $10.01 2.34% 4,400
CRNT
Ceragon Networks Ltd. $7.45 $7.29 2.15% 6,581
OTTR
Otter Tail Corporation $35.95 $35.34 1.70% 6,140
As of 9/18/2008 9:30:00 AM
--------------------------------------------------------------------------------
Most Active tables are available for the NASDAQ Pre-Market (8:00-9:30 a.m. ET) and for NASDAQ, NYSE, and Amex After Hours Market (4:00-6:30 p.m. ET.) For each session, tables exist for the most active securities by share volume, percent change advancers and decliners. Investors can simply toggle between the Pre-Market and After Hours Market links to view the Most Active tables for either trading session on NASDAQ. Click on the symbol to proceed to the company's quote page and click on the name to visit that company's web site.
A separate page is dedicated to NASDAQ, NYSE and Amex Most Active securities during the regular trading session between 9:00 a.m. ET and 4:00 p.m. ET.
Investors may trade in the Pre-Market (8:00-9:30 a.m. ET) and the After Hours Market (4:00-6:30 p.m. ET). Participation by Market Makers and ECNs is strictly voluntary and as a result may offer less liquidity and inferior prices. Stock prices may also move more quickly in this environment. Investors who anticipate trading during these times are strongly advised to use limit orders.
Pre-Market data is provided by ILX on a real-time basis; After Hours Market data is provided by ILX on a 15 minute delayed basis for NASDAQ stocks and a 20 minute delayed basis for NYSE and Amex stocks. Pre-Market information will be posted for the pre-market (8:00-9:30 a.m. ET) on nasdaq.com from 8:15 a.m. to 7:30 a.m. ET of the following day. After Hours Market information will be posted for the after hours market (4:00-6:30 p.m. ET) on nasdaq.com from 4:15 p.m. to 3:30 p.m. ET of the following day.
Summary Quote
News
Charting
Extended Trading
Company Financials
InfoQuote
Summary Quote
News
Charting
Extended Trading
Company Financials
NASDAQ Pre-Market Most Active – Pre-Market / After Hours
NASDAQ-100 PMI Pre-Market Quotes Heat Map 5 Day Volume Chart
September 18, 2008 - Pre-Market Closed
Total Pre-Market Share Volume: 14,173,661
NASDAQ - Pre-Market Ten Most Active Share Volume
Advanced Declined
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
QQQQ
PowerShares QQQ Trust, Series 1 $40.21 $41.07 2.14% 9,108,404
AAPL
Apple Inc. $127.83 $130.57 2.14% 343,332
MSFT
Microsoft Corporation $24.57 $24.75 0.73% 341,863
ORCL
Oracle Corporation $18.10 $18.38 1.55% 194,173
SHPGY
Shire Limited $48.50 $48.37 0.27% 162,092
ERIC
LM Ericsson Telephone Company $9.63 $9.80 1.77% 141,392
RIMM
Research in Motion Limited $93 $95.89 3.11% 129,412
INTC
Intel Corporation $18.55 $18.77 1.19% 108,400
ETFC
E*TRADE Financial Corporation $2.69 $2.79 3.72% 79,245
LVLT
Level 3 Communications, Inc. $2.69 $2.92 8.55% 77,434
As of 9/18/2008 9:30:02 AM
--------------------------------------------------------------------------------
NASDAQ - Pre-Market Ten Most Advanced
Active Share Volume Declined
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
PGICD
Progressive Gaming International Corporation $4.25 $6 41.18% 9,100
ACGY
Acergy S.A. $10.18 $11.30 11.00% 4,600
LVLT
Level 3 Communications, Inc. $2.69 $2.92 8.55% 77,434
SSRI
Silver Standard Resources, Inc $18.09 $19.58 8.24% 27,295
RYAAY
Ryanair Holdings plc $24.36 $26.33 8.09% 5,963
BEXP
Brigham Exploration Company $12.09 $13 7.53% 4,000
GLNG
Golar LNG Limited $12.62 $13.55 7.37% 5,200
GFIG
GFI Group Inc. $4.20 $4.50 7.14% 11,500
VMED
Virgin Media Inc. $8.29 $8.88 7.12% 4,530
ARMH
ARM Holdings, plc $5.94 $6.32 6.40% 10,186
As of 9/18/2008 9:30:03 AM
--------------------------------------------------------------------------------
NASDAQ - Pre-Market Ten Most Declined
Active Share Volume Advanced
Symbol
Company Name
Market
Close Last Sale (Pre-Market) % Change
(Pre-Market) Share
Volume
(Pre-Market)
SRDX
SurModics, Inc. $39.11 $29.55 24.44% 47,161
UAUA
UAL Corporation $12.53 $11.61 7.34% 48,929
DBRN
Dress Barn, Inc. (The) $15.36 $14.65 4.62% 4,500
ACTS
Actions Semiconductor Co., Ltd. $2.66 $2.55 4.14% 10,740
ILMN
Illumina, Inc. $79.88 $77.08 3.51% 4,802
PRGS
Progress Software Corporation $25.37 $24.50 3.43% 5,128
VRTX
Vertex Pharmaceuticals Incorporated $26.57 $25.81 2.86% 65,660
PBIP
Prudential Bancorp, Inc. of Pennsylvania $10.25 $10.01 2.34% 4,400
CRNT
Ceragon Networks Ltd. $7.45 $7.29 2.15% 6,581
OTTR
Otter Tail Corporation $35.95 $35.34 1.70% 6,140
As of 9/18/2008 9:30:00 AM
--------------------------------------------------------------------------------
Most Active tables are available for the NASDAQ Pre-Market (8:00-9:30 a.m. ET) and for NASDAQ, NYSE, and Amex After Hours Market (4:00-6:30 p.m. ET.) For each session, tables exist for the most active securities by share volume, percent change advancers and decliners. Investors can simply toggle between the Pre-Market and After Hours Market links to view the Most Active tables for either trading session on NASDAQ. Click on the symbol to proceed to the company's quote page and click on the name to visit that company's web site.
A separate page is dedicated to NASDAQ, NYSE and Amex Most Active securities during the regular trading session between 9:00 a.m. ET and 4:00 p.m. ET.
Investors may trade in the Pre-Market (8:00-9:30 a.m. ET) and the After Hours Market (4:00-6:30 p.m. ET). Participation by Market Makers and ECNs is strictly voluntary and as a result may offer less liquidity and inferior prices. Stock prices may also move more quickly in this environment. Investors who anticipate trading during these times are strongly advised to use limit orders.
Pre-Market data is provided by ILX on a real-time basis; After Hours Market data is provided by ILX on a 15 minute delayed basis for NASDAQ stocks and a 20 minute delayed basis for NYSE and Amex stocks. Pre-Market information will be posted for the pre-market (8:00-9:30 a.m. ET) on nasdaq.com from 8:15 a.m. to 7:30 a.m. ET of the following day. After Hours Market information will be posted for the after hours market (4:00-6:30 p.m. ET) on nasdaq.com from 4:15 p.m. to 3:30 p.m. ET of the following day.
World & U.S. Indices
Index Name (Symbol) Value Change
Net / % Status
NIKKEI 225 (NIK/O) 11489.30 260.49 2.22% Closed
NASDAQ Canada (CND) 944.15 44.56 4.95% Closed
NASDAQ Comp. (IXIC) 2199.10 100.25 4.78% Closed
NASDAQ-100 (IXNDX) 1697.42 64.97 3.98% Closed
S&P 500 (SPX) 1206.51 50.12 4.33% Closed
DJIA (INDU) 11019.69 410.03 3.86% Closed
CAC 40 (CAC40) 3957.86 42.25 1.06% Closed
FTSE100 (UKX100) 4880 32.40 0.66% Closed
BEL 20 (BEL20) 2783.91 5.04 0.18% Closed
Index Name (Symbol) Value Change
Net / % Status
NIKKEI 225 (NIK/O) 11489.30 260.49 2.22% Closed
NASDAQ Canada (CND) 944.15 44.56 4.95% Closed
NASDAQ Comp. (IXIC) 2199.10 100.25 4.78% Closed
NASDAQ-100 (IXNDX) 1697.42 64.97 3.98% Closed
S&P 500 (SPX) 1206.51 50.12 4.33% Closed
DJIA (INDU) 11019.69 410.03 3.86% Closed
CAC 40 (CAC40) 3957.86 42.25 1.06% Closed
FTSE100 (UKX100) 4880 32.40 0.66% Closed
BEL 20 (BEL20) 2783.91 5.04 0.18% Closed
Q&A for Extended Trading
What is the Nasdaq-100 Pre-Market IndicatorSM?
A question asked every day by investors and the financial news media is “Will the market open up or down today?” The Nasdaq-100 Pre-Market Indicator is an index of trading activity based on pre-market open prices. The PMI was developed by nasdaq.com to help gauge pre-market trends leading into the trading day as a predictor of opening prices.
What is the Nasdaq-100 After Hours IndicatorSM?
The Nasdaq-100 After Hours Indicator is also an index of trading activity. The AHI is based on extended trading prices during the after hours market, 4:00 to 6:30 p.m. ET.
How would the Nasdaq-100 Indicators be used?
Historically, limited information sources have been available to gauge market sentiment during extended trading, leading into or after regular market hours trading. Resources have been pretty much limited to observation of trading activity in individual stocks or futures contracts.
Now, with the PMI and AHI, it’s possible to get a big pre-market or after hours market picture based on actual trading data.
How representative of the market as a whole are the Nasdaq-100 Indicators?
The Nasdaq-100 Index has, since its inception, been one of the most frequently used gauges of the marketplace and is widely considered to be a good barometer of the market as a whole. With the same calculation as the Nasdaq-100 Index but using pre-market or after hours prices, the Nasdaq-100 Indicators offer a helpful measure — indicating extended trading trends.
How are the Nasdaq-100 Pre-Market and After Hours Indicators calculated?
The Indicators are minute by minute calculations during extended hours trading, using the same calculation used for the Nasdaq-100 Index during regular market hours.
The Pre-Market Indicator is calculated based on last sale prices of Nasdaq-100 securities during pre-market trading, 8:00 to 9:30 a.m. ET. If a Nasdaq-100 security does not trade during the pre-market, the calculation uses last sale from the previous day 4 p.m. closing price.
The After Hours Indicator is calculated based on last sale prices of Nasdaq-100 securities during after hours trading, 4:00 to 6:30 p.m. ET. And if a Nasdaq-100 security does not trade in the after hours market, the calculation uses last sale price from that day’s 4 p.m. closing.
How was the quality of the Nasdaq-100 Pre-Market and After Hours Indicators evaluated?
Nasdaq Economic Research performed an analysis of the methodology for calculating the Indicators’ values and determined that the methodology is consistent with calculation of the Nasdaq-100 Index during regular market hours and has shown good continuity with prices at open and close of regular market hours.
What is the Nasdaq-100 Pre-Market IndicatorSM?
A question asked every day by investors and the financial news media is “Will the market open up or down today?” The Nasdaq-100 Pre-Market Indicator is an index of trading activity based on pre-market open prices. The PMI was developed by nasdaq.com to help gauge pre-market trends leading into the trading day as a predictor of opening prices.
What is the Nasdaq-100 After Hours IndicatorSM?
The Nasdaq-100 After Hours Indicator is also an index of trading activity. The AHI is based on extended trading prices during the after hours market, 4:00 to 6:30 p.m. ET.
How would the Nasdaq-100 Indicators be used?
Historically, limited information sources have been available to gauge market sentiment during extended trading, leading into or after regular market hours trading. Resources have been pretty much limited to observation of trading activity in individual stocks or futures contracts.
Now, with the PMI and AHI, it’s possible to get a big pre-market or after hours market picture based on actual trading data.
How representative of the market as a whole are the Nasdaq-100 Indicators?
The Nasdaq-100 Index has, since its inception, been one of the most frequently used gauges of the marketplace and is widely considered to be a good barometer of the market as a whole. With the same calculation as the Nasdaq-100 Index but using pre-market or after hours prices, the Nasdaq-100 Indicators offer a helpful measure — indicating extended trading trends.
How are the Nasdaq-100 Pre-Market and After Hours Indicators calculated?
The Indicators are minute by minute calculations during extended hours trading, using the same calculation used for the Nasdaq-100 Index during regular market hours.
The Pre-Market Indicator is calculated based on last sale prices of Nasdaq-100 securities during pre-market trading, 8:00 to 9:30 a.m. ET. If a Nasdaq-100 security does not trade during the pre-market, the calculation uses last sale from the previous day 4 p.m. closing price.
The After Hours Indicator is calculated based on last sale prices of Nasdaq-100 securities during after hours trading, 4:00 to 6:30 p.m. ET. And if a Nasdaq-100 security does not trade in the after hours market, the calculation uses last sale price from that day’s 4 p.m. closing.
How was the quality of the Nasdaq-100 Pre-Market and After Hours Indicators evaluated?
Nasdaq Economic Research performed an analysis of the methodology for calculating the Indicators’ values and determined that the methodology is consistent with calculation of the Nasdaq-100 Index during regular market hours and has shown good continuity with prices at open and close of regular market hours.
In Focus: Financial shares up as world markets rally
Financial shares rose on Wednesday following "sharp losses" earlier in the week as markets around the world rallied from a battering, according to reports.
Marketwatch states that Europe led the way in the mini-recovery, with stock markets in the UK, Germany and France all overcoming worries about slowing economies hitting company profits to record gains.
British financial institution the Royal Bank of Scotland saw its shares rise four per cent, while French bank Credit Agricole was up 3.6 per cent, it added.
The site also noted that US markets closed "decisively higher" after the Federal Reserve offered support to the country's financial sector.
Aluminium producer Alcoa also contributed to easing fears over earnings after its second-quarter profits outperformed Wall Street predictions thanks to increased prices and higher than expected demand.
Meanwhile, in Shanghai, stocks "soared" on Wednesday, as investors poured into the market looking to capitalise on recent losses to snap up some bargains, the site said.
The upward trend was also fuelled by widespread speculation that the Chinese government may be about to intervene in order to support and stimulate further market growth.
Financial shares rose on Wednesday following "sharp losses" earlier in the week as markets around the world rallied from a battering, according to reports.
Marketwatch states that Europe led the way in the mini-recovery, with stock markets in the UK, Germany and France all overcoming worries about slowing economies hitting company profits to record gains.
British financial institution the Royal Bank of Scotland saw its shares rise four per cent, while French bank Credit Agricole was up 3.6 per cent, it added.
The site also noted that US markets closed "decisively higher" after the Federal Reserve offered support to the country's financial sector.
Aluminium producer Alcoa also contributed to easing fears over earnings after its second-quarter profits outperformed Wall Street predictions thanks to increased prices and higher than expected demand.
Meanwhile, in Shanghai, stocks "soared" on Wednesday, as investors poured into the market looking to capitalise on recent losses to snap up some bargains, the site said.
The upward trend was also fuelled by widespread speculation that the Chinese government may be about to intervene in order to support and stimulate further market growth.
In Focus: Russia to restrict sale of "strategic" shares on foreign markets
Authorities in Russia have announced plans to impose limits on the sale of shares in the country's oil, mining and defence firms on foreign exchanges, according to reports.
In a move analysts have described as an attempt to "lock down" strategically-important sectors, companies will only be allowed to trade a certain percentage of their stock abroad, the Globe and Mail states.
Those involved in geological exploration for natural resources such as oil face the strictest limits, as they will only be allowed to sell five per cent of their shares on foreign markets.
Companies involved in national security and defence-related sectors will be restricted to trading 25 per cent of their shares abroad, while the limit for firms linked to other strategic sectors has been reduced from 35 per cent to 30 per cent, the newspaper said.
Russia said the move is intended to increase the number of shares traded in roubles in order to support President Dmitry Medvedev's policy of turning the nation into a major financial centre by 2020.
Mr Medvedev came to power in March 2008
Authorities in Russia have announced plans to impose limits on the sale of shares in the country's oil, mining and defence firms on foreign exchanges, according to reports.
In a move analysts have described as an attempt to "lock down" strategically-important sectors, companies will only be allowed to trade a certain percentage of their stock abroad, the Globe and Mail states.
Those involved in geological exploration for natural resources such as oil face the strictest limits, as they will only be allowed to sell five per cent of their shares on foreign markets.
Companies involved in national security and defence-related sectors will be restricted to trading 25 per cent of their shares abroad, while the limit for firms linked to other strategic sectors has been reduced from 35 per cent to 30 per cent, the newspaper said.
Russia said the move is intended to increase the number of shares traded in roubles in order to support President Dmitry Medvedev's policy of turning the nation into a major financial centre by 2020.
Mr Medvedev came to power in March 2008
In Focus: Energy prices a "bright spot" in gloomy economy
After hitting record highs this year, energy prices began declining in June, providing the economists with a "bright spot" amid the gathering gloom by fuelling a "broad rally" in worldwide stock markets, according to reports.
The New York Times states the price of oil, which hit a record $145.29 a barrel on July 3rd, has declined by 16 percent since then while petrol has come back under the $4 a gallon barrier.
Meanwhile, natural gas prices - which experienced the fastest rises in the energy sector this year - have dropped by one-third since the start of July.
These falls have spurred investors and prompted some analysts to predict the declines could last until the end of 2008 as worldwide demand softens, the publication notes.
However, commodity prices are still "extraordinarily high" by historical standards and some economic experts have warned that events such as a hurricane in the Gulf Coast or ramped up tensions in the Middle East could see prices quickly climb again.
Bernard Baumohl, chief global economist for the Economic Outlook Group, said: "Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors."
After hitting record highs this year, energy prices began declining in June, providing the economists with a "bright spot" amid the gathering gloom by fuelling a "broad rally" in worldwide stock markets, according to reports.
The New York Times states the price of oil, which hit a record $145.29 a barrel on July 3rd, has declined by 16 percent since then while petrol has come back under the $4 a gallon barrier.
Meanwhile, natural gas prices - which experienced the fastest rises in the energy sector this year - have dropped by one-third since the start of July.
These falls have spurred investors and prompted some analysts to predict the declines could last until the end of 2008 as worldwide demand softens, the publication notes.
However, commodity prices are still "extraordinarily high" by historical standards and some economic experts have warned that events such as a hurricane in the Gulf Coast or ramped up tensions in the Middle East could see prices quickly climb again.
Bernard Baumohl, chief global economist for the Economic Outlook Group, said: "Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors."
US Markets- In Focus
SEC moves to strengthen short selling rules
09/18/2008
The Securities and Exchange Commission (SEC) has implemented a set of "coordinated actions" designed to strengthen the regulations protecting investors from "abusive" short... Read the full story
--------------------------------------------------------------------------------
Markets face "short but stormy" week
-09/02/2008
As markets resume trading following the Labor Day weekend, some analysts are predicting a "short but stormy" week ahead for stocks.... Read the full story
SEC to introduce mutual funds comparison tool
-08/25/2008
The Securities and Exchanges Commission (SEC) plans to introduce new software that will give investors a "quick and easy" way to search and compare data on different Read the full story
Look for ''great companies at good prices'' in bear market
-08/21/2008
While bear markets can prove tricky territory for generating returns, investors can nevertheless make money if they remain focused on the right trading strategies and use the... Read the full story
Oil to drive market in week ahead, say experts
-08/18/2008
The direction of the US stock market is likely to be driven by the price of oil, although problems in the financial sector and events in Georgia may... Read the full story
Take long-term view in erratic market, say experts
-08/14/2008
Stock markets are likely to remain erratic in the near future as "wary" investors latch on to "any scrap of news" for hints as to where the economy may be headed next, it has been... Read the full story
SEC moves to strengthen short selling rules
09/18/2008
The Securities and Exchange Commission (SEC) has implemented a set of "coordinated actions" designed to strengthen the regulations protecting investors from "abusive" short... Read the full story
--------------------------------------------------------------------------------
Markets face "short but stormy" week
-09/02/2008
As markets resume trading following the Labor Day weekend, some analysts are predicting a "short but stormy" week ahead for stocks.... Read the full story
SEC to introduce mutual funds comparison tool
-08/25/2008
The Securities and Exchanges Commission (SEC) plans to introduce new software that will give investors a "quick and easy" way to search and compare data on different Read the full story
Look for ''great companies at good prices'' in bear market
-08/21/2008
While bear markets can prove tricky territory for generating returns, investors can nevertheless make money if they remain focused on the right trading strategies and use the... Read the full story
Oil to drive market in week ahead, say experts
-08/18/2008
The direction of the US stock market is likely to be driven by the price of oil, although problems in the financial sector and events in Georgia may... Read the full story
Take long-term view in erratic market, say experts
-08/14/2008
Stock markets are likely to remain erratic in the near future as "wary" investors latch on to "any scrap of news" for hints as to where the economy may be headed next, it has been... Read the full story
In Focus: Buy into business with eyes open, expert advises
Buying into a small business can be a complex process and "should not be taken lightly", but according to one expert there are some tips that can smooth the process.
Writing on MarketWatch, former Fortune, Money and Columbia Journalism Review editor Marshall Loeb said keeping some "basic guidelines" in mind can help buyers negotiate the "room for error" presented by investing in firm.
He pointed to Ed Pendarvis on Entrepreneur.com, who recommended first and foremost that buyers get into a business they know they will like and that fits their skills. No matter how strong a company may be, a buyer will find it difficult to run if they hate the work, he said.
Prospective owners should also "probe the seller" for crucial background on an organization, such as its recent performance and the reason they are selling.
Next, they should weigh up the "value drivers" of the business, such as its location, inventory, staff skills, customer base and standing among its competitors.
Finally, Mr Loeb said, business owners must be realistic about financing their purchase, as the current market could make it difficult to raise capital for investment.
Analysts have warned that the current turbulence on Wall Street could make it difficult for entrepreneurs to secure lending from banks
Buying into a small business can be a complex process and "should not be taken lightly", but according to one expert there are some tips that can smooth the process.
Writing on MarketWatch, former Fortune, Money and Columbia Journalism Review editor Marshall Loeb said keeping some "basic guidelines" in mind can help buyers negotiate the "room for error" presented by investing in firm.
He pointed to Ed Pendarvis on Entrepreneur.com, who recommended first and foremost that buyers get into a business they know they will like and that fits their skills. No matter how strong a company may be, a buyer will find it difficult to run if they hate the work, he said.
Prospective owners should also "probe the seller" for crucial background on an organization, such as its recent performance and the reason they are selling.
Next, they should weigh up the "value drivers" of the business, such as its location, inventory, staff skills, customer base and standing among its competitors.
Finally, Mr Loeb said, business owners must be realistic about financing their purchase, as the current market could make it difficult to raise capital for investment.
Analysts have warned that the current turbulence on Wall Street could make it difficult for entrepreneurs to secure lending from banks
Pakistan's KSE Board To Review Index Floor Level Wednesday
KARACHI -(Dow Jones)- The Karachi Stock Exchange's board will meet Wednesday to review the minimum floor level imposed on the benchmark KSE-100 index.
"The board of directors will meet tomorrow to discuss the situation following the freezing of the KSE-100 index at 9144 points," one of the directors of the Karachi Stock Exchange, who asked not to be named, said Tuesday.
The benchmark KSE-100 index has fallen over 40% from its all-time high of 15, 676 on April 18. Following the continuous decline in the market, the Karachi Stock Exchange set a minimum floor level for the index at 9144 last Wednesday.
"Since the cap, the market has gained 1%, but the turnover has registered substantial decline," he said.
-By Haris Zamir, Contributing to Dow Jones Newswires; 91-11-43563300; chandrasekhar.jayachandran@dowjones.com
(END) Dow Jones Newswires
09-02-080601ET
Copyright (c) 2008 Dow Jones & Company, Inc.
KARACHI -(Dow Jones)- The Karachi Stock Exchange's board will meet Wednesday to review the minimum floor level imposed on the benchmark KSE-100 index.
"The board of directors will meet tomorrow to discuss the situation following the freezing of the KSE-100 index at 9144 points," one of the directors of the Karachi Stock Exchange, who asked not to be named, said Tuesday.
The benchmark KSE-100 index has fallen over 40% from its all-time high of 15, 676 on April 18. Following the continuous decline in the market, the Karachi Stock Exchange set a minimum floor level for the index at 9144 last Wednesday.
"Since the cap, the market has gained 1%, but the turnover has registered substantial decline," he said.
-By Haris Zamir, Contributing to Dow Jones Newswires; 91-11-43563300; chandrasekhar.jayachandran@dowjones.com
(END) Dow Jones Newswires
09-02-080601ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Wednesday, September 17, 2008
Introduction
The following facts and figures relate to the foreign exchange market. Most of the information comes from the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2004, and published in March 2005. 52 central banks and monetary authorities participated in the survey, collecting information from approximately 1200 market participants.
Structure
Decentralised, over-the-counter market, also known as the 'interbank' market
Main participants: Central Banks, commercial and investment banks, hedge funds, pension funds, corporations & private speculators
The free-floating currency system began in 1973, and was officially mandated in 1978
Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2004
Trading Hours
24 hour market
Sunday 5pm EST through Friday 4pm EST. Rollover at 5pm EST
Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America
Size
Largest market in the world
$1.9 trillion average daily turnover, equivalent to:
More than 10 times the average daily turnover of global equity markets 1
40 times the average daily turnover of the NYSE 2
$300 a day for every man, woman, and child on earth
An annual turnover more than 10 times world GDP 3
The spot market accounts for about one-third of daily turnover
1. About $167 billion - World Federation of Exchanges aggregate 2004
2. About $46 billion - NYSE 2004
3. About $36 trillion - World Bank 2003
Source: BIS Triennial Survey 2004
Major Markets
The US & UK account for more than 50% of turnover
Major markets: London, New York, Tokyo
Trading activity is heaviest when major markets overlap
Nearly two-thirds of NY activity occurs in the morning hours while European markets are open 4
4. NY Federal Reserve
Average Daily Turnover by Country
Concentration in the Banking Industry
16 banks account for 75% of turnover in the U.K.
11 banks account for 75% of turnover in the U.S.
11 banks account for 75% of turnover in Japan
Note: The reference here is to individual banking offices rather than banking organisations.
Source: BIS Triennial Survey 2004
Trading
An estimated 95% of transactions are speculative
More than 40% of trades last less than two days
About 80% of trades last less than one week
Brokers research: 90% of traders lose money, 5% break even, 5% make money
Technical Analysis
Commonly used technical indicators:
Moving averages
RSI
Fibonacci retracements
Stochastics
MACD
Momentum
Bollinger bands
Pivot point
Elliott Wave
Currencies
The US dollar is involved in approximately 90% of all foreign exchange transactions, equivalent to over $1.5 trillion a day
Currency Codes
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Source: BIS Triennial Survey 2004
Currency Pairs
Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
Dollar bloc: USD/CAD, AUD/USD, NZD/USD
Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
Source: BIS Triennial Survey 2004
The following facts and figures relate to the foreign exchange market. Most of the information comes from the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2004, and published in March 2005. 52 central banks and monetary authorities participated in the survey, collecting information from approximately 1200 market participants.
Structure
Decentralised, over-the-counter market, also known as the 'interbank' market
Main participants: Central Banks, commercial and investment banks, hedge funds, pension funds, corporations & private speculators
The free-floating currency system began in 1973, and was officially mandated in 1978
Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2004
Trading Hours
24 hour market
Sunday 5pm EST through Friday 4pm EST. Rollover at 5pm EST
Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America
Size
Largest market in the world
$1.9 trillion average daily turnover, equivalent to:
More than 10 times the average daily turnover of global equity markets 1
40 times the average daily turnover of the NYSE 2
$300 a day for every man, woman, and child on earth
An annual turnover more than 10 times world GDP 3
The spot market accounts for about one-third of daily turnover
1. About $167 billion - World Federation of Exchanges aggregate 2004
2. About $46 billion - NYSE 2004
3. About $36 trillion - World Bank 2003
Source: BIS Triennial Survey 2004
Major Markets
The US & UK account for more than 50% of turnover
Major markets: London, New York, Tokyo
Trading activity is heaviest when major markets overlap
Nearly two-thirds of NY activity occurs in the morning hours while European markets are open 4
4. NY Federal Reserve
Average Daily Turnover by Country
Concentration in the Banking Industry
16 banks account for 75% of turnover in the U.K.
11 banks account for 75% of turnover in the U.S.
11 banks account for 75% of turnover in Japan
Note: The reference here is to individual banking offices rather than banking organisations.
Source: BIS Triennial Survey 2004
Trading
An estimated 95% of transactions are speculative
More than 40% of trades last less than two days
About 80% of trades last less than one week
Brokers research: 90% of traders lose money, 5% break even, 5% make money
Technical Analysis
Commonly used technical indicators:
Moving averages
RSI
Fibonacci retracements
Stochastics
MACD
Momentum
Bollinger bands
Pivot point
Elliott Wave
Currencies
The US dollar is involved in approximately 90% of all foreign exchange transactions, equivalent to over $1.5 trillion a day
Currency Codes
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Source: BIS Triennial Survey 2004
Currency Pairs
Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
Dollar bloc: USD/CAD, AUD/USD, NZD/USD
Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
Source: BIS Triennial Survey 2004
In recent years, the foreign exchange market could favor more and more people, it becomes a favorite for the international investors, and this is strongly related to the characteristics of the Forex market. The main characteristics of the foreign exchange market are:
1st, It consists market but no trading field
The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work
Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game
In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.
1st, It consists market but no trading field
The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work
Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game
In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.
Presently, there are various kinds of financial market, it is divided into: Stock market, interest market (including bond, commercial bill and so on), gold market (including gold, platinum, silver), futures market (including grain, cotton and kapok, oil and so on), option market and foreign exchange market or forex market and so on.
The foreign exchange market is a place to trade foreign exchange currency, or it is also a place for the transaction of all foreign currency. The foreign exchange market therefore is existence, because of:
Trade and investment
Import and export business, people pays one kind of currency when doing business, but when earns another kind of currency when receive the commodity. This means that, when settling account, business people will pay and receive different currencies. Therefore, they must convert the currencies that they received into the currencies that they could buy commodities. With this similar, when buying a foreign property a company must use the concerned country's currency to make payment, therefore, it needs to convert the domestic currency is concerned country's currency.
Speculation
Currencies exchange rates could fluctuate according to the demand and supply between two currencies. A Forex trader buys up one kind of currency in an exchange rate, but up casts this currency in another more advantageous exchange rate, he may gain. Speculation has occupied most of the Forex market.
Hedging
Due to the fluctuation between two currencies, those companies who owns foreign asset (for example factory), when these companies convert these properties into cost country currencies, there consist of certain risks. When the value of a foreign asset which is estimated based on foreign currencies remained unchanged, if the exchange rate changes, when converting this property value according to the domestic currency, there could be profit and loss. The company may eliminate such hidden risk through hedging. This carries out a foreign currency trading, its transaction result just counterbalances the foreign currency property profit and loss which produces by the exchange rate change.
Forex Market Development
The history of the Forex market as an international capital speculation market is much shorter compared the stock, the gold, the stock, the interest market, but it is developing in an astonishing speed. Today, the foreign exchange market daily trading volume has amounted to 150 billion US dollars, it’s scale has gone far beyond the stock, the stock and other finance commodity markets, it has became the world's most biggest sole finance market and the also the speculation market. Since the birth of the foreign exchange market, the fluctuation of the exchange rate of the Forex market is becoming bigger. In September 1985, 1 US dollar exchanged 220 Japanese Yen, but in May 1986, 1 US dollar only could exchange 160 Japanese Yen, in 8 months, the Japanese Yen has revalued 27%. In recent years, the foreign exchange market wave amplitude has been bigger, on September 8, 1992, 1 pound exchanged 2.0100 US dollars, on November 10, 1 pound exchanged 1.5080 US dollars, in the short two months, the pound exchanged US dollar exchange rate to fall more than 5,000, depreciated 25%. Not only that, presently, everyday the fluctuation of the exchange rate of the Forex market enlarges unceasingly, within a day the rise and drop 2% to 3% is commonly seen. On September 16, 1992, the pound exchanged US dollar from 1.8755 to fall to 1.7850, the pound on first lowers 5%.
Due to the large fluctuation of the Forex market, it has created more opportunities for the investor, attracted more and more investors to join this ranks.
The foreign exchange market is a place to trade foreign exchange currency, or it is also a place for the transaction of all foreign currency. The foreign exchange market therefore is existence, because of:
Trade and investment
Import and export business, people pays one kind of currency when doing business, but when earns another kind of currency when receive the commodity. This means that, when settling account, business people will pay and receive different currencies. Therefore, they must convert the currencies that they received into the currencies that they could buy commodities. With this similar, when buying a foreign property a company must use the concerned country's currency to make payment, therefore, it needs to convert the domestic currency is concerned country's currency.
Speculation
Currencies exchange rates could fluctuate according to the demand and supply between two currencies. A Forex trader buys up one kind of currency in an exchange rate, but up casts this currency in another more advantageous exchange rate, he may gain. Speculation has occupied most of the Forex market.
Hedging
Due to the fluctuation between two currencies, those companies who owns foreign asset (for example factory), when these companies convert these properties into cost country currencies, there consist of certain risks. When the value of a foreign asset which is estimated based on foreign currencies remained unchanged, if the exchange rate changes, when converting this property value according to the domestic currency, there could be profit and loss. The company may eliminate such hidden risk through hedging. This carries out a foreign currency trading, its transaction result just counterbalances the foreign currency property profit and loss which produces by the exchange rate change.
Forex Market Development
The history of the Forex market as an international capital speculation market is much shorter compared the stock, the gold, the stock, the interest market, but it is developing in an astonishing speed. Today, the foreign exchange market daily trading volume has amounted to 150 billion US dollars, it’s scale has gone far beyond the stock, the stock and other finance commodity markets, it has became the world's most biggest sole finance market and the also the speculation market. Since the birth of the foreign exchange market, the fluctuation of the exchange rate of the Forex market is becoming bigger. In September 1985, 1 US dollar exchanged 220 Japanese Yen, but in May 1986, 1 US dollar only could exchange 160 Japanese Yen, in 8 months, the Japanese Yen has revalued 27%. In recent years, the foreign exchange market wave amplitude has been bigger, on September 8, 1992, 1 pound exchanged 2.0100 US dollars, on November 10, 1 pound exchanged 1.5080 US dollars, in the short two months, the pound exchanged US dollar exchange rate to fall more than 5,000, depreciated 25%. Not only that, presently, everyday the fluctuation of the exchange rate of the Forex market enlarges unceasingly, within a day the rise and drop 2% to 3% is commonly seen. On September 16, 1992, the pound exchanged US dollar from 1.8755 to fall to 1.7850, the pound on first lowers 5%.
Due to the large fluctuation of the Forex market, it has created more opportunities for the investor, attracted more and more investors to join this ranks.
Forex is the abbreviation for foreign exchange, refers to the foreign currency or the foreign country currency expresses which can be use in the international settlement payment means and the property, mainly it includes the credit instrument, disbursement voucher, the negotiable securities and the foreign exchange cash and so on.
The International Monetary Fund defined Forex as the international creditor's rights which a country has, no matter this kind of creditor's rights are express by the foreign currency or expressed by the standard currency.
Exchange Rate
Exchange rate, also known as the exchange price, it refers by a country currency being express by another country currency, or it is also the price ratio between both countries currency, generally it is being expressed by using the price proportion of both countries. For instance: USD/JPY=105.40, is being expressed a US dollar equal to 105.40 Japanese Yen, US dollar is also known as the unit currency, the Japanese Yen is known as the price currency.
In the foreign exchange market, the exchange rate is demonstrated by five numerals, for example:
Euro/US dollar: EUR/USD 1.3325
US dollar/Japanese Yen: USD/JPY 104.95
Pound/US dollar: GBP/USD 1.9337
US dollar/Swiss Franc: USD/CHF 1.2303
The exchange rate smallest change unit is, namely a final one-figure number digital change, is called an exchange rate basic point (Pip), abbreviation exchange rate spot, for example:
Euro EUR 0.0001
Japanese Yen JPY 0.01
Pound GBP 0.0001
Swiss Franc CHF 0.0001
The International Monetary Fund defined Forex as the international creditor's rights which a country has, no matter this kind of creditor's rights are express by the foreign currency or expressed by the standard currency.
Exchange Rate
Exchange rate, also known as the exchange price, it refers by a country currency being express by another country currency, or it is also the price ratio between both countries currency, generally it is being expressed by using the price proportion of both countries. For instance: USD/JPY=105.40, is being expressed a US dollar equal to 105.40 Japanese Yen, US dollar is also known as the unit currency, the Japanese Yen is known as the price currency.
In the foreign exchange market, the exchange rate is demonstrated by five numerals, for example:
Euro/US dollar: EUR/USD 1.3325
US dollar/Japanese Yen: USD/JPY 104.95
Pound/US dollar: GBP/USD 1.9337
US dollar/Swiss Franc: USD/CHF 1.2303
The exchange rate smallest change unit is, namely a final one-figure number digital change, is called an exchange rate basic point (Pip), abbreviation exchange rate spot, for example:
Euro EUR 0.0001
Japanese Yen JPY 0.01
Pound GBP 0.0001
Swiss Franc CHF 0.0001
“If you get in on Jones’ tip; get out on Jones’ tip”. If you are riding another person’s idea, ride it all the way.
Run early or not at all. Don't be an eleven o'clock bull or a five o'clock bear.
Woodrow Wilson said, "a governments first priority is to organize the common interest against special interests". Successful traders seek out market opportunities capitalizing on the reality that government's first priority is rarely achieved.
People who buy headlines eventually end up selling newspapers.
If you do not know who you are, the market is an expensive place to find out.
Never give advice-the smart don't need it and the stupid don't heed it.
Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word-nobody! Thus the successful trader bases no moves on what supposedly will happen but reacts instead to what does happen.
Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.
Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does console yourself by thinking of all the times when liquidating early preserved gains you would otherwise have lost.
When the ship starts to sink, don't pray-jump!
Life never happens in a straight line. Any adult knows this. But we can too easily be hypnotized into forgetting it when contemplating a chart. Beware of the chartist's illusion.
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
Whatever you do, whether you bet with the herd or against, think it through independently first.
Repeatedly reevaluate your open positions. Keep asking yourself: would I put my money into this if it were presented to me for the first time today? Is this trade progressing toward the ending position I envisioned?
It is a safe bet that the money lost by (short term) speculation is small compared with the gigantic sums lost by those who let their investments "ride". Long term investors are the biggest gamblers as after they make a trade they often times stay with it and end up losing it all. The intelligent trader will . By acting promptly-hold losses to a minimum.
As a rule of thumb good trend lines should touch at least three previous highs or lows. The more points the line catches, the better the line.
Volume and open interest are as important to the technician as price.
The clearest and easiest way to determine a trend is from previous highs and lows. Higher highs and higher lows mark an uptrend, lower highs and lower lows mark a downtrend.
Don't sell a quiet market after a fall because a low volume sell-off is actually a very bullish situation.
Prices are made in the minds of men, not in the soybean field: fear and greed can temporarily drive prices far beyond their so called real value.
When the market breaks through a weekly or monthly high, it is a buy signal. When it breaks through the previous weekly or monthly low, it is a sell signal.
Every sunken ship has a chart.
Take a trading break. A break will give you a detached view of the market and a fresh look at yourself and the way you want to trade for the next several weeks.
Assimilate into your very bones a set of trading rules that works for you.
The final phase in a bull move is an accelerated runaway near the top. In this phase, the market always makes you believe that you have underestimated the potential bull market. The temptation to continue pyramiding your position is strong as profits have now swelled to the point that you believe your account can stand any setback. It is imperative at this juncture to take profits on your pyramids and reduce the position back to base levels. The base position is then liquidated when it becomes apparent that the move has ended.
Run early or not at all. Don't be an eleven o'clock bull or a five o'clock bear.
Woodrow Wilson said, "a governments first priority is to organize the common interest against special interests". Successful traders seek out market opportunities capitalizing on the reality that government's first priority is rarely achieved.
People who buy headlines eventually end up selling newspapers.
If you do not know who you are, the market is an expensive place to find out.
Never give advice-the smart don't need it and the stupid don't heed it.
Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word-nobody! Thus the successful trader bases no moves on what supposedly will happen but reacts instead to what does happen.
Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.
Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does console yourself by thinking of all the times when liquidating early preserved gains you would otherwise have lost.
When the ship starts to sink, don't pray-jump!
Life never happens in a straight line. Any adult knows this. But we can too easily be hypnotized into forgetting it when contemplating a chart. Beware of the chartist's illusion.
Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.
Whatever you do, whether you bet with the herd or against, think it through independently first.
Repeatedly reevaluate your open positions. Keep asking yourself: would I put my money into this if it were presented to me for the first time today? Is this trade progressing toward the ending position I envisioned?
It is a safe bet that the money lost by (short term) speculation is small compared with the gigantic sums lost by those who let their investments "ride". Long term investors are the biggest gamblers as after they make a trade they often times stay with it and end up losing it all. The intelligent trader will . By acting promptly-hold losses to a minimum.
As a rule of thumb good trend lines should touch at least three previous highs or lows. The more points the line catches, the better the line.
Volume and open interest are as important to the technician as price.
The clearest and easiest way to determine a trend is from previous highs and lows. Higher highs and higher lows mark an uptrend, lower highs and lower lows mark a downtrend.
Don't sell a quiet market after a fall because a low volume sell-off is actually a very bullish situation.
Prices are made in the minds of men, not in the soybean field: fear and greed can temporarily drive prices far beyond their so called real value.
When the market breaks through a weekly or monthly high, it is a buy signal. When it breaks through the previous weekly or monthly low, it is a sell signal.
Every sunken ship has a chart.
Take a trading break. A break will give you a detached view of the market and a fresh look at yourself and the way you want to trade for the next several weeks.
Assimilate into your very bones a set of trading rules that works for you.
The final phase in a bull move is an accelerated runaway near the top. In this phase, the market always makes you believe that you have underestimated the potential bull market. The temptation to continue pyramiding your position is strong as profits have now swelled to the point that you believe your account can stand any setback. It is imperative at this juncture to take profits on your pyramids and reduce the position back to base levels. The base position is then liquidated when it becomes apparent that the move has ended.
Foreign exchange development history - exchange market evolution foreign exchange development history - exchange market evolution gold remittance system and Bretton woods agreement
In 1967, a Chicago bank rejected to provide pound loan to a professor named Milton Friedman, because his purposed was to use this fund to sell short the British pound. Mr. Friedman realized excessively that the price ratio from the British pound to US dollar at that time was high, he wanted first to sell the British pound, after the British pound fell he buys back the British pound to repay the bank again. This family bank rejects the loan offer based on the "Bretton woods Agreement" which was established 20 years ago. This agreement has fixed the various countries' currency to US dollar exchange rate, and the price ratio between the U.S dollar and the gold is also fixed to 35 US dollars to each ounce of gold.
The Bretton Woods Agreement was signed in 1944, the purposed was to prevent the currency to escape between countries, and also to limit the international speculation, thus to stabilize the international currency. Before this agreement was signed, the gold remittance standard system which was widely used since 1876 - was leading the international economy system until the First World War. In the gold remittance system, the currency was at the stable level under the support of the gold price. The gold remittance system has abolished the old time king and the ruler which depreciates the currency value unlawfully, which will lead to inflation.
But, the gold remittance standard system is certainly imperfect. Along with a country economic potentiality enhancement, it can import massive products from overseas, until it exhausts the gold reserve of certain country. It resulted the supply of the currency reduces, the interest rate raises, the economic activity will start to decline until it reaches the recession limit. Finally, the commodity price falls to the valley, gradually attracts other countries to stream in, massively rushes to purchase this country commodity. This will pour gold into this country, this will increase this country currency supplies quantity, and it will reduce the interest rate, and will create the wealth. This is so called the "the prosperity - decline” pattern and is the circulation of the gold remittance standard system, until the trade circulation and the gold freedom was broken by the First World War.
After several catastrophes wars, the Bretton Woods agreement has appeared. The countries which signed the treaty agreed to maintain the domestic currency to US dollar exchange rate, as well as the necessity of the corresponding ratio of the gold, and only allow a small fluctuation. Countries are prohibited to depreciate the currency value for the gain trade benefit, only allows the country to depreciate not more then 10%. Enters the 50's, the continuous growth of the international trade causes the fund large-scale shift which produces because of the postwar reconstruction, this causes Bretton Woods system which establishes the foreign exchange rate to lose stability.
This agreement was finally abolished in 1971, US dollar no longer could convert to gold. Until 1973, each major industrialized nation currency exchange rate fluctuation has been more freely, mainly regulates by the foreign exchange market through the currency supplies and demand quantity. The business volume, the transaction speed as well as the price variability, have achieved a comprehensive growth in the 1970's, come along with the emerge of price ratio fluctuation, the brand-new financial tool, then only the market liberalization and the trade liberalization could be achieved.
In the 1980s, along with the published of the computer and correlation technology, the international capital has flow rapidly, and strongly related the Asia, Europe and America market. Foreign exchange business volume from 80's rises daily from 70 billion US dollars to 150 billion US dollars after 20 years.
European market inflation
One of the reasons why the foreign exchange developed rapidly was the rapid development of the Euro dollar market. In a Euro dollar market, US dollar is stored beyond the border of America banks. Similarly, the European market is refers to property depositing outside the currency rightful owner country market. A Euro dollar market was formed at first in the 50's, at that time Russia deposited its petroleum income beyond the US border, avoid being freeze by the US government. This has formed a large offshore US dollar national treasury which is beyond the control of the US government. The American government has formulated a law to prohibited US dollar from lending money for the foreigner. Because the degree of freedom of the Euro dollar market is bigger and the rate of return is bigger, therefore it has large attraction. Starting from the 80's, the American company starts to borrow loan from the offshore market, they discovered that the European market is a wealth center which consists of large amount of floating capital which could provide short-term loan.
London once was (until now still is) one of the main offshore market. In the 80's, the Bank of England in order to maintain its global finance industry center dominant position, using US dollar as England pound substitution to make loan, thus to become a Euro dollar market center. London's convenient geographical position (is situated between Asian and Americas market) also helps to maintain the European market as the dominant position.
In 1967, a Chicago bank rejected to provide pound loan to a professor named Milton Friedman, because his purposed was to use this fund to sell short the British pound. Mr. Friedman realized excessively that the price ratio from the British pound to US dollar at that time was high, he wanted first to sell the British pound, after the British pound fell he buys back the British pound to repay the bank again. This family bank rejects the loan offer based on the "Bretton woods Agreement" which was established 20 years ago. This agreement has fixed the various countries' currency to US dollar exchange rate, and the price ratio between the U.S dollar and the gold is also fixed to 35 US dollars to each ounce of gold.
The Bretton Woods Agreement was signed in 1944, the purposed was to prevent the currency to escape between countries, and also to limit the international speculation, thus to stabilize the international currency. Before this agreement was signed, the gold remittance standard system which was widely used since 1876 - was leading the international economy system until the First World War. In the gold remittance system, the currency was at the stable level under the support of the gold price. The gold remittance system has abolished the old time king and the ruler which depreciates the currency value unlawfully, which will lead to inflation.
But, the gold remittance standard system is certainly imperfect. Along with a country economic potentiality enhancement, it can import massive products from overseas, until it exhausts the gold reserve of certain country. It resulted the supply of the currency reduces, the interest rate raises, the economic activity will start to decline until it reaches the recession limit. Finally, the commodity price falls to the valley, gradually attracts other countries to stream in, massively rushes to purchase this country commodity. This will pour gold into this country, this will increase this country currency supplies quantity, and it will reduce the interest rate, and will create the wealth. This is so called the "the prosperity - decline” pattern and is the circulation of the gold remittance standard system, until the trade circulation and the gold freedom was broken by the First World War.
After several catastrophes wars, the Bretton Woods agreement has appeared. The countries which signed the treaty agreed to maintain the domestic currency to US dollar exchange rate, as well as the necessity of the corresponding ratio of the gold, and only allow a small fluctuation. Countries are prohibited to depreciate the currency value for the gain trade benefit, only allows the country to depreciate not more then 10%. Enters the 50's, the continuous growth of the international trade causes the fund large-scale shift which produces because of the postwar reconstruction, this causes Bretton Woods system which establishes the foreign exchange rate to lose stability.
This agreement was finally abolished in 1971, US dollar no longer could convert to gold. Until 1973, each major industrialized nation currency exchange rate fluctuation has been more freely, mainly regulates by the foreign exchange market through the currency supplies and demand quantity. The business volume, the transaction speed as well as the price variability, have achieved a comprehensive growth in the 1970's, come along with the emerge of price ratio fluctuation, the brand-new financial tool, then only the market liberalization and the trade liberalization could be achieved.
In the 1980s, along with the published of the computer and correlation technology, the international capital has flow rapidly, and strongly related the Asia, Europe and America market. Foreign exchange business volume from 80's rises daily from 70 billion US dollars to 150 billion US dollars after 20 years.
European market inflation
One of the reasons why the foreign exchange developed rapidly was the rapid development of the Euro dollar market. In a Euro dollar market, US dollar is stored beyond the border of America banks. Similarly, the European market is refers to property depositing outside the currency rightful owner country market. A Euro dollar market was formed at first in the 50's, at that time Russia deposited its petroleum income beyond the US border, avoid being freeze by the US government. This has formed a large offshore US dollar national treasury which is beyond the control of the US government. The American government has formulated a law to prohibited US dollar from lending money for the foreigner. Because the degree of freedom of the Euro dollar market is bigger and the rate of return is bigger, therefore it has large attraction. Starting from the 80's, the American company starts to borrow loan from the offshore market, they discovered that the European market is a wealth center which consists of large amount of floating capital which could provide short-term loan.
London once was (until now still is) one of the main offshore market. In the 80's, the Bank of England in order to maintain its global finance industry center dominant position, using US dollar as England pound substitution to make loan, thus to become a Euro dollar market center. London's convenient geographical position (is situated between Asian and Americas market) also helps to maintain the European market as the dominant position.
Forex trading isn’t strange words for those who looking forward to make quick profit in the financial market. Most investors will have at least hear or read about Forex trading. If Forex is a new term to you, please do read the Introduction to the Forex market before proceed reading this Forex trading article.
Forex trading is said to be the highest risk with highest return investment (or speculation game to be more accurate) in the financial market. The amount traded in the Forex market is much larger than any stock market or even combining few stock markets. Forex trading is simply a world wide trading market running 24 hours from Monday to Friday.
Everyday, there are new Forex traders entering into trading Forex. Some of them don’t even fully understand how Forex is traded but have already trading Forex. They are not idiot who want to burn their hard earned money, it’s just because Forex market is simply too lucrative market to enter with extreme high return. Any Forex traders can easily make a double return just in few minutes time trading Forex.
Forex trading is the trading of buying or selling certain currency. For example, buying US Dollar, then selling it later at a higher price to gain profit. Forex traders may also first sell US Dollar and later on buy it back at a lower price with the same gaining profit. It’s simple strategy of selling price minus buying price to make profit. In Forex trading, we just treat currency as a good, buy it and sell it.
You might now think how can Forex trading make huge profit just by selling and buying currency? Forex is traded using margin, Forex traders don’t need to full amount to buy any currency. For example, Forex traders just need 1000 Dollar to buy up 100,000 Dollar. This allows any Forex traders to make huge profit with little money.
Another important factor that any Forex traders can make huge profit is the high fluctuation for currency. Every day every seconds, the currency exchange rate is moving up and down, the Forex exchange rate fluctuate more heavily whenever there is any important economic data being released.
Forex trading is simply sounds too easy for anyone to make profit in very short time. But before you committed into Forex trading, it is strongly advised to have full understanding in Forex trading. Do read up other Forex trading articles in this website and share Forex trading knowledge in the Forex forums.
Forex trading is said to be the highest risk with highest return investment (or speculation game to be more accurate) in the financial market. The amount traded in the Forex market is much larger than any stock market or even combining few stock markets. Forex trading is simply a world wide trading market running 24 hours from Monday to Friday.
Everyday, there are new Forex traders entering into trading Forex. Some of them don’t even fully understand how Forex is traded but have already trading Forex. They are not idiot who want to burn their hard earned money, it’s just because Forex market is simply too lucrative market to enter with extreme high return. Any Forex traders can easily make a double return just in few minutes time trading Forex.
Forex trading is the trading of buying or selling certain currency. For example, buying US Dollar, then selling it later at a higher price to gain profit. Forex traders may also first sell US Dollar and later on buy it back at a lower price with the same gaining profit. It’s simple strategy of selling price minus buying price to make profit. In Forex trading, we just treat currency as a good, buy it and sell it.
You might now think how can Forex trading make huge profit just by selling and buying currency? Forex is traded using margin, Forex traders don’t need to full amount to buy any currency. For example, Forex traders just need 1000 Dollar to buy up 100,000 Dollar. This allows any Forex traders to make huge profit with little money.
Another important factor that any Forex traders can make huge profit is the high fluctuation for currency. Every day every seconds, the currency exchange rate is moving up and down, the Forex exchange rate fluctuate more heavily whenever there is any important economic data being released.
Forex trading is simply sounds too easy for anyone to make profit in very short time. But before you committed into Forex trading, it is strongly advised to have full understanding in Forex trading. Do read up other Forex trading articles in this website and share Forex trading knowledge in the Forex forums.
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