FXCM Holdings LLC has released its latest balance sheet. The numbers reflect FXCM’s financial strength and status as of February 28, 2010.
Highlights include:
* $137,870,045 Million in Capital (Assets Minus Liabilities) – an increase of over $20 million since the last update four months ago.
* $152,167,482 In Operating Cash (Excludes Client Funds) – an increase of about $25 million since the last update.
* $365,319,721 In Customer Deposits – an increase of almost $45 million (!) since the last update.
FXCM’s figures have managed to surprise me as I figured that the increased competition in the market will take its toll on all brokers, especially the US ones, however it doesn’t seem to be the case with FXCM. It would be interesting to understand whether all US brokers managed to achieve a similar impressive growth.
FXCM believes that financial transparency in the retail forex industry is more important than ever and will continue to publicly post its balance sheet on its Web site quarterly here
Balance Sheet (Unaudited)
FOR THE MONTH ENDED FEBRUARY 28, 2010
(Amounts in USD)
CUSTOMER CASH $365,319,721
OPERATING CASH $152,167,482
OTHER ASSETS $11,204,504
FIXED ASSETS $10,095,086
TOTAL ASSETS $538,786,793
CUSTOMER DEPOSITS $365,319,721
OTHER LIABILITIES $35,597,027
TOTAL LIABILITIES $400,916,748
FXCM CAPITAL $137,870,045
TOTAL LIABILITIES AND FXCM CAPITAL $538,786,793
Drew Niv, CEO of FXCM, commented: “FXCM is proud of our continued financial discipline and strong balance sheet. We believe clients should have the necessary information to make intelligent choices.”
FXCM Holdings LLC consists of FXCM Australia Ltd., Forex Trading LLC, Forex Capital Markets LLC, Forex Capital Markets Ltd., FXCM Asia Ltd., and FXCM DMCC.
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About FXCM Holdings LLC
Forex Capital Markets (FXCM) is a leading global forex broker that caters to both retail and institutional markets. Founded in 1999, FXCM is one of the largest brokers, regulated by several of the world’s most respected financial authorities.
At the heart of FXCM’s client offering is No Dealing Desk* forex trading, Clients have Direct Market Access to some of the world’s largest forex liquidity providers, enabling FXCM to offer clients spread as low as 1 pip on major crosses. Clients also have the benefits of mobile trading, one-click order execution and trading from real-time charts. FXCM’s CFD product† offers no requite trading and allows traders to trade oil, gold, silver and stock indices, along with forex on one platform. In addition to currency and CFD trading, FXCM offers educational courses on forex trading, and provides free news and research through DailyFX.com.
*Please note that FXCM Micro, in its discretion, may or may not offset individual transactions unlike transactions in most FXCM Standard accounts.
† CFDs are not available to residents of the United States of America and its territories.
Risk Disclaimer: Trading FX and CFDs on margin carries a high level of risk, and may not be suitable for all investors read full disclosure.
Friday, April 30, 2010
CME posts strong results, ponders another Forex venue?
CME Group, one of the world’s largest futures and options exchanges, reported that first-quarter total revenues for 2010 increased 7 percent to $693 million and operating income increased 7 percent to $415 million from the year-ago period.
* First-quarter net income was $240 million and diluted earnings per share were $3.62, both up 21 percent from the same period last year. First-quarter 2010 results included $6 million in non-operating income for the recovery of a bankruptcy claim and a $6 million reduction in certain tax reserves, offset primarily by $10 million of professional fees related to the company’s joint venture with Dow Jones. These three items increased net income by $2 million. First-quarter 2010 figures include the results of Dow Jones Indexes beginning March 19, 2010.
* First-quarter 2010 operating margin was 60 percent, in line with first-quarter 2009. Operating margin is defined as operating income as a percentage of total revenues.
First-quarter net income was $240 million and diluted earnings per share were $3.62, both up 21 percent from the same period last year. First-quarter 2010 results included $6 million in non-operating income for the recovery of a bankruptcy claim and a $6 million reduction in certain tax reserves, offset primarily by $10 million of professional fees related to the company’s joint venture with Dow Jones. These three items increased net income by $2 million. First-quarter 2010 figures include the results of Dow Jones Indexes beginning March 19, 2010.
What’s more interesting is that CME announced plans to handle a range of off-exchange derivatives contracts, such as interest-rate swaps, swap options, and so-called “cap” and “floor” contracts. The exchange is also working on clearing capabilities to accommodate foreign-exchange forwards, swaps and options alongside over-the-counter spot deals.
Here this becomes interesting, is this CME’s another take on the retail FX market after the much hyped FXMarketspace launch and crash? It would be extremely interesting to see how CME would like to implement this. Although this is inline with my perception of the global FX marketplace becoming more centralized via several clearing venues this is surely not going to be easy for CME as it already failed once and the market has more than enough of such venues at this point.
* First-quarter net income was $240 million and diluted earnings per share were $3.62, both up 21 percent from the same period last year. First-quarter 2010 results included $6 million in non-operating income for the recovery of a bankruptcy claim and a $6 million reduction in certain tax reserves, offset primarily by $10 million of professional fees related to the company’s joint venture with Dow Jones. These three items increased net income by $2 million. First-quarter 2010 figures include the results of Dow Jones Indexes beginning March 19, 2010.
* First-quarter 2010 operating margin was 60 percent, in line with first-quarter 2009. Operating margin is defined as operating income as a percentage of total revenues.
First-quarter net income was $240 million and diluted earnings per share were $3.62, both up 21 percent from the same period last year. First-quarter 2010 results included $6 million in non-operating income for the recovery of a bankruptcy claim and a $6 million reduction in certain tax reserves, offset primarily by $10 million of professional fees related to the company’s joint venture with Dow Jones. These three items increased net income by $2 million. First-quarter 2010 figures include the results of Dow Jones Indexes beginning March 19, 2010.
What’s more interesting is that CME announced plans to handle a range of off-exchange derivatives contracts, such as interest-rate swaps, swap options, and so-called “cap” and “floor” contracts. The exchange is also working on clearing capabilities to accommodate foreign-exchange forwards, swaps and options alongside over-the-counter spot deals.
Here this becomes interesting, is this CME’s another take on the retail FX market after the much hyped FXMarketspace launch and crash? It would be extremely interesting to see how CME would like to implement this. Although this is inline with my perception of the global FX marketplace becoming more centralized via several clearing venues this is surely not going to be easy for CME as it already failed once and the market has more than enough of such venues at this point.
Places To Get a Great Forex Trading System
It’s very important that if you’re exploring forex trading or already trading that you have a trading system. One aspect of that trading system are the actual setup rules which usually contain entry and exit techniques. Traders put a lot of time and effort in developing these setup rules too often neglecting other aspects such as position sizing or relative size of your profits compared to losses. Therefore it’s important to find a comprehensive forex trading system.
Where can you find a comprehensive forex trading system? Throughout the last three years, I’ve been through many trading systems obtained mostly from books, forums, or other websites. I’ve found that almost every time, I’ll mold that system into something totally different than the original incarnation, something that fits my personality and style of trading. Many times, the original system will also need to be expanded to include things that were neglected or forgotten. Those of you searching for the perfect system may find this method of modifying existing forex trading systems desirable. There are places where you can find the whole package without any need for modification.
This brings me to the question, "where did you get your forex trading system?" I think there are four main ways of getting a trading system.
- Buy it. There are tons for sale out there on the net but heed caution. Many were just copied from forums, books, or other websites. Sometimes when you buy forex education, part of the package will include a trading system. For instance, Rob Booker provides his Arizona rules as part of his mentoring program.
- Get a free one. There are many free systems that can be found in books, forums, or other websites. I guess one can question whether a system found is a book is free since you paid for the book.
- Create an original system yourself. My main trading system is an original creation. There may be other systems out there that are similar to it since it’s a culmination of years of exposure to other systems and experiences.
- Modify someone else’s system and make it your own. As I stated above, I have done this many times.
Rich is Trading Forex Again
So after yet another hiatus from trading forex, I just recently had my first trade in months. It was a successful one also. But the question I want to answer is, “Is this blog dead?” The answer is no. I’ve made a living over the past 3 years ducking in and out of here depending on what’s going on in my life. Sometimes I’m just too swamped at my real job, other times I just don’t feel like writing, but I always come back. The great thing is I’ve built up a lot of content over the years so a lot of it applies to the type of forex trader you’re trying to become.
So where do I go from here? I’m in the mood to start trading forex again so that’s what I’m going to do. I’m also going to talk a little about stocks. I’ve had a lot of success, believe it or not, trading the stock market in the last couple of months and I think I’ve learned some things that I could apply to trading forex. So you’ll hear me talk about some of these things also.
Stay tuned….
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Greece Weighs on the Euro…Still
This has really become the story that simply won’t go away. Just when it seemed investors had fully digested the implications of the Greek debt crisis, they once again turned their attention to it and attacked the Euro with renewed vigor. Summarized one analyst, “Fears regarding Greece have been reignited.” As a result, the Euro is already down nearly 10% on the year, and we are barely into the second quarter!
Since I last posted on this issue, there have been a handful of key developments, the most important of which was the approval of an emergency loan packaged. Under the terms of the agreement, the EU will lend €30 Billion to Greece, and the IMF will lend an additional €15 Billion. Both loans will have 3-year terms and 5% coupons. While George Papaconstantinou, Finance Minister of Greece, “insisted that this was ‘not tantamount’ to asking for a bailout,” the markets were of the opposite mindset, which is why the Euro immediately advanced 1.5% when news of the loan package broke on April 12.
Since then, the Euro has cooled, the Greek stock market has dropped, and borrowing costs have surged: “The spread between the government’s 10-year bonds and benchmark German debt [has risen] to 549 basis points, the highest in at least 12 years. Credit- default swaps tied to Greece’s debt jumped 149 basis points to a record 635.” What happened?!
It seems that despite the assurances of Eurozone countries that “parliamentary approval would take ‘one week or two weeks at the maximum’ ” and analysts’ assertions that “Greece is as close to activating the rescue package as one can imagine,” the markets were simply not convinced. Some EU member countries have warned that “new legislation” will be required to lend money to Greece and “a group of German professors are readying a challenge to the rescue plan in Germany’s constitutional court.” In short, until Greece has the money in hand, nothing can be taken for granted. In addition, Greece must refinance €8 Billion in short-term debt that expires on May 19, and investors are skeptical that it can do so at tolerable interest rates, if at all. For example, a US Dollar-denominated bond offering that was projected to bring in $5-10 Billion attracted only $1-4 Billion in institutional interest.
Of course, there is also the concern that even if Greece can raise enough short-term cash to remain solvent, it will once again face trouble in the medium term: “An infusion of cash won’t fix Greece’s long-term problems, and the ‘only choice’ for Greece could be a ‘dramatic economic contraction,’ ” said one expert.Even if default wasn’t previously inevitable, it is quickly becoming self-fulfilling, since investors’ nervousness is leading to higher interest rates (aka borrowing costs), which is making it more difficult for Greece to reduce its budget deficit, which will cause investors to become more nervous, etc etc.
Unsurprisingly, experts have begun to look at alternative scenarios, such as leaving the Euro. The consensus is that it would be mechanically and legally feasible, but economically catastrophic. It would result in massive currency devaluation and economic recession, and wouldn’t even eliminate the sizable chunk of Greek debt that is denominated in foreign currency. In short, it remains a last resort or last resorts, and isn’t even on the table at the moment.
If investors learned anything from the credit/housing crisis, it is that things can quickly go from bad to worse, and they don’t want to have to learn that lesson a second time with Greece and the Euro. In the end, investors will stay away until there is more clarity surrounding Greece’s finances. Until then, betting on the Euro would be an “aggressive call.”
Since I last posted on this issue, there have been a handful of key developments, the most important of which was the approval of an emergency loan packaged. Under the terms of the agreement, the EU will lend €30 Billion to Greece, and the IMF will lend an additional €15 Billion. Both loans will have 3-year terms and 5% coupons. While George Papaconstantinou, Finance Minister of Greece, “insisted that this was ‘not tantamount’ to asking for a bailout,” the markets were of the opposite mindset, which is why the Euro immediately advanced 1.5% when news of the loan package broke on April 12.
Since then, the Euro has cooled, the Greek stock market has dropped, and borrowing costs have surged: “The spread between the government’s 10-year bonds and benchmark German debt [has risen] to 549 basis points, the highest in at least 12 years. Credit- default swaps tied to Greece’s debt jumped 149 basis points to a record 635.” What happened?!
It seems that despite the assurances of Eurozone countries that “parliamentary approval would take ‘one week or two weeks at the maximum’ ” and analysts’ assertions that “Greece is as close to activating the rescue package as one can imagine,” the markets were simply not convinced. Some EU member countries have warned that “new legislation” will be required to lend money to Greece and “a group of German professors are readying a challenge to the rescue plan in Germany’s constitutional court.” In short, until Greece has the money in hand, nothing can be taken for granted. In addition, Greece must refinance €8 Billion in short-term debt that expires on May 19, and investors are skeptical that it can do so at tolerable interest rates, if at all. For example, a US Dollar-denominated bond offering that was projected to bring in $5-10 Billion attracted only $1-4 Billion in institutional interest.
Of course, there is also the concern that even if Greece can raise enough short-term cash to remain solvent, it will once again face trouble in the medium term: “An infusion of cash won’t fix Greece’s long-term problems, and the ‘only choice’ for Greece could be a ‘dramatic economic contraction,’ ” said one expert.Even if default wasn’t previously inevitable, it is quickly becoming self-fulfilling, since investors’ nervousness is leading to higher interest rates (aka borrowing costs), which is making it more difficult for Greece to reduce its budget deficit, which will cause investors to become more nervous, etc etc.
Unsurprisingly, experts have begun to look at alternative scenarios, such as leaving the Euro. The consensus is that it would be mechanically and legally feasible, but economically catastrophic. It would result in massive currency devaluation and economic recession, and wouldn’t even eliminate the sizable chunk of Greek debt that is denominated in foreign currency. In short, it remains a last resort or last resorts, and isn’t even on the table at the moment.
If investors learned anything from the credit/housing crisis, it is that things can quickly go from bad to worse, and they don’t want to have to learn that lesson a second time with Greece and the Euro. In the end, investors will stay away until there is more clarity surrounding Greece’s finances. Until then, betting on the Euro would be an “aggressive call.”
No Credit Risk in Forex
The risks in trading forex are manifold. There is interest rate risk (the possibility that interest rates could change adversely), country risk (that a political, economic, or monetary crisis could adversely affect the dynamics of a country’s currency), and obviously there is exchange rate risk (that exchange rates can and often do fluctuate adversely). However, there is zero or nil credit risk. Why is that?!
First of all, what do I mean by credit risk? Often used interchangeably with the terms settlement risk and counterparty risk (depending on the type of security/investment in question), credit risk refers to the possibility that one party (all financial transactions necessarily involve two parties) will not honor its side of the financial agreement. In the case of forex, this refers to the risk that either the buyer or the seller will not be able to fulfill its promise to deliver currency at the agreed-upon exchange rate. For example, let’s assume that I’ve signed a contract to exchange $100 Dollars for Euros at $1.35. There is a risk that after you hand over the Dollars, the counterparty will not be able to supply the Euros, and even worse, that it won’t be able to return your Dollars.
With regard to transactions involving other types of securities (especially derivatives), this risk is very real, albeit minimal. Anyone who signed a long-term financial contract with Lehman Brothers or Bear Stearns is probably fighting in bankruptcy court to collect pennies on every dollar that they are owed. As I said, however, this is essentially a non-risk in forex. While currency markets fluctuated wildly in the wake of both bankruptcies, these fluctuations were completed unrelated to the possibility that Lehman Brothers and Bear Stearns would not be able to honor their trades, and in fact forex markets continued functioning with very little interruption. In fact, “In the dreadful week following Lehman Brothers’ collapse, more than $150bn of Lehman’s FX trades were settled successfully.” How was this possible?
The answer is CLS, or Continuous Linked Settlement, which is an interconnected system used exclusively for settling foreign exchange transactions, and owned by its member banks. CLS handles 55% of all forex transactions (but a much higher proportion of the volume), amounting to Trillions of dollars in activity per day, and involving 17 of the most popular currencies. Basically, all trades involving major financial institutions (7,000 at last count) pass through CLS, and are netted out at the end of each day such that each participating bank only has to make and receive payment once (for each currency) rather than 10,000 separate times.
As far as retail forex trading is concerned, this doesn’t mean that every trade that you make passes through CLS or even that your broker is itself a member of CLS (chances are that it isn’t). Instead, your broker probably settles all of these trades internally, and then must settle with its market makers at the end of each day, who in turn, settle with each other through CLS. Even though you aren’t directly connected with CLS, its existence still makes seamless forex trading possible for you.
At the same time, CLS doesn’t do anything to limit the possibility that your broker will go bankrupt (like Lehman Brothers), and that you won’t have to line up outside of bankruptcy court to try to reclaim the balance of your account. (Still, this is unlikely if you’ve selected a reputable broker with a healthy capital position). Instead, it means that when you place 100 trades over the course of a day, you can now take for granted the fact that all of them will be settled on time at the correct exchange rate.
First of all, what do I mean by credit risk? Often used interchangeably with the terms settlement risk and counterparty risk (depending on the type of security/investment in question), credit risk refers to the possibility that one party (all financial transactions necessarily involve two parties) will not honor its side of the financial agreement. In the case of forex, this refers to the risk that either the buyer or the seller will not be able to fulfill its promise to deliver currency at the agreed-upon exchange rate. For example, let’s assume that I’ve signed a contract to exchange $100 Dollars for Euros at $1.35. There is a risk that after you hand over the Dollars, the counterparty will not be able to supply the Euros, and even worse, that it won’t be able to return your Dollars.
With regard to transactions involving other types of securities (especially derivatives), this risk is very real, albeit minimal. Anyone who signed a long-term financial contract with Lehman Brothers or Bear Stearns is probably fighting in bankruptcy court to collect pennies on every dollar that they are owed. As I said, however, this is essentially a non-risk in forex. While currency markets fluctuated wildly in the wake of both bankruptcies, these fluctuations were completed unrelated to the possibility that Lehman Brothers and Bear Stearns would not be able to honor their trades, and in fact forex markets continued functioning with very little interruption. In fact, “In the dreadful week following Lehman Brothers’ collapse, more than $150bn of Lehman’s FX trades were settled successfully.” How was this possible?
The answer is CLS, or Continuous Linked Settlement, which is an interconnected system used exclusively for settling foreign exchange transactions, and owned by its member banks. CLS handles 55% of all forex transactions (but a much higher proportion of the volume), amounting to Trillions of dollars in activity per day, and involving 17 of the most popular currencies. Basically, all trades involving major financial institutions (7,000 at last count) pass through CLS, and are netted out at the end of each day such that each participating bank only has to make and receive payment once (for each currency) rather than 10,000 separate times.
As far as retail forex trading is concerned, this doesn’t mean that every trade that you make passes through CLS or even that your broker is itself a member of CLS (chances are that it isn’t). Instead, your broker probably settles all of these trades internally, and then must settle with its market makers at the end of each day, who in turn, settle with each other through CLS. Even though you aren’t directly connected with CLS, its existence still makes seamless forex trading possible for you.
At the same time, CLS doesn’t do anything to limit the possibility that your broker will go bankrupt (like Lehman Brothers), and that you won’t have to line up outside of bankruptcy court to try to reclaim the balance of your account. (Still, this is unlikely if you’ve selected a reputable broker with a healthy capital position). Instead, it means that when you place 100 trades over the course of a day, you can now take for granted the fact that all of them will be settled on time at the correct exchange rate.
Gold Rises as “Alternative Currency”
Everything in forex is relative, right? Actually, it turns out this adage is wrong, as there is now a way you can short the entire forex market! I’m not talking about some innovative new financial product that you’ve never heard of, but rather something that everyone already knows about: Gold.
Before you accuse me of sounding like an infomercial, consider that while gold has been an investable commodity for quite some time, its trading pattern has changed recently, especially in the context of forex. Before, the link between gold and forex was inverse and clear: “When the greenback strengthens…this tends to pressure gold since it reduces the need to buy as a hedge against a soft dollar. Also, a strengthening dollar makes commodities generally more expensive in other currencies.” In other words, a rising Dollar is usually accompanied by falling gold prices, and vice versa.
Over the course of 2010, this relationship has steadily grown weaker and weaker, and in the last month, it has almost completely broken down. To understand the rationale for such a change, one needs not to look any further than the sovereign debt crisis currently facing Greece and indirectly, the Eurozone. This crisis has affected the way that investors think about gold; while previously it was primarily viewed as an inflation hedge, now it is seen as a hedge against fiscal/financial crisis. In this regard, it has assumed the characteristics of a “safe haven” currency, much like the US Dollar.
“Gold is going to move higher regardless of what happens in the currency market, as long as there are fears of problems in Europe. People are starting to have more skepticism to a lot of these sovereign entities,” explained one analyst. At the moment, that means that the inverse correlation between the Dollar and Gold (Dollar Up = Gold Down) appears to have reversed itself, such that a rising Dollar is also accompanied by rising gold. In this case, there may be correlation (since investors are buying both gold AND the Dollar as safe haven vehicles) but there is no causation between the two as there was before.
At the moment, the correct interpretation is that anything is preferable to the Euro (whose sovereign debt problems are the most pressing). Thus, gold prices are rising at basically the same rate as the Euro as falling, and gold prices in local currency (EUR, CHF, GBP) terms are already at record levels.
Before you accuse me of sounding like an infomercial, consider that while gold has been an investable commodity for quite some time, its trading pattern has changed recently, especially in the context of forex. Before, the link between gold and forex was inverse and clear: “When the greenback strengthens…this tends to pressure gold since it reduces the need to buy as a hedge against a soft dollar. Also, a strengthening dollar makes commodities generally more expensive in other currencies.” In other words, a rising Dollar is usually accompanied by falling gold prices, and vice versa.
Over the course of 2010, this relationship has steadily grown weaker and weaker, and in the last month, it has almost completely broken down. To understand the rationale for such a change, one needs not to look any further than the sovereign debt crisis currently facing Greece and indirectly, the Eurozone. This crisis has affected the way that investors think about gold; while previously it was primarily viewed as an inflation hedge, now it is seen as a hedge against fiscal/financial crisis. In this regard, it has assumed the characteristics of a “safe haven” currency, much like the US Dollar.
“Gold is going to move higher regardless of what happens in the currency market, as long as there are fears of problems in Europe. People are starting to have more skepticism to a lot of these sovereign entities,” explained one analyst. At the moment, that means that the inverse correlation between the Dollar and Gold (Dollar Up = Gold Down) appears to have reversed itself, such that a rising Dollar is also accompanied by rising gold. In this case, there may be correlation (since investors are buying both gold AND the Dollar as safe haven vehicles) but there is no causation between the two as there was before.
At the moment, the correct interpretation is that anything is preferable to the Euro (whose sovereign debt problems are the most pressing). Thus, gold prices are rising at basically the same rate as the Euro as falling, and gold prices in local currency (EUR, CHF, GBP) terms are already at record levels.
Base Currency and Variable Currency
When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. Or buy euro and sell Japanese yen, or any other combination of dozens of widely traded currencies. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.
The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.
The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.
Markets Force Action!
n the wake of the S&P downgrades of European debt, pressure is being applied to Germany in a call to action, politics be damned. The Euro is in real danger of structural collapse, as exploding debt and rising yields are encouraging defaults every day this continues without resolution.
In the meantime, unemployment figures came in better than expected in Germany which may ease the political tension over the bailouts which may allow the government to take action more swiftly. European stocks are higher as earnings have been improving. So what we are seeing is an improving economic picture, with this debt situation looming as the fly in the ointment. While having a lower Euro is good for growth, there needs to be a debt resolution to prevent it from falling beyond the point of no return.
In other news, UK home prices were higher; New Zealand maintained interest rates, and US initial jobless claims were better than the previous month. So this all adds up to a resumption of moderate risk-taking, with all eyes and ears on the EU and its debt crisis.
In the forex market:
Aussie (AUD): The Aussie is higher on risk-taking and on a report that home prices growth is slowing showing signs that the previous five rate hikes have been helping to allow growth to proceed moderately.
Loonie (CAD): The Loonie is higher this morning on risk-taking as oil is higher to just above $84. The BOC Governor Carney will be testifying today and the market may be concerned that he may attempt to further squash hopes of a rate hike in a follow up to yesterday’s quote about nothing being “pre-ordained”. The Loonie is getting an added boost from the New Zealand decision to keep rates stable.
Kiwi (NZD): The Kiwi is higher on risk-taking as well despite the fact that the RBNZ maintained rates at a record low 2.5% citing “elevated risks” in the marketplace. Future rate hikes will be forthcoming down the road provided a broad-based recovery continues. In addition, trade balance figures came in better than expected, showing signs that indeed recovery is taking place.
Euro (EUR): Unemployment figures came in much better than expected, and Euro zone confidence figures came in better than expected despite all of the problems related to the Greek debt crisis. I wrote a while back that the term “Chermany” was going to be important in the global economy in the near future. China is to the US what Germany is to the rest of the EU. They export goods and encourage debt. China has prospered due to its currency peg; and Germany due to its EU participation. If Germany continues to drag out this bailout process, they may ultimately be responsible for the Euro’s demise.
Pound (GBP): The Pound is higher this morning as UK home prices advanced the most since 2007, halting a two-day decline as risk appetite returned to the market. Expect the Pound to continue to trade sideways until after the outcome of the next week’s elections.
Dollar (USD): The Dollar is lower this morning as the Fed left rates unchanged yesterday and continued with the “extended period” language. They also signaled that sustained job gains would be necessary to consider moving on rates. Initial jobless claims figures dropped 11K to 448K, but don’t let the “Lamestream” Media fool you into believing that the jobs picture is getting better. This is most certainly a case of “less bad” and at this pace the Fed will be keeping rates low for a very LONG “extended period”.
Yen (JPY): The yen is lower on a resumption of carry trades as yield-seeking is taking place.
Within the next two weeks, we should have a good idea of what level of risk there is in the marketplace. There are two major elections occurring over that time span, one in the UK, the other in Germany.
If the current regime in Germany can maintain its power in the May 9th elections, than expect a resolution to happen rather quickly despite its unpopularity. If the balance of power should shift, then there could be further delays which could cause problems with Greece’s next debt payment due in mid-may.
So until these elections pass, I expect some range-bound trading. We will certainly have days of different measures of risk based on economic data points, but the election and subsequent resolution to the EU debt crisis is paramount.
So my bias is toward risk appetite, with a quick trigger to get out if risk-aversion should heat up. In other words, I am keeping my trading short-term and taking what the market gives me, rather than trying to guess what will take place. I advise traders out there to do the same.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
In the meantime, unemployment figures came in better than expected in Germany which may ease the political tension over the bailouts which may allow the government to take action more swiftly. European stocks are higher as earnings have been improving. So what we are seeing is an improving economic picture, with this debt situation looming as the fly in the ointment. While having a lower Euro is good for growth, there needs to be a debt resolution to prevent it from falling beyond the point of no return.
In other news, UK home prices were higher; New Zealand maintained interest rates, and US initial jobless claims were better than the previous month. So this all adds up to a resumption of moderate risk-taking, with all eyes and ears on the EU and its debt crisis.
In the forex market:
Aussie (AUD): The Aussie is higher on risk-taking and on a report that home prices growth is slowing showing signs that the previous five rate hikes have been helping to allow growth to proceed moderately.
Loonie (CAD): The Loonie is higher this morning on risk-taking as oil is higher to just above $84. The BOC Governor Carney will be testifying today and the market may be concerned that he may attempt to further squash hopes of a rate hike in a follow up to yesterday’s quote about nothing being “pre-ordained”. The Loonie is getting an added boost from the New Zealand decision to keep rates stable.
Kiwi (NZD): The Kiwi is higher on risk-taking as well despite the fact that the RBNZ maintained rates at a record low 2.5% citing “elevated risks” in the marketplace. Future rate hikes will be forthcoming down the road provided a broad-based recovery continues. In addition, trade balance figures came in better than expected, showing signs that indeed recovery is taking place.
Euro (EUR): Unemployment figures came in much better than expected, and Euro zone confidence figures came in better than expected despite all of the problems related to the Greek debt crisis. I wrote a while back that the term “Chermany” was going to be important in the global economy in the near future. China is to the US what Germany is to the rest of the EU. They export goods and encourage debt. China has prospered due to its currency peg; and Germany due to its EU participation. If Germany continues to drag out this bailout process, they may ultimately be responsible for the Euro’s demise.
Pound (GBP): The Pound is higher this morning as UK home prices advanced the most since 2007, halting a two-day decline as risk appetite returned to the market. Expect the Pound to continue to trade sideways until after the outcome of the next week’s elections.
Dollar (USD): The Dollar is lower this morning as the Fed left rates unchanged yesterday and continued with the “extended period” language. They also signaled that sustained job gains would be necessary to consider moving on rates. Initial jobless claims figures dropped 11K to 448K, but don’t let the “Lamestream” Media fool you into believing that the jobs picture is getting better. This is most certainly a case of “less bad” and at this pace the Fed will be keeping rates low for a very LONG “extended period”.
Yen (JPY): The yen is lower on a resumption of carry trades as yield-seeking is taking place.
Within the next two weeks, we should have a good idea of what level of risk there is in the marketplace. There are two major elections occurring over that time span, one in the UK, the other in Germany.
If the current regime in Germany can maintain its power in the May 9th elections, than expect a resolution to happen rather quickly despite its unpopularity. If the balance of power should shift, then there could be further delays which could cause problems with Greece’s next debt payment due in mid-may.
So until these elections pass, I expect some range-bound trading. We will certainly have days of different measures of risk based on economic data points, but the election and subsequent resolution to the EU debt crisis is paramount.
So my bias is toward risk appetite, with a quick trigger to get out if risk-aversion should heat up. In other words, I am keeping my trading short-term and taking what the market gives me, rather than trying to guess what will take place. I advise traders out there to do the same.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Interest Rate Differentials
Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.
Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!
Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.
Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!
Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.
Friday, March 12, 2010
Forex trading examples
Example 1
An investor has a margin deposit with Saxo Bank of USD 100,000.
The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.
The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.
Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.
Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.
Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.
Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.
As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.
This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.
Example 2:
The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).
The dealer quotes 112.05-10. The investor sells EUR at 112.05.
Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.
He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.
Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.
The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.
This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.
Example 3
The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:
He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.
Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.
After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.
Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.
Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.
The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.
An investor has a margin deposit with Saxo Bank of USD 100,000.
The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.
The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.
Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.
Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.
Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.
Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.
As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.
This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.
Example 2:
The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).
The dealer quotes 112.05-10. The investor sells EUR at 112.05.
Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.
He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.
Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.
The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.
This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.
Example 3
The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:
He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.
Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.
After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.
Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.
Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.
The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.
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New to the Forex market?
We've worked hard to distill our collective trading experience into an approach suitable for all skill levels.
Step 1: Understand the FOREX market. Dive into Forex 101 for a compact overview of the basics or sit back and join us at one of our live interactive webinars.
Step 2: Prepare to trade in a live environment. Register for one of our training courses and study at your own pace or join us at a local workshop, where our experienced instructors can teach you in a dynamic classroom setting.
Step 3: Test your skills risk free. Sharpen your technical analysis techniques with a free 30 day practice account.
Step 1: Understand the FOREX market. Dive into Forex 101 for a compact overview of the basics or sit back and join us at one of our live interactive webinars.
Step 2: Prepare to trade in a live environment. Register for one of our training courses and study at your own pace or join us at a local workshop, where our experienced instructors can teach you in a dynamic classroom setting.
Step 3: Test your skills risk free. Sharpen your technical analysis techniques with a free 30 day practice account.
Benchmarking the Economic
Benchmarking the Economic Recovery is the
Next Major Fundamental Driver
During the worst of the financial crisis through the end of 2008 and even into the opening months of 2009, the market’s primary concern was risk appetite. Interest rate cuts were pervasive and expected return was the last thing on any traders mind. Sharp losses in nearly every investment class leveraged capital preservation into the upper echelons of importance. However, with interest rates bottoming out and safe havens no longer essential, we have seen speculative funds slowly finding their way out of risk-free zones and coming off of the sidelines to once again be put back to work. This leads us to a natural market truism: when fear isn’t the dominant influence, greed takes over
Next Major Fundamental Driver
During the worst of the financial crisis through the end of 2008 and even into the opening months of 2009, the market’s primary concern was risk appetite. Interest rate cuts were pervasive and expected return was the last thing on any traders mind. Sharp losses in nearly every investment class leveraged capital preservation into the upper echelons of importance. However, with interest rates bottoming out and safe havens no longer essential, we have seen speculative funds slowly finding their way out of risk-free zones and coming off of the sidelines to once again be put back to work. This leads us to a natural market truism: when fear isn’t the dominant influence, greed takes over
EUR/USD: Trading the Euro-Zone GD
The advanced 2Q GDP reading for the Euro-Zone could weigh on the exchange rate as economists forecast the growth rate to contract 0.5% from the first quarter, and fears of a slower recovery could hamper the outlook for future policy as the European Central Bank anticipates price pressures to remain subdued throughout the second-half of the year.
Trading the News: Euro-Zone Gross Domestic Product
What’s Expected
Time of release: 08/13/2009 9:00 GMT, 05:00 EST
Primary Pair Impact : EURUSD
Expected: -0.5%
Previous: -2.5%
Trading the News: Euro-Zone Gross Domestic Product
What’s Expected
Time of release: 08/13/2009 9:00 GMT, 05:00 EST
Primary Pair Impact : EURUSD
Expected: -0.5%
Previous: -2.5%
4Q 2008 Euro-Zone
Gross Domestic Product
The advanced GDP reading for the Euro-Zone showed the economy contracted 1.5% in the fourth quarter to mark the biggest downturn since the series began in 1995, while the annual rate of growth slipped 1.2% from the previous year, which is the first full-year drop on record, and conditions are likely to get worse as the International Monetary Fund forecasts economic activity to contract 2.0% in 2009. As the region faces its first recession in over a decade, fears of a deepening downturn may lead policymakers to take further steps to shore up the economy, and the European Central Bank is expected to lower the benchmark interest rate by another 50bp to a record-low of 1.50% as the outlook for growth and inflation falter. Meanwhile, as the overnight rate falls close to zero, the Governing Council may look beyond the interest rate to manage monetary policy, and is likely to adopt unconventional measures to stimulate the economy.
The advanced GDP reading for the Euro-Zone showed the economy contracted 1.5% in the fourth quarter to mark the biggest downturn since the series began in 1995, while the annual rate of growth slipped 1.2% from the previous year, which is the first full-year drop on record, and conditions are likely to get worse as the International Monetary Fund forecasts economic activity to contract 2.0% in 2009. As the region faces its first recession in over a decade, fears of a deepening downturn may lead policymakers to take further steps to shore up the economy, and the European Central Bank is expected to lower the benchmark interest rate by another 50bp to a record-low of 1.50% as the outlook for growth and inflation falter. Meanwhile, as the overnight rate falls close to zero, the Governing Council may look beyond the interest rate to manage monetary policy, and is likely to adopt unconventional measures to stimulate the economy.
Bearish Scenario:
If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on EURUSD ahead of the data release.
Tips To Start Trading Forex
If you’re just starting trading Forex, there are a few tips that can save you time, work and money. The first tip is extremely simple: trade just a single currency pair. Most professionals trade just one or 2 currency pairs at most. However, most beginners tend to try to trade all the currency pairs. If you’re just starting trading Forex, it’s a good idea to trade for example the EUR/USD. Don’t trade anything else unless you already have lots of experience with this currency pair and feel you can start trading 2 currency pairs.Other common mistake in Forex is that traders try to make a quick buck. This way they tend to trade intraday charts in order to capture fast profits. This is a mistake. No matter what strategy or system you’re using, there’s a good probability that it will work much better on larger time frames. If you decide to start trading using, for example, a 4 hours chart, you’re way ahead traders that try to trade on a 5 minute chart. The truth is that in the intraday charts there’s much noise, and since you can’t trade 24 hours a day, you end up losing some of the best movements. If you’re trading larger time frames, you’ll trade with less stress and you’ll be able to capture bigger trends. With these 2 advantages, it will be easier to start making money in Forex.
The Best Time Frames To Use In Forex
There are lots and lots of time frames you can use in Forex. All Forex charting platforms offer charts from 1 minute up to weekly or even monthly time frames. So, which is the best time frame to analyze a currency pair and make money in Forex?That depends on the kind of trader you are. If you’re a day trader you need to use a short time frame in order to capture the small trends in Forex. If you’re a swing trader or investor, you need to use larger time frames, in order to capture the biggest swings in Forex.The best time frames for a day trader:There are plenty of time frames that can be used for day trading. The most common ones are the 1 minute, the 3 minutes, the 5 minutes, the 15 minutes or even the 30 minutes.The 1 minute time frame is not very good. Since you’ll always pay a 3 or 5 pips spread in Forex, most of the times the 1 minute period doesn’t offer you much opportunities. This time frame is too small in order to avoid all the noise, and in order to find good intraday trends. The same happens with the 3 minutes chart. If you use this chart you won’t be able to notice any difference between a small price swing and a big one.The 5 minutes is a decent time frame to day trade Forex. It allows you to catch fast trades with decent movement in order to pay for the spread and keep some profit for you as well.The 15 minutes time frame is like the 5 minutes, one of the best time frames for a day trader. It allows you to clearly see the difference between small trends and the big ones. This time frame also allows you to hold your winners for much more time than the 5 minutes time frame, so it’s a good choice for day traders.The 30 minutes time frame can also be used for day trading Forex. However, this time frame can only be used if you intend to hold a trade for up to 6 or 8 hours.
How To Trade Forex Without Actually Trading Forex
Forex is currently the biggest financial market in the world. Lots of stocks and options traders and even beginners are entering the Forex market to use the huge leverage available in this market and profit from the currency trends.Forex is an attractive market, but it’s also a risky market. Lots of traders lose their entire account in less than a month. Even for the 1st month survivors, most of these guys are out of the market in less than 6 months.The problem with Forex is that it’s an incredible difficult market. First of all, it’s open 24 hours a day, and that’s a big challenge for any retail trader. You can’t be watching your screen 24 hours a day like a big bank or an investment house. So, in numerous occasions, you find that your favorite currency pair had the biggest movement of the day when you were not watching it. Another problem with Forex is the difficulty to get a decent broker. There are lots of brokers which aren’t even regulated. Some traders discover this when they try to withdraw money from their accounts.Forex has also lots of advantages, like the leverage and the liquidity. Besides this, trends on Forex tend to last much longer than in other financial markets. How can you trade Forex without actually trade Forex? In other words, how can you take advantage of the Forex market without even open an account with a Forex broker.Basically you have 2 different options. You can trade with a futures broker and trade for example the USD future instead of trading the EUR/USD.The second way you can trade Forex is to trade ETF’s. ETF’s are Exchanged Traded Funds, and there are a few ETF’s which allow you to buy or sell a currency. Here are the most important ETF’s which allow you to take advantage of Forex without trading directly on the Forex market:•FXB – British pound ETF•FXE – Euro ETF. Buying FXE is like buying EUR/USD•FXC – Canadian dollar ETF•FXF – Swiss franc ETF•FXY – Japanese YenTrading these ETF’s is a simple as trading a stock. These ETF’s allow you to trade Forex like if you were simply buying for example a Microsoft share.
Forex Trading Diary
A Forex trading diary is one of the best tools you can use to learn and master the forex market. This diary allows you to spot your mistakes and learn from them.All traders make mistakes. If you don’t take notes of these mistakes you’ll probably forget about them. The result is simple: you’ll make these mistakes again, and they will cost you time and money.If you annotate your trades in detail, you’ll be able to notice what you did wrong. You’ll spot your mistakes, and you’ll be able to avoid them in the future.The more detail you put in this diary, the better. You can describe the reasons that led you to buy or sell a currency pair. You can even take a screenshot of the chart when you decided to buy and sell your position.Take notes of all the details that made you believe you would be making money on this trade. What was your state of mind? If you were anxious or nervous you were more prone to do a mistake. If you were tired or didn’t have a clear plan for the trade, you made a mistake. When you close your position, write in your trading diary why you closed your position. In the future this can be really valuable to you.Writing a trading diary allows you to learn at a faster rate. Since you analyze all the details that led you to buy and sell a currency pair, you’ll be able to quickly spot what you did wrong, and what you could have done better.This will help you to grow as a trader and make better trades in the future.When you have some free time, read your diary and notice what you have been learning. Keep thinking about what you can do to improve your trading in the future.All traders make mistakes. The smart ones try to learn from these mistakes and the best way to learn from your mistakes is to write a complete and detailed trading diary.
Forex Mechanical Trading Systems
A Forex Mechanical trading system is a software that can watch the market for you, take all the decisions and trade directly on your broker. Most automated trading systems on the market are EAs for MT4.What are the advantages and disadvantages in using this king of trading system in your trading?Advantages:1.With a simple installation the software does all the work for you. It analyses the market 24 hours a day, looks for good opportunities and trades for you. The only thing you need to do is to leave your computer on and he’ll do all the work for you.2.Usually, on this kind of software, you can easily backtest the strategy. With 1 or 2 clicks of a mouse, you can know exactly how a system performed in the last years. You’ll see all the trades this system generated, how much money he was able to win or lose, and even analyze the maximum drawdown of previous years.3.Usually, the mechanical trading systems allows a user to define some key points like, for example, the maximum risk a trader is able to let the software use. This way you can improve your system so that it performs better and face fewer risks.4.The price of this kind of product is an advantage as well. Considering that just a few years ago this kind of product price was of thousands of dollars and nowadays there are some good automatic trading systems that cost less than $100.Disadvantages:1.Since these mechanical systems are based on technical analysis there is no guarantee that they can keep performing as well as they have been performing in the past. So, no matter how good the previous performance is, you can never be sure how this system will behave in the future.2.A software can’t think like a trader. It can analyze charts and manage your account, but it can’t analyze news or political events. So, if there’s a major shift or economic event, while a trader can adapt his strategy, the mechanical systems might not be able to adapt to the new kind of market.Since automatic systems do all the work for you, you can get dependent on it. This would be bad if the system stops working and you need to adapt it to the new market conditions.
How To Avoid Huge Risks In Forex
Forex market is a challenging and risky market, but there are a few steps you can follow in order to decrease your risk in Forex:1 – Always use a stop loss. This stop loss can be a mental point when you decide that you’ll exit the trade, or a stop loss order that you place on your broker. No matter what your choice is, a stop loss point is a good way to avoid high risks. It allows you to avoid fear and greed, and to cut your losses before they rip off your account.2 – Use risk management rules. Don’t risk more than 5% of your account in a single trade. If you risk too much, you can suffer big losses in a matter of days or even hours. If you decide to risk no more than 5% of your account in a single trade, you won’t lose all your account unless you lose more than 20 times in a row.3 – Trade with a solid and reliable broker. If you choose the wrong broker, that’s enough to be in a high risk situation. Don’t ever trade with unregulated brokers or brokers that trade against their clients. Make sure you trust your broker (and that you have good reasons to do so) before you open an account.4 – Avoid trading during news releases. If you’re trading during a major economic release, you’re taking some high risks. The economic release can result in major volatility on the market, and if this volatility goes against your position, you’ll be in trouble. So, if you want to avoid higher risks, don’t trade during news unless you’re an experienced trader.5 – Avoid day trading. Day trading is the most difficult technique to use in Forex. The market is open 24 hours a day and the day trader has to be experienced in order to manage his trades and to deal with all the stress that comes with day trading. It’s better to start trading in larger time frames so that you can trade with less stress and with better risk/reward positions.6 – Trade with at least 2:1 risk/reward. This means that for every pip you’re risking, you’ll plan to win at least 2 pips. If your target is at least twice your stop loss, you can be wrong 50% of the times and still make money in the end.7 – Keep learning and practicing as much as you can. This will allow you to minimize risks and to develop new and powerful strategies to make money on Forex.
Day Trading Forex
Day trading Forex is probably the most difficult task to any trader. Most Forex newbies find day trading extremely attractive. Since Forex brokers allow to use huge margins, beginners try to use too much margin and capture small profit trades.The truth is that it’s extremely difficult to make money consistently day trading Forex.First of all, the Forex market is open 24 hours a day. A trader can’t be watching the market all the time, so it will be extremely difficult to be able to spot all the good opportunities the Forex market provides him in a day. Add to this the fact that Forex market lacks volatility during most of the day. If you try to day trade, you can be hours and hours in front of the computer waiting for a good opportunity that simply won’t appear. This is not only bad because you won’t be able to profit, but you also make much more mistakes. When a trader spends too much time waiting for a trade, his mind can trick him and force him to make some costly mistakes.The spreads that appear to be so small on the most common currency pairs, are extremely high for day traders. Sure, 3 pips for example seems like a small spread. But this small spread means you’ll lose 3 pips every time you buy and 3 pips every time you sell. This means that you’ll be losing 6 pips every time you open and close a trade. If you make for example 5 trades in a day, you’ll be paying 30 pips to your broker. So, in order to make some money when day trade, you have to make much more than 30 pips a day in order to pay the higher fees.Last but not least, day trading Forex is extremely stressful. This is true in any financial market, but on Forex tends to be much worse. Due to the 24 hours period and the lack of volatility during most of the day, day traders have a hard time trying to make a consistent profit.Overall, day trading Forex is extremely difficult, and should only be approached by the most experienced traders. Even experienced traders have difficulties in trying to make money on day trade. So, if you’re just starting on Forex, you should avoid day trading and trade on longer time frames.
Why So Many People Fail At Forex Tr
Most people lose money on Forex. That’s a fact. But why does that happen?This simply happens because most people come to Forex with the wrong mindset. They see Forex as a get rich quick opportunity, and they learn the hardest way that Forex is not a get rich scheme.Forex trading is a business and has to be treated like it.Let’s see the most common mistakes that can make you lose your shirt on Forex:Mistake number 1: Treating Forex as a get rich quick opportunity:Due to the high leverage on Forex, beginners start to think that they can start with just a small amount of money and get millionaire in a short time span. Well, this is a huge mistake. If you use high leverage, you can double or triple your account in a short period of time. No question about that. However, you can also lose your entire account in less than a day. This is something most beginners forget about… If you increase your profit potential, you also increase your risk.If you want to make money on Forex you need to protect your money. You need to use small leverage or no leverage at all.Mistake number 2: Beginners want to achieve great returns on a short period of time:This mistake is extremely connected with the previous one. Most beginners want to achieve great results on the short term. So, they leverage their account too much and try to day trade. This way, they can start making good money daily. That’s a thought, but unfortunately that’s not the reality. Day trading can be profitable but only if made by the most experienced traders on the market. When you’re day trading you’re paying much more trading commissions than on swing trading (remember that commission fees are free, but you always pay the spread). So, in order to make money on day trading, you need to make much more pips than on swing trading.Besides this, if you’re day trading, you need volatility. Most of the day there is a lack of volatility in the market. If there’s no volatility you won’t be able to make money. When that happens the only one profiting from your trades is your broker.Mistake number 3: Thinking it’s easy to make money on Forex:If it was easy to make money on Forex, everyone would be doing it. Forex is one of the most complex and difficult markets to trade and you can only make money if you’re good at it. The only way you can make money on Forex is to educate yourself and work hard on it. You need to read everything that you can about Forex. The fact that you’re reading this article shows me that you’re on the right track. But don’t stop here. Read everything that you can and study the Forex market. Visit our forex trading systems, forex trading courses, forex ebooks and forex softwares sections to find the best products on the market.You should also open a demo account on a Forex broker so that you can start practicing and improving your trading skills. And you should never ever start trading on a real account until you’re making money consistently on a demo account.Mistake number 4: Thinking you’re smarter than the other traders or smarter than the market:Some beginners think they are smarter than everyone that can’t make money on Forex. That’s a big mistake. Some people are smart, well educated and can’t make money on Forex. If you start feeling you’re smarter than them you’ll believe that you don’t have to make big efforts to make money on Forex, and that will probably destroy your trading career. You need to keep in mind that Forex trading is a difficult business, and you need to work hard on it if you expect to make a living at it.Other beginners think they are smarter than the market. They believe they can find some magical way to make money on Forex. I have bad news for those guys: there’s no magic that make you money effortlessly.The market is always right. If you lose money you were wrong, not the market. When you lose money, you should accept responsibility for it and analyze your trade so that you can discover what went wrong. This way you’ll grow as a trader and avoid some mistakes in the future.Traders that blame the market don’t last much time in Forex.Mistake number 5: Thinking that you can make money in Forex with no work at all:Some people think they can make money on Forex with no work at all. That’s a huge mistake. Forex is a market where most people lose money. If you want to make money at it, you need to work hard, educate yourself, use the best products and dedicate plenty of time to it. That’s the only way you can make money on Forex.Mistake number 6: Using a lousy Forex broker:Some traders decide to trade on an unreliable broker and learn that it’s simply impossible to make money if you’re using a bad broker. If your broker has bad executions or charge big spreads, you’re in a big disadvantage compared with other traders.If your broker doesn’t offer you good platforms or charts, you’ll need to pay for platforms or charts which will affect your wallet as well.There are other people who open accounts in unregulated brokers. This is a huge risk. If those brokers runaway with your money, you’ll be in trouble.Before you open an account with a broker make sure you know everything that you can about it. A good broker must offer you good trading platforms and cheap fees. It should also offer you security. It must be regulated (preferentially in USA or in Europe) and should never ever trade against their clients.(http://www.forextopten.com/why-so-many-people-fail-at-forex-trading.html)
5 Myths About Forex Trading
1 – If I know how to trade stocks, I know how to make Money on Forex:If you have experience trading stocks and think you can simply apply your knowledge on Forex and make money, you’re going to be disappointed. The truth is the Forex market is completely different from the stock market. Firstly, the Forex market is open 24 hours a day. This may not seem a big deal but it’s a significant difference in relation to the stock market. As the Forex market is open 24 hours a day, this brings more complexity to a trader. If in the stock market you have periods of higher and lower volatility, in the Forex these differences are even higher.Many stock day traders think the Forex market is easy because it is open 24 hours a day. They think about it this way because, in their heads, this way they can trade whenever they want and make their quick bucks. Truth is you can make money in the Forex. But for that, you need to have a deep knowledge about this market. You have to know the best time to trade Forex in order to adjust your strategy to this market.Besides this, the same indicators that work in stocks don’t always work in Forex. The Forex market is more complex and, this way, the indicators don’t work so well.Another big difference between stocks and Forex is the brokers. In the Forex market, due to the lack of regulation, a lot of Forex brokers don’t act in the best interest of their clients. It’s a lot more difficult to find a good Forex broker than a stock broker. As it is essential to find a good Forex broker to make money in Forex, a trader will have to work harder on this. 2 – Since the market is open 24 hours a day, you can make Money anytime you want:Once again, this is not true. In order to make money, a trader needs volatility. Although this market is open 24 hours a day, in the majority of the time there isn’t enough volatility to make good trades. The market being open 24 hours a day is a big challenge because volatility can appear at any time within this large time span and the trader can’t be watching the market all the time. He has to adjust his strategy in order to only trade in the high volatility periods.3 – Comission trades are free on Forex market: Are commissions free on Forex? Not exactly. You don’t pay a fixed commission when you place an order. Although, you pay the spread, which is the difference between the bid and the ask.By paying this spread every time you place an order, as in other financial markets, as more trades you place, the bigger the costs you have. This way, as the number of trades executed increases, the harder it is to make money in Forex.In the Forex market, as in any other market, a trader must avoid the overtrading at all costs.4 – You need to predict what will happen in order to make Money in forex:In order to make money in Forex, you need to react to what is happening. This is not the same thing as predict. A good trader simply reacts to whatever the market is telling him. He analyses charts, reads the news and all information he has at his disposal in order to react as fast as possible to the market movements. A good trader is always looking to evolve and learn. He is always looking at the more recent Forex systems and courses released to keep learning. 5 – The more complicated my strategy, the best:This is another myth that has nothing to do with the reality on Forex trading. The truth is that usually the simple strategies or systems outperform the complicated ones. So, there’s no need to use plenty of different indicators at the same time. Study the market, find your favorite system or strategy, and stick with it.
Forex Brokers Scams
In order to make money in Forex you need to trade with a solid broker. The problem in the Forex market is that it’s not easy to find a broker that you can trust.There are plenty of Forex broker scams out there so you need to be extra cautious when you need to choose a forex broker. If you visit http://www.forextopten.com/forex-broker.html you see that most of the Forex brokers aren’t reliable. Some of them trade against you, others are offshore companies and others manipulate prices so that you lose all the time.It’s shocking to see how many scam brokers you can easily find on Forex. Until there’s a solid regulation on the Forex market you should avoid:• Brokers based on offshore territories or 3rd world countries (that kind of brokers can’t guarantee your safety of funds).• Brokers that trade against you. If a broker makes money when you lose, believe me, you will lose.• Brokers that don’t state where are they based.• Brokers involved in scams. You should research about a broker before you open an account with them. Try to know what traders think about it and if they are an honest broker or not. You can read and rate reviews at http://www.forextopten.com/forex-broker.html ).• Brokers that allow you to trade Forex with less than $100. In the real trading world, if a broker offers you 100, 200 or 400x margin that’s not an advantage for you. If you trade with much margin, you will lose your money in the short-term. A small movement against you will make you lose your entire account. So, avoid brokers that promise you to make money with a tiny amount.Before you send your money to a broker please remember that there are plenty of Forex broker scams out there, so it pays to make your due diligence. My advice to you is that you only consider brokers based in US or EU, with solid fundamentals so that you can be sure about the safety of funds. Don’t use brokers that trade against you, and be sure to read reviews about them before you send them any money. Read all the information on the brokers’ website, and if you have any question, make sure to contact them before you open the account.(http://www.forextopten.com/forex-brokers-scams.html)
How You Can Master The Forex Market (Part I)
Here are the 10 easy steps that you can follow in order to learn and start trading the Forex market.Step 1 – Learn the BasicsIf you’re a new trader on Forex, the first thing you must do is to learn the basics. You need to know what the Forex market is and how it works. You also need to learn the key economical terms. You can visit Wikipedia for a good definition on Forex Market. In this step, you also need to learn the difference between fundamental analysis and technical analysis. You also need to open a demo account with a forex broker and get familiar with the process of placing a trade. You can also use this account to watch the Forex market behavior and to get familiar with the most common currency pairs.You should also get familiar with some currency websites. Scroll Forextopten so that you can read some articles about Forex and start learning right away.The last thing you need to do in order to complete step 1 is to adopt the right mindset. You need to enter the Forex market with the right expectations and knowledge. You should have realistic expectations about the Forex market and define a plan to learn it. When you learn all these basics, it’s time to move to step 2.Step 2 – Learn Technical Analysis Technical analysis is probably the most important tool for a forex trader. When you learn how to properly read a chart, you can start calling yourself a trader. The time you need to complete this step 2 depends on your current technical analysis knowledge.There are 2 good resources to learn or improve your technical analysis knowledge and both of them are completely free.• Incredible Charts is the best place to learn technical analysis. Here you can learn all about any technical indicator. You can find out what your favorite technical indicators are and how you can take advantage of them.• StockCharts is another great resource to learn and to improve your technical analysis skills. You should visit these resources and get a good knowledge about technical analysis before you begin step 3. Step 3 – Plan How You’ll TradeNow that you already have some knowledge about the Forex market and about Technical Analysis, it’s time to decide how you would like to trade. Would you like to day trade? Would you like to swing trade? It all depends on your personality and on the time you have to trade. There’s not such thing as the best trading style. The best trading style is simply the one that best suits your personality. If your personality is more suitable for day trading, you probably won’t be a bright swing trader. If you prefer less stress and/or you don’t have the time to stay in front of your screen all day, you will probably be better in swing trading. You’re the only one who can decide the kind of trader you want to be. When you discover that, you should define your goals as well as the period of the day that you’ll commit to Forex trading. Step 4 – Develop Your StrategyThis is the most important step to master the Forex market. So, you should dedicate a good amount of time to this step.Now that you know what kind of trader you want to be and that you’re aware about your goals, you’re ready to define your trading strategy.You can use your technical analysis skills to define a trading strategy from scratch. Define it and test it deeply before you commit real money to it.You can also visit some websites in order to learn their own strategies and techniques.
New to the Forex market?
For those new to the Forex market, CMS Forex has gathered extensive online training information for those who wish to become involved with trading foreign currencies. Prepare yourself for the Forex Arena with our Forex Education material and become acquainted with the basics of the Forex market and our Forex trading platform, VT Trader™.
Forex Versus Stocks
Unparalleled liquidity
In the forex market, over $3.2 trillion worth of trades are traded daily, which makes the currency trading market the most liquid market in the world – trading in 1 day what Wall St. trades in 1 month. No matter what time of the day or night it is, the forex market is always moving, and around the world active traders are buying and selling currencies.
50 times more leverage than trading stocks
With stocks, the maximum leverage is 2:1. But when you trade Forex with CMS Forex, you can use up to 100:1 leverage. For example, if you invest $1,000 in stocks, with 2:1 leverage you may buy up to $2,000 worth of shares. However, if you invest $1,000 margin on a foreign currency trade, at 100:1 leverage, you can control up to $100,000 in currencies. Leverage is one of the most appealing and risky factors of the forex market. Traders should note that trading using leverage may increase potential gains as well as losses on any given trade.
Scratch-out the middleman
Spot currency trading bypasses expensive middlemen that are always associated with trading stocks. With forex, clients are able to interact directly with the currency market, and can buy and sell at the simple click of a mouse. No mess. No hassle. No middleman.
In the forex market, over $3.2 trillion worth of trades are traded daily, which makes the currency trading market the most liquid market in the world – trading in 1 day what Wall St. trades in 1 month. No matter what time of the day or night it is, the forex market is always moving, and around the world active traders are buying and selling currencies.
50 times more leverage than trading stocks
With stocks, the maximum leverage is 2:1. But when you trade Forex with CMS Forex, you can use up to 100:1 leverage. For example, if you invest $1,000 in stocks, with 2:1 leverage you may buy up to $2,000 worth of shares. However, if you invest $1,000 margin on a foreign currency trade, at 100:1 leverage, you can control up to $100,000 in currencies. Leverage is one of the most appealing and risky factors of the forex market. Traders should note that trading using leverage may increase potential gains as well as losses on any given trade.
Scratch-out the middleman
Spot currency trading bypasses expensive middlemen that are always associated with trading stocks. With forex, clients are able to interact directly with the currency market, and can buy and sell at the simple click of a mouse. No mess. No hassle. No middleman.
Forex Overview
Fundamental Analysis
Fundamental analysis involves examining the intrinsic value of a nation’s currency based on economic news releases that reflect the strength, or weakness, of a country’s economy. Fundamental traders follow these news announcements, known as “fundamental indicators,” because they paint a picture of a currency's strength in relation to other countries.
Fundamental indicators are reports that include statistical data on things such as employment, gross domestic product (GDP), international trade, retail sales, housing, manufacturing, and interest rates. The stability, growth, or decline in any of these sectors may have an effect – direct or indirect – on the value of a country’s currency.
Factors That Move The Forex Market
Central banks play a key role in the Forex market because they have the responsibility of changing the country’s “base” interest rate. A central bank has to find a fine balance when setting interest rates as it wants to maintain growth in the economy, but at the same time it has to be careful to curtail inflation. The bank’s decisions on whether to raise, cut, or hold the interest rate fuels speculation in the Forex market, where the value of a currency, or group of currencies, changes in real time.
In addition to information about a country’s economy, the value of a currency is connected to national and international political events, elections, and changes in government trade policies. The prices of sensitive commodities like oil and gasoline are an important fundamental indicator as high prices can hurt consumer spending and confidence, and curtail the activities of certain businesses and government services.
Fundamental analysis involves examining the intrinsic value of a nation’s currency based on economic news releases that reflect the strength, or weakness, of a country’s economy. Fundamental traders follow these news announcements, known as “fundamental indicators,” because they paint a picture of a currency's strength in relation to other countries.
Fundamental indicators are reports that include statistical data on things such as employment, gross domestic product (GDP), international trade, retail sales, housing, manufacturing, and interest rates. The stability, growth, or decline in any of these sectors may have an effect – direct or indirect – on the value of a country’s currency.
Factors That Move The Forex Market
Central banks play a key role in the Forex market because they have the responsibility of changing the country’s “base” interest rate. A central bank has to find a fine balance when setting interest rates as it wants to maintain growth in the economy, but at the same time it has to be careful to curtail inflation. The bank’s decisions on whether to raise, cut, or hold the interest rate fuels speculation in the Forex market, where the value of a currency, or group of currencies, changes in real time.
In addition to information about a country’s economy, the value of a currency is connected to national and international political events, elections, and changes in government trade policies. The prices of sensitive commodities like oil and gasoline are an important fundamental indicator as high prices can hurt consumer spending and confidence, and curtail the activities of certain businesses and government services.
Trading Forex
Using, the individual trader attempts to determine trends in the price movements of currencies, and by buying or selling currency pairs, attempts to gain profits. The most often traded currencies, the major currencies, are those of countries with stable governments and respected central banks that target low inflation. Currencies that often trade along with the U.S. Dollar include the European Euro, the Japanese Yen, and the British Pound as they are the most liquid. A trader can trade these currencies in any combination. CMS Forex also offers the Swiss Franc, and the Canadian, Australia and New Zealand Dollars making for 19 total trading instruments when accounting for all the cross pairs. More "Exotic" currencies are not offered as they are often tightly regulated and simply too illiquid.
Buying and Selling Currencies
Traders can generate profits (or losses) whether a currency is rising or falling by buying one currency, which is anticipated to gain value against another currency or selling one currency, which is anticipated to lose value against another currency. Taking 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. Alternatively, a short position is one in which the trader sells a currency that he anticipates to depreciate and aims to buy the currency back later at a lower price.
Buying and Selling Currencies
Traders can generate profits (or losses) whether a currency is rising or falling by buying one currency, which is anticipated to gain value against another currency or selling one currency, which is anticipated to lose value against another currency. Taking 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. Alternatively, a short position is one in which the trader sells a currency that he anticipates to depreciate and aims to buy the currency back later at a lower price.
Technical Analysis Articles
Here at CMS we pride ourselves on our superb forex charts, that comes with our. It features easy to use drawing tools, technical indicators and charting capabilities. In this section we will explain how technical analysis works by providing informative articles on the most popular and widely used forex technical indicators. Traders are walked through comprehensive examples of how these technical indicators generate trading signals, examples of some trading strategies, and also explain the information that can be observed about the conditions of the market.
It is highly recommended that you practice with the VT Trader platform as you read through these articles. It is easy to and to sign up for a if you dont have one already.
It is highly recommended that you practice with the VT Trader platform as you read through these articles. It is easy to and to sign up for a if you dont have one already.
Relative Strength Index
Introduction
The Relative Strength Index (RSI) is one of the most popular indicators used by technical traders. It is an oscillator, which means it moves back and forth between 0 and 100 levels. It was first introduced by Welles Wilder in an article in Commodities Magazine (now known as Futures) in June, 1978. The RSI is used most often by day traders and other short term investors, but the information it provides can help all investors.
The RSI is a trend following oscillator that ranges from 0 to 100. It gives an indication whether the currency is currently "overbought" or "oversold", or in other words, it is a measure of momentum.
If a currency’s price is increasing, RSI will move upwards towards 100, implying buying or accumulation of the currency pair.
If the pair's price is decreasing, RSI will move downwards. This implies selling pressure or distribution.
When Wilder introduced the RSI, he recommended using 14-days as the default period. Since then, the 9-day and 25-day period RSIs have also gained popularity.
The Relative Strength Index (RSI) is one of the most popular indicators used by technical traders. It is an oscillator, which means it moves back and forth between 0 and 100 levels. It was first introduced by Welles Wilder in an article in Commodities Magazine (now known as Futures) in June, 1978. The RSI is used most often by day traders and other short term investors, but the information it provides can help all investors.
The RSI is a trend following oscillator that ranges from 0 to 100. It gives an indication whether the currency is currently "overbought" or "oversold", or in other words, it is a measure of momentum.
If a currency’s price is increasing, RSI will move upwards towards 100, implying buying or accumulation of the currency pair.
If the pair's price is decreasing, RSI will move downwards. This implies selling pressure or distribution.
When Wilder introduced the RSI, he recommended using 14-days as the default period. Since then, the 9-day and 25-day period RSIs have also gained popularity.
USD Falls as Stocks Reach New Yearl
The dollar traded lower on Thursday as US stocks hit a new yearly high. The US trade deficit widened more than expected and initial jobless claims declined more than anticipated. The dollar index fell for a fifth consecutive day to 76.80, approaching the 76-area support. The S&P 500 rose 10.77 points to 1,044.14, the highest closing since October 6, 2008. The USD/JPY was lower, testing the 91.50-area support for a second day. The euro rose. European Central Bank Governing Council members Axel Weber and Yves Mersch signaled that the ECB will not remove any stimulus for the foreseeable future. The commodity currencies appreciated marginally on concerns over the Chinese economic outlook. Premier Wen said China’s economic recovery is “unstable, unbalanced and not yet solid.” Australia’s employment declined more than expected. The Bank of Canada left its benchmark interest rate unchanged at 0.25%, as expected, and said “persistent strength in the Canadian dollar remains a risk to growth.” We are buying the EUR/USD and also buying the USD/CHF on speculation the Swiss National bank will intervene to lower the franc value.
The GBP/USD rose as the Bank of England kept its asset purchasing plan at £175 billion and maintained the key interest rate at 0.50%, as forecast. Some investors had expected an increase in the BOE’s quantitative easing program. The pair was also supported by increasing risk appetite and rising UK home prices. The GBP/USD outlook improved as the pair rose above 1.66 today. There are resistance in the 1.70 area and support in the 1.64.
The GBP/USD rose as the Bank of England kept its asset purchasing plan at £175 billion and maintained the key interest rate at 0.50%, as forecast. Some investors had expected an increase in the BOE’s quantitative easing program. The pair was also supported by increasing risk appetite and rising UK home prices. The GBP/USD outlook improved as the pair rose above 1.66 today. There are resistance in the 1.70 area and support in the 1.64.
Financial and Economic News and Comments
US & Canada
The US trade deficit widened more than expected to $32.0 billion in July from a revised 27.5 billion in June, data from the Commerce Department showed. Exports increased 2.2% m/m to $127.6 billion in July, led by autos/parts. Imports, outpacing exports, rose a record 4.7% m/m to $159.6 billion, also driven by autos/parts, with additional large contributions from crude oil and pharmaceuticals. Exports fell 22.4% y/y and imports dropped 30.4% y/y; consequently, the monthly trade deficit was $32.9 billion smaller than last year.
US initial jobless claims fell 26,000 to a lower-than-expected 550,000 in the week ending September 5, the lowest level since July, from the previous week’s upwardly revised 576,000, figures from the Labor Department showed. The 4-week moving average declined 2,750 to 570,000. Continuing claims in the week ending August 29 dropped 159,000 to 6,088,000 from the preceding week’s upwardly revised 6,247,000. The 4-week moving average of those continuing claims decreased 37,750 to 6,182,500. The insured unemployment rate for the week ending August 29 slid to 4.6% from the prior week’s 4.7%. In short, the declines in both initial jobless and continuing claims signal the end of the recession (yellow areas), as shown in the chart below.
The US trade deficit widened more than expected to $32.0 billion in July from a revised 27.5 billion in June, data from the Commerce Department showed. Exports increased 2.2% m/m to $127.6 billion in July, led by autos/parts. Imports, outpacing exports, rose a record 4.7% m/m to $159.6 billion, also driven by autos/parts, with additional large contributions from crude oil and pharmaceuticals. Exports fell 22.4% y/y and imports dropped 30.4% y/y; consequently, the monthly trade deficit was $32.9 billion smaller than last year.
US initial jobless claims fell 26,000 to a lower-than-expected 550,000 in the week ending September 5, the lowest level since July, from the previous week’s upwardly revised 576,000, figures from the Labor Department showed. The 4-week moving average declined 2,750 to 570,000. Continuing claims in the week ending August 29 dropped 159,000 to 6,088,000 from the preceding week’s upwardly revised 6,247,000. The 4-week moving average of those continuing claims decreased 37,750 to 6,182,500. The insured unemployment rate for the week ending August 29 slid to 4.6% from the prior week’s 4.7%. In short, the declines in both initial jobless and continuing claims signal the end of the recession (yellow areas), as shown in the chart below.
Forex Managed Accounts
Investing in the Forex market is a great opportunity to diversify and benefit from the liquidity that global foreign exchange provides. A good way to leap into Forex trading is through Forex managed accounts while receiving professional training .Ultimately, good trader's fine tunes their own trading system and learns how the market reacts to specific news and patterns. The big players in Forex trading are primarily central banks, commercial banks, non-banking International Corporation, hedge funds, private investors and speculators. There are a few factors as to why Forex is starting to attract more small investors. Forex can be traded 24 hours a day 5 days a week. Managed account accommodates those investors who wish to allocate part of their initial investment capital to the Forex market but are either unable to watch the markets 24 hours a day or prefer to have their risk capital managed by professionals. Managed Forex trading depends on certain strategies which may be known to the investors or exclusively to the fun managers.It is not enough for one to simply invest money without knowing the basics of what s/he is into. Even if a Forex fund manager does not know the technicalities involved in trading, it makes a lot of sense for such a person to know what goes up and comes down or stays there as it concerns the trading activities. Searching for a good managed Forex account is not an easy task. Some trading systems take too many trades causing the trader to margin out too soon or give poor signals all together. Clients are advised to be sure of trading system that is able to back up its data with proven results and back tests their system in real-time. Depending on the broker that is managing your account and their ability to pay out is what counts the most.
Thursday, February 25, 2010
CMS FOREX
Our customer base stretches around the globe. Traders in North America, Europe and Asia have seen why CMS is the leading online distributor of Forex. While many other financial institutions have been falling in recent years, CMS has always been profitable and has been always growing! The time has never been better to enter this booming global industry. Join today CMS if you want to be part of a financial powerhouse with unlimited growth potential.
Capital Market Services LLC is a Futures Commission Merchant (FCM), a member of the National Futures Association (NFA) and regulated by the Commodity Futures Trading Commission (CFTC).
CMS Forex was founded by professional Forex traders, currency traders and software developers, and as a result has been able to identify the needs of operators from the beginning. Since 1999, CMS Forex's mission has been to provide the most powerful technology combined with the currency trade execution quality, competitive services and reliable customer service. During the past seven years, CMS Forex has quickly become one of the leading online institutions of the world retail foreign exchange, providing security, software user-friendly Forex trading.
CMS Forex is positioned as an industry leader in the Forex market and continues its growth as it strives to offer its customers the best business environment. Based in New York, CMS Forex and its subsidiaries now have offices in Boston, Tokyo, Bermuda, St. Petersburg and Shanghai. Bermuda Capital Market Services International and CMS Japan were created to strengthen the global reach and better serve our international clients.
CMS Forex strives to serve both retail and institutional segment of the Forex community. Their commitment to providing innovative technology from foreign exchange trading, fair dealing practices and excellent customer service sets CMS Forex as a major force that traders look for advanced Forex chart up to date Forex news, Forex education and information.
CMS Forex Partners in New York, St. Petersburg, Shanghai and are dedicated to go the extra mile to satisfy customer needs, by creating and constantly improving on the already sophisticated and easy trading software, VT Trader ™. These attributes, plus many others, demonstrate that CMS Forex has built from the base of a service that really stands on its own.
England Forex Bank
Pakistani Forex Trend
World's Forex
How to Trade Currencies Like The 'BIG DOGS' Forex Traning Program
History of Forex Trading Briefly!
Initially, the value of goods was expressed in terms of other goods, ie an economy based on barter between individual market. The obvious limitations of such a system encouraged establishing more generally accepted means of exchange at a fairly early stage of history, to establish a common benchmark of value. In different economies, from teeth to feathers to pretty stones has served this purpose, but soon metals, notably gold and silver, have been established as a means of payment accepted and reliable storage of value . Originally, coins were simply minted from the preferred metal, but stable political regimes in the introduction of a paper form of government notes (I owe you) gained acceptance during the Middle Ages. Notes, often introduced more successfully through force of persuasion are the foundation of modern currencies.Before World War, most central banks supported their currencies with convertibility to gold. Although paper money could always be traded for gold, in reality this does not happen often, promoting the sometimes disastrous notion that was not necessarily a need for full coverage of central reserves of government.At time, the balloon supply of paper money without gold cover led to devastating inflation and resulting political instability. To protect local national interests, foreign exchange controls increasingly introduced to prevent market forces from punishing monetary irresponsibility.In the latter stages of World War II, the Bretton Woods agreement was reached on the initiative of the U.S.. UU. in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new global reserve currency in favor of a system built on the U.S. dollar. Other international institutions like the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as the emerging victors of WW2 searched for a way to avoid destabilizing monetary crises leading to war . The Bretton Woods agreement resulted in a system of fixed exchange rates that partly restore the gold standard, fixing the U.S. dollar in USD35/oz and fixing the other major currencies against the dollar - and was destined to be permanent.The Bretton Woods system came under increasing pressure as national economies moved in different directions during the sixties. A number of realignments kept the system alive for a long time but eventually Bretton Woods collapsed in the seventies after President Nixon suspended gold convertibility in August 1971. The dollar was no longer adequate as sole international currency at a time which was under strong pressure from U.S. budget deficits.The rising and trade following decades have seen the currency market become the world's largest market by far. Restrictions on capital flows have been eliminated in most countries, leaving the market forces free to adjust the exchange rates according to their perceived values.But the idea of fixed exchange rates has by no means dead . The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, the European Monetary System. This attempt to fix exchange rates met with near extinction in 1992-93, when economic pressures forced devaluations accumulated a number of weak European currencies. However, the quest for currency stability has continued in Europe with the new attempt to solve not only the currencies but actually replace many of them with the euro in 2001.The lack of sustainability in exchange rates fixed assumed new prominence to events in Southeast Asia in the latter part of 1997, after which the currency was devalued the currency against the U.S. dollar, leaving other fixed exchange rates, particularly in South America , looking very vulnerable.But while commercial companies have had to face an environment much more volatile currency in recent years, investors and financial institutions have found a new park. The size of the foreign exchange markets and market dwarfs any investment by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world stock and bond markets combined.
Foreign Exchange Market
In foreign exchange market is a cash in foreign currency of the big banks. In this market, currencies are bought and sold and exchange rates are determined. Unlike Stock Market, Forex operates on a 24 hour clock which allows after-hours trading. The foreign exchange market gives you the freedom and flexibility to build your portfolio is not on your timetable the Stock Exchanges.
Saturday, February 20, 2010
Benefits of Forex Trading Customers
Forex deals are based on money market securities of a variety of nations to create a market where millions of people involved in the trades are done on a daily basis. This currency trading is like the U.S. market because people buy and sell stocks in the same way, but the exchange and the over all results are much larger. Those who make transactions on the Forex stock market include UBS, Deutsche Bank, HSBC, and many others like Citigroup and Merrill Lynch and more American financial firms.
To get your hands dirty in forex trading, contact any company large broker assistance would be far more beneficial to you. Sure, anyone can get involved in the forex market, but requires some education in the flow of foreign exchange market and right where you should put your money at any time.
Forex deals are based on money market securities of a variety of nations to create a market where millions of people involved in the trades are done on a daily basis. This currency trading is like the U.S. market because people buy and sell stocks in the same way, but the exchange and the over all results are much larger. Those who make transactions on the Forex stock market include UBS, Deutsche Bank, HSBC, and many others like Citigroup and Merrill Lynch and more American financial firms.
To get your hands dirty in forex trading, contact any company large broker assistance would be far more beneficial to you. Sure, anyone can get involved in the forex market, but requires some education in the flow of foreign exchange market and right where you should put your money at any time.
To get your hands dirty in forex trading, contact any company large broker assistance would be far more beneficial to you. Sure, anyone can get involved in the forex market, but requires some education in the flow of foreign exchange market and right where you should put your money at any time.
What is Forex (Foreign Exchange)?
Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for another. The foreign exchange market is the largest financial market in the world with the equivalent of more than $ 1.9 trillion changing hands daily, more than three times the aggregate amount of the equity of U.S. Treasury and mixed markets. Unlike other financial markets, the Forex market has no physical location, no central exchange (off-exchange)
An Introduction To The World Wide Forex Market
The Basics of Forex are similar to the stock market in any country, but in a much larger scale, that involves people, currencies and trade worldwide, in almost all exchange rates and country.Different change to occur every day. What dollar value can be one day could be higher or lower the next. The trading on the currency market is one that has to look close, or if you are investing huge amounts of money, you could lose large amounts of money. The main commercial areas of the currency, which occurs in Tokyo, London and New York, but there are also many other places in the world where the forex market takes place.
Currency Trading - Forex
The foreign exchange market, often referred to as FOREX, is the market for different currencies, making it the largest financial market in the world with a daily average turnover of approximately $ 3 billion. It is a market which, in essence, is based on world trade. Goods and services are exchanged 24 hours a day around the world. As the transactions that take place all the time These transactions across national borders require payments in non-domestic currencies. That is where the forex market comes in.
Some Interesting Facts about Automated Forex Trading
Is your debt overwhelming giving sleepless nights? It really makes you feel bad. You have taken the money from relatives and acquaintances. Banks and other lenders have turned down. If you are concerned about this type of situation, you should seek some really good profitable ideas and tips to combat your debt. You may be surprised to hear that the automated Forex market can help in resolving the debt. Making Forex investment can alleviate its financial problems. You can use the money from forex trading for the settlement of their debts with a debt settlement program debt.
When you're in the Forex market, its main goal as an investor is undoubtedly profit from foreign currency movements in the market. A range of income opportunities in the forex market and some of them are:
The options for zero commission trading
24-hour trading
Unrestricted access to Forex traders worldwide
Opportunity to make money in both rising and falling markets
For trade leverage, investors have the opportunity of trading with low margin
In short, if they really take a serious approach to making profits, foreign investment is a suitable option for you. With the advent of automated forex trading, Forex investors have had success with the variety of its investment in the foreign exchange market. Some of them even claim they have not experienced losses since 1999 when it began using the automated installation of foreign exchange trading.
When you're in the Forex market, its main goal as an investor is undoubtedly profit from foreign currency movements in the market. A range of income opportunities in the forex market and some of them are:
The options for zero commission trading
24-hour trading
Unrestricted access to Forex traders worldwide
Opportunity to make money in both rising and falling markets
For trade leverage, investors have the opportunity of trading with low margin
In short, if they really take a serious approach to making profits, foreign investment is a suitable option for you. With the advent of automated forex trading, Forex investors have had success with the variety of its investment in the foreign exchange market. Some of them even claim they have not experienced losses since 1999 when it began using the automated installation of foreign exchange trading.
3 Tips For Forex Trading
1. Learn how to trade Forex. If you really intend to become a profitable forex trader must know what to do. Do not be like 98% of forex traders and decide to start without knowing what steps to take first, If you do, you could lose big money. The FX market is brutal to understand.
However, blindly jumping on it can be treacherous. I'm not trying to scare you. Like everything in life before it can become a professional who needs to understand the basics, then you can grow and develop from there and the currency market is no difference.
2. Finding a Forex trading system automated to help build your business in Forex. The following advice on how Forex trading is the purchase of a huge system. The system should reduce the amount of work to do to make money. That's why it is influential, which benefits from a large system.
3. Have a plan of daily action. You need a different strategy and set goals. What do you get? What do you expect from the shops? These are some things you want to plan. Failure to declare, you want to make a good profit from its foreign exchange trading company. More information HowToForexTrade.net
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