Exchange

WORLD FOREX: Dollar Down Vs Yen But Jobs Data Pose Upside Risk

2010-12-03T05:01:00.002-08:00

TOKYO (Dow Jones)--The dollar fell against the yen in Asia Friday as Japanese exporters sold the currency to settle accounts. But the decline was limited ahead of key U.S. non-farm payrolls data due later in the day.
Trading was subdued in Asia because most short-term-focused investors stood on the sidelines ahead of the 1330 GMT jobs data, which traders said would be a watershed for the greenback.
"Nonfarm payrolls will be crucial," said Calvin Tse, a strategist at Morgan Stanley.
Traders said the result is likely to surprise to upside, as recent U.S. economic data have beaten market expectations.
The non-farm payrolls number is forecast to increase by 144,000 in November from October, when it climbed by 151,000. The jobless rate, meanwhile, may stand unchanged at 9.6%, according to a Dow Jones poll of economists.
A strong jobs number would lead investors to expect the Federal Reserve to scale back its latest quantitative easing measures, and so is a definite positive for the U.S. currency, they said.
Barclays Capital senior Japan strategist Masafumi Yamamoto is one of many who expect a positive surprise, forecasting a 170,000 increase and a 9.5% jobless rate. If this view is correct, the dollar may rise to Y84.50, he said.
As of 0450 GMT, the U.S. unit was at Y83.70 from Y83.86 overnight in New York. The ICE Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was at 80.262 from 80.203.
Meanwhile, the euro was again weaker against its U.S. and Japanese counterparts. It was at $1.3203 from $1.3225 and Y110.52 from Y110.95.
European Central Bank President Jean-Claude Trichet told Dow Jones Newswires in an interview Thursday that cheap money will continue to be easily available. His remarks were in line with expectations, but weren't enough to give the euro a sustained boost, dealers said.
They said there are no quick solutions to the ongoing European debt concerns, and that will keep weighing on the common currency for some time. The problem may even undermine investor confidence in the euro if the situation keeps worsening, dealers said.
"What happens next is a great concern to investors, as the currency union increasingly looks less sustainable over the long term," said Stephen Hull, a senior strategist at Morgan Stanley.
The house says the best way to play a weak euro is to buy the safe-haven Swiss franc. As of 0450 GMT, the euro was CHF1.3126, and Morgan Stanley targets CHF1.2800 in the short term.

Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT 
 
                         Latest     Previous   %Chg   Daily   Daily    %Chg 
                                    2150 GMT          High    Low      12/31 
 
USD/JPY Yen              83.69-70   83.86-88   -0.20  83.89   83.68   -10.09 
EUR/USD Euro             1.3201-05  1.3220-22  -0.14  1.3222  1.3194   -7.79 
GBP/USD Sterling         1.5591-96  1.5603-06  -0.08  1.5605  1.5582   -3.54 
USD/CHF Swiss Franc      0.9939-44  0.9921-29  +0.18  0.9950  0.9922   -4.01 
USD/CAD Canadian Dlr     1.0037-39  1.0029-32  +0.08  1.0044  1.0025   -4.53 
AUD/USD Australian Dlr   0.9753-58  0.9761-66  -0.08  0.9774  0.9741   +8.57 
NZD/USD New Zealand Dlr  0.7553-63  0.7549-59  +0.05  0.7564  0.7547   +4.09 
EUR/JPY Yen              110.47-53  110.86-91  -0.35  110.87  110.45  -17.10

NFA publishes guide for retail forex traders

2010-12-03T05:01:00.000-08:00

December 2, Chicago - National Futures Association (NFA) announced today that it has published a revised edition of its popular investor education booklet for consumers interested in the retail off-exchange foreign currency (forex) market. The revised publication, now entitled "Trading Forex: What Investors Need to Know", describes how the retail forex market operates, the risks involved in trading forex and how the market is regulated. The guide also includes a glossary of terms.

"We revised the publication to reflect the Commodity Futures Trading Commission's retail forex rules, which became effective on October 18," says NFA's Director of Communications and Education Larry Dyekman. "Among other things, the rules now require any retail forex introducing broker, money manager or pool operator to register with the CFTC and become Members of NFA. We believe that consumers should learn as much as they can about the market and how it is regulated before opening a forex trading account."

Single copies of the guide will be offered free of charge to the investing public. Individuals may order a free copy of the publication by calling NFA's Information Center at 312-781-1410 or 800-621-3570 or by emailing NFA at information@nfa.futures.org.

Individuals also have the option of viewing and printing the publication by downloading it from the Investor Information section of NFA's website (www.nfa.futures.org).

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.

FOREX-Euro inches up

2010-12-03T04:58:00.001-08:00

TOKYO, Dec 3 (Reuters) - The euro's rebound from a 2-½ month low stalled on Friday, though it retained most gains made after talk of European Central Bank buying of euro zone periphery debt helped knock down those yields.

The immediate focus of the market moved to U.S. payrolls data later in the day, with a surprisingly strong U.S. housing number adding to budding optimism on the U.S. economy.

The euro nestled at $1.3220 EUR=, little changed on the day and floating well above a 2-½ month low of $1.2969 plumbed on Tuesday in the wake of massive selling in euro zone periphery government bonds.

"I suspect the euro has bottomed out in the near term and will test $1.33-34," said a trader at a Japanese brokerage house.

Its 100-day moving average, at around $1.3327, is seen as the next resistance level. More important resistance lurks in the $1.3334-64 area, its August peak and a 38.2 percent retracement of its June-November rally.

Traders said the ECB was buying Portuguese and Irish debt on Thursday, calming investor panic over euro zone debt for now, helping the single currency.

The sharp fall in the yields of Spanish, Portuguese and other countries' bonds offset initial disappointment after ECB President Jean-Claude Trichet did not explicitly commit the bank to ramping up bond buying.

As widely expected, the ECB extended nonstandard provisions, committing to provide unlimited one-week, one-month and three-month funding for vulnerable banks until at least April.

Forex Market :-Market Introduction :- forex history

2010-07-07T03:08:00.000-07:00

Forex (Foreign Exchange) is the international financial market used for trade of world currencies. It has been working since 70s of the 20th century - from the moment when the biggest world nations decided to switch from fixed exchange rates to floating ones.

Daily volume of Forex trade exceeds 4 trillion United States dollars, and this number is always growing.

Main currency for Forex operations is the United States dollar (USD).

Main Forex market participants:

- Central banks of countries;
- Commercial banks;
- Investing banks;
- Brokers, dealers;
- Pension funds;
- Insurance companies;
- International corporations;
- Individuals.

Unlike stock exchanges, Forex market doesn't have any fixed schedule or operating hours - it's open 24 hours per day, 5 days per week from Monday to Friday, since buy/sell orders are performed by world banks any time during the day or night (some banks even work on Saturdays and Sundays). Just like any other exchange, Forex market is driven by supply and demand of a particular tool. For instance, there are buyers and sellers for "Euro vs US dollar".

Exchange rates at Forex are changing constantly, and fluctuations may happen many times per second - this market is very liquid.

Exchange rates are influenced by:

- Economical factors (economical indicators of countries at the moment, politics of Central banks, changing interest rates, behaviour of importers and exporters, etc);
- Political factors (speeches of political leaders, president elections, etc);
- Market participants' mood and feelings, their expectations, rumours, etc;
- Force-major events (terroristic acts, accidents, catastrophes, etc).

Nevertheless, Forex market is much more stable than stock exchanges - it is not subject to huge surges, even if one currency is declining, another one is improving.

One of big advantages of the market is its' close relation with latest information technologies. Clients from different parts of the planet may connect to Internet and start trading. Even big banks tend to use electronic trading - it's the most common way of trading now. At this moment, Forex is at the rapid developing phase, and it's expected to grow more and more in the future.

Some of the advantages of Forex market over stock markets and/or other equities include:

- Traders can make profits both on declining and developing economies;
- Traders can make very short-term orders - with some other markets there are certain regulations;
- Thanks to retail centers like "Forex 4 You", it's much easier to join Forex market - virtually no minimum capital, quick registration, etc;
- Market is not regulated;
- There are no broker commissions or they are very low;
- Much higher leverages are provided;
- Market works non-stop 24 hours.

Forex Market :- forex history

2010-07-07T03:07:00.000-07:00

Historically the value of goods was expressed through some other goods, for example - a barter economy where individuals exchange goods. The obvious disadvantages of such a system encouraged establishment of more generally accepted and understanded means of goods exchange long time ago in history - to set a common scale of value. In different places everything from teeth to jewelry has served this purpose but later metals, and especially gold and silver, were introduced as an accepted means of payment, and also a reliable form of value storage.

   Originally, coins were basically minted from the metal, but stable political systems introduced a paper form of IOUs (I owe you) which gained wide acceptance during the Middle Ages. Such paper IOUs became the basis of our modern currencies.

   Before First World War most central banks supported currencies with gold. Even though banknotes always could be exchanged for gold, in reality this did not happen that often, developing an understanding that full reserves are not really needed.

   Sometimes huge supply of banknotes without gold support led to giant inflation and hence political instability. To protect national interests foreign exchange controls were introduced to demand more responsibility from market players.

   Closer to the end of World War II, the Bretton Woods agreement was signed as the initiative of the USA in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US dollar. Other international institutions such as 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 the destabilising monetary crises which led to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD35/oz and fixing the other main currencies to the dollar - and was intended 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 early seventies following president Nixon's suspension of the gold convertibility in August 1971. The dollar was no longer suitable as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

   The following decades have seen foreign exchange trading develop into the largest global market by far. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

   But the idea of fixed exchange rates has by no means died. 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 pent-up economic pressures forced devaluations of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro in 2001.

   The lack of sustainability in fixed foreign exchange rates gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates, in particular in South America, looking very vulnerable.

   But while commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have found a new playground. The size of foreign exchange markets now dwarfs any other investment market by a large factor. It is estimated that more than USD 3,000 billion is traded every day, far more than the world's stock and bond markets combined.

forex :- Inventories released by the US

2010-07-07T03:04:00.001-07:00

The Wholesale Inventories released by the US Census Bureau captures sales and inventory statistics from the second stage of the manufacturing process. The sales figures do not move the market as they do not reflect personal consumption while wholesale inventories may change the aggregate inventory profile which can influence the GDP forecast. A high inventory suggests economic slowing in the US, that is seen as negative (or bearish) for the USD, whereas a low reading is seen as positive (or bullish).

forex :- Germany consumer price index

2010-07-07T03:03:00.001-07:00

The Germany consumer price index released by the Statistiches Bundesamt Deutschland measures the average price change for all goods and services purchased by households for consumption purposes. CPI is the main indicator to measure inflation and changes in purchasing trends. A high reading is positive (or Bullish) for the EUR, while a low reading is negative (or bearish).

forex in july :- forex and JPY :- Japanese currency

2010-07-07T03:00:00.000-07:00

The Japanese currency remained within the market’s range of interest as a currency shelter, though the Yen’s strengthening to the US Dollar was much less essential than at the previous sessions. The disenchanting ADP data on the US Payrolls occurred to be the main trouble spot for the investors. Less intensive purchases of the Yen may obviously be explained with the investors’ current expectances of the publication of the most important weekly data the Main Labor Report in the USA, which may render more precise trading checkpoints. The Yen mainly goes ahead upturning at the current session. Probably, it’s a result of the today published optimistic economic data. As represented, the Tankan Report for the 2nd quarter stated the advance to 1 from -14 in the 1st quarter. The indexes, which are included in this report and depict the affairs of various economic branches, have also demonstrated the significant advance. The nearest prospects for the currency of “The Land of Rising Sun” will obviously be grounded on the narrow volatile trading amidst the expectances of the information from the USA, though with the intents to advance due to the investors’ dull inclination to risk at the same time.

forex in july :- forex and GBP

2010-07-07T02:58:00.001-07:00

Generally speaking, the British Pound incurred pressure all over last session and so completed the day with significant loss to the US Dollar. Obviously, the first impression of the GfK data on the consumer confidence in Great Britain, which were worse than before, was influencing the whole day. Furthermore, the general market layout never encouraged the raise of the inclination to risk. Moreover, the later published economic data from the “Isles”, which demonstrated positive, failed to change the environment greatly, but caused the transient “cable” purchases influxes only. The consumer confidence index fell down to -19 points from -18 in May i.e., exceeded the forecasts. That might be caused by the expectances of the state expenditures retrenchment and also fiscal tightening. However, the British home prices up-rocketed in June as compared to the previous month, though with slowdown. The home price index grew up for 0.1% m/m and 8.7% y/y, whereas it was +0.5% m/m and 9.8% y/y in May. The business investment also rose up: it was stated 7.8% q/q and -7.7% y/y of the upturn in the 1st quarter, despite the presumed +6.0% q/q and -11.0% y/y. Today the publicizing of the British business activity “triptych” is going to start. The market is looking forward for the announcement of the manufacturing activity – the PMI for this branch is like to slide down to 57.6 from 58.0. Besides, the Bank of England Quarterly Credit Conditions Report for the 2nd quarter will also attract attention. Neither special negative nor essential positive is expected. So, the news is going to make no influence, in fact. That’s why the Sterling will stay within the ranges with the inclination to slight loss to the “buck” amidst the expectances of the tomorrow US Main Labor Report.

forex in july :- forex and EUR

2010-07-07T02:57:00.001-07:00

The common European currency slightly advanced at the last session due to the support from the ECB tender of three-month crediting. The demand for the liquidities turned out to be worse than forecasted as the Banks were interested in 133.933 Billion only, while the analysts expected the loans in amount of about 250 Billion of euro. The assets’ capacity wasn’t limited. Actually, the Bank could get the necessary amount at interest of 1.0%. That’s why the result of the kind was considered as a justification of the absence of problems of assets’ deficiency at the Euro zone financial institutions. That also meant the latter were able to fulfill their obligations without any supplemental assistance. Of course, it became a good reason for optimism, so the Euro occurred in the forefront of purchasing increase amidst the upturn of the European stick indexes. However, the common fears about the economic increase together with the data from the USA, in particular the ADP report, and finally, still acute debts troubles of the Euro zone countries suppressed the common currency, which lost some part of recently got positions and kept a little gain to the US Dollar only. The publication of the Euro zone’s economic statistics made no influence, because the result was quite predictable: the number of the German jobless decreased for 21 thousand, despite the forecasts of -23 thousand, so the unemployment rate kept the previous mark of 7.7%. The consumer inflation fell down a little all over the Euro zone as the consumer price index occurred at 1.4% after 1.6% in May. The today news is going to represent the ISM data on the manufacturing of the Euro zone in general, Germany and some other leading countries of the block. The June PMI is foreseen remained at the value of the advanced estimation in Germany, France and in the Euro zone in general, while the Italian one is predicted sagging. Besides, the data on the retail sales in Germany will also arouse interest due to the probability of the essential increase: 0.5% m/m and -0.6% y/y thereupon -0.5% m/m and -3.1% y/y before. Also possible, the Euro would get a support by reason of this publication, but for a short while only, as it seems, because the anticipation of the data from the USA has already begun to make their impact on the market and will have kept tension till tomorrow.

forex and profit :- making profit using forex :- How do I make a profit using Forex?

2010-07-07T02:55:00.000-07:00

Forex and profit :- making profit using forex :- How do I make a profit using Forex?

Again, the answer is obvious: just as with any market, you make money by buying cheaper and selling more expensive! Buy for less, sell for more! All you do is take advantages of fluctuations in the relative values of world currencies. Each currency's value changes every day in the currency exchange market. All you have to do is use these fluctuations to your advantage.

forex:- what exactly is Forex

2010-07-07T02:53:00.000-07:00

It's a market. That simple.

More precisely, FOREX is a currency trading market, and it's one of the largest and most rapidly developing markets on the planet. Over 2.5 trillion dollars are turned over on Forex every single day. That's more than 100 times more than the amount turned over daily on NASDAQ. If you're intrigued, you can click here and get more detailed market information from Forex4you.

So, what's a market? Simple: it's a place where goods are traded. Forex is no different, but with one little twist: the goods traded on Forex are the national currencies of the world's countries. For example, on Forex you might pay in American dollars and buy some Canadian dollars. Or, you could sell your Euros for Japanese Yen. There's nothing more to it than that.

Introduction to Stock Trading

2009-08-16T05:30:00.000-07:00

How often have you heard people say that investing in stocks and shares is like gambling? The truth is that investing in stocks is gambling in the same way as doing any business is gambling because there is always an element of risk in every business.
What is a stock?
A stock, in simple words, is a share in the ownership of a company. Starting and expanding a company on a large scale needs capital, something which individuals or group of individuals cannot afford. The company, therefore, offers to sell its share to the general public. When a company sells it’s privately held shares to new investors for the first time, it is called an IPO-Initial Public Offering or going public.
For example, when you start a company you can issue five shares to raise capital. So each share would be worth 20% or one fifth of the company’s ownership. Therefore, if an individual holds one share and buys another, he owns 40% or two fifth of the company. It must be understood that in normal course a stock, share or equity mean the same thing.
The idea underlying the ownership of a stock is that the shareholders can make claims to the profits and assets of the company.
The fact, however, remains that every public traded company normally issues millions of shares. Therefore, owning a few shares does not mean that you can visit the company any time and start issuing orders or inspecting the records. A stock holding only gives you certain rights such as voting to elect the board of directors of the company or owing some assets.
Normally the ownership of stock is represented by an attractively designed and important stock certificate, which is actually a piece of paper that represents a share or ownership of the company. With the advancement of technology investors usually do not get those paper certificates like their old time counterparts. Stock ownership is, therefore, recorded electronically.
Transfer of shares
The stock is, moreover, held in street name. Street name means that the stock is held in broker’s name and not in the customer’s name. This allows the ownership to be transferred more easily when a stock is bought or sold. This is a time saving procedure for the investors as they do not have to go down to the broker’s office every time they wish to buy or sell their stock.
How do the stocks trade?
Suppose you want to buy or sell stocks. Would you like to advertise your intention to buy or sell them in the local newspapers? And what if you don’t find buyers or sellers even after advertising? It is precisely to answer all such issues, the stock exchange came into existence.
The exchanges act as intermediaries between the buyers and sellers and facilitate stock trading. Typically, electronic exchanges are more efficient, which is why even the face-to-face exchanges normally have electronic transaction services.
There are two main types of exchanges, physical and virtual.
Physical stock exchanges: As the name itself suggests, these exchanges have a physical presence or in other words, they are located in buildings.
Virtual stock exchanges are electronic exchanges, which are linked through computer networks. The entire process of stock trading takes place electronically or online.
Typical examples of stock exchanges are the NYSE, NASDAQ and AMEX.
NYSE
NYSE or the New York Stock Exchange is an example of a physical stock exchange where trading takes place face to face. Whenever you hear the term “listed exchange”, it refers to the NYSE. Of course computers do assist in the trading process.
NASDAQ
The NASDAQ market is the virtual exchange also known as the OTC-over the counter market. There is no trading floor, no specialist, and no central location. Instead all the trading takes place via a computerized network of dealers.
AMEX
The American Stock Exchange or the AMEX is the third largest stock exchange in the US. Prior to NASDAQ’s emergence, it was the second biggest exchange. Currently the stocks traded at the AMEX are primarily the small cap or the lower market capitalization when compared to larger companies.

Stock Research

2009-08-16T05:29:00.000-07:00

As in other fields, the internet revolution has created the fierce competition amongst the share brokers. If the broker takes regular and methodical steps to educate the investor on topics that interest him studying which one thinks that profits can be increased, that is the best service the broker can provide. The main participants in the stock exchange are investors, market analysts, traders and other institutions concerned with investment business. Most of them depend upon research and analysis to do the trade, for which they create specialized cells. Transferring the research findings for the benefit of the clients has become the important part of their operations.
The vast amount of study material on shares available online, has thrown up a new class of research scholars who conduct research on the share market in their individual capacity. Research by such individuals is likely to be without any bias.Stock Research education is available to the investors, with tools like charting software, books, service providers, training and a number of different research techniques.
Any package of stock research education must involve the following for the correct evaluation of the intrinsic worth of the share:
Fundamental Analysis Technical Analysis
Fundamental analysis contains the use of economic and financial data to assess solvency, efficiency and liquidity and the earning potential of the specified company. For this analysis, the documents required are the annual report and the relevant financial statements, legal observations by the corporate officers, statistics related to the industry, market trends and the macro-economic data. The goal of the fundamental analyst is to locate the undervalued shares and tender advice to buy them in anticipation of appreciation of value.
Technical analysis views the actual history of trading and the price of the share or index. A chart is used for this purpose. A technical analyst proceeds on the belief that securities move in trends. Such trends continue until something happens to change the trend. With this approach sometimes the analysis could be wrong and patterns and levels can not be detected properly. But such an eventuality is rare. In majority of the cases, the analysis is right.
Buying and selling activity affects the price of the traded shares. A trader has the reason either for buying or selling the share. Traders often act alone but the weight of the numbers has a direct influence on short term prices. They succeed in creating confusion and uncertainties in the minds of buyers or sellers and their actions contribute to the upswings and downswings in the price of a share.
This is the context where stock research education has the important role to play. With charts and technical indicators you are able to study group behaviors and sentiments of the investors. This study is considered both science and art. It is science, because scientific tools like mathematical formula, statistics and computers are used in the study.
Stock research education helps one to determine the relative strength of buyers and sellers; judge the mood of the market and determine the favorable time to buy and sell the equities. To articulate the theory how the price is expected to move and to formulate a stop-loss strategy. The important principle as for the technical analysis of stock market research is-history repeats itself and it happens so, quite often.

Stock Options

2009-08-16T05:28:00.000-07:00

Stock Options

Stock Options provide the holder the right to buy or sell particular shares at a fixed pre-determined price within a fixed period of time. A new investor needs to understand the process of exercising the rights of such options, before embarking on this form of trade. Like any other branch of trade and commerce, Stock Market too has a terminology of its own. For an investor it is necessary to familiarize and know about their applications and implications. Let me begin with the conditions and mood of the market, which is the main concern of the brokers and investors.
A bearish view of the market is when one expects the share price to fall; not of a particular share, but share market as a whole.
A bullish view is exactly the opposite of the above condition. One expects the share market as a whole to rise and show aggressive tendency.
A neutral view is when the share market is neither bullish nor bearish. The movement is very restricted and hence strategies for trading will have to be appropriately modified as per the demand of a particular share. The situational aspects matter much and each decision is on its merits.
The terms that relate to the mechanics and operations are:
Call Options is when all procedures and steps are predetermined as for the right of the holder to buy the underlying share. They refer to the price and the time.
Put Options give the holder the right to sell the underlying stock at a fixed pre-determined price within a certain, fixed period of time.
Strike price is the fixed, pre determined price at which you can trade (both buy and sell) the shares. This cannot be changed throughout the duration of the option contract.
Expiry is the date at which the option contract stands terminated. This cannot be changed throughout the life of the option, and thereafter the contract is null and void.
Most of the shares are never traded at par. You pay premium for the shares doing well in the market and that are assessed to have assured prospects of growth. Premium is the amount that you are willing to pay for the options contract. Each share has set prices for trading. The amount you pay for the share depends on the level of strike price to the current share price. That amount is the premium. Premium is inclusive of both the options time value and the intrinsic value.
Stock option contact’s value or premium is decided by various factors. Five such factors are important and are material the contract. They are, the price of the share, the strike price, the date of expiry, the cumulative cost required to hold a position in the stock (inclusive of interest plus dividend) and the estimate of the expected volatility of the share price. The strike price refers to the price at which an underlying share can be sold or purchased. A stock price must go above (for calls) or go below (for puts) the strike price, before a position can be exercised for a profit.
Stock Option contracts can be done for most individual shares that are traded in the Exchanges. The US SEC (Securities and Exchange Commission), however, has implemented restrictions that prevent US traders from trading non US stock options, so US traders can only trade US stock options. The contract must contain the information relating to Symbol, Currency, Exchange, Multiplier, Expiration Date, Last trading Date, Strike Price, Type, Exercise Style, Maximum Size and Tick Size.
Long Term Stock Options (LEAPS)
Most of the options are short term the expiry date being up to 3 months. LEAPS expire anywhere from 9 to 30 months. These are good for long term trades, to seek protection for profit from an existing trade. All other trading procedures are similar.
Forward stock market and contracts are meant for the experienced players in shares. A new investor should desist from exercising these options.

Forex trading example

2009-08-13T07:51:00.001-07:00

Forex trading example

Trader x has an account of USD 50'000.

He buys EUR/USD 500'000 @ 1.1500 at the market and places a stop loss order at 1.1460.

At this point his maximum risk is USD 2'000 and his margin utilisation is 10%, well above the minimum.

During the day the forex market fluctuates and initially moves down to 1.1480.

At this point trader x has an unrealised loss of USD 1'000 and his margin utilisation has fallen to 9.60% reflecting the effect of the downward move on his margin capacity.

Later still the price moves back up to 1.1550 and trader x decides to take profit. He sells at 1.1550 making a USD 2'500 profit which represents a 5% return on his account value. Note that trader x took only a risk of USD 2'000 and made a return of USD 2'500 this equates to a risk/reward ratio of 1.25. A high risk reward ratio is what every trader should be aiming for.

The viewer should note that the example above is a random case scenario and in no way is meant to allude that the potential for profit is greater than the potential for loss in foreign exchange trading.

Familiarize yourself with forex trading with our free forex demo account.

Buying / Selling

2009-08-13T07:50:00.001-07:00

Buying / Selling

First, the traders should determine whether they want to buy or sell. If they want to enter a short order - whereby they will profit if the exchange rate falls - they simply need to click on the SELL rate. The opposite holds true for traders who enter buy orders: they can simply click on the BUY rate, and thus will profit if the exchange rate goes up.

Example of How Buying / Selling Works

As with all markets, there are two prices for every currency pair. The difference between these two prices is the spread, or the cost of the trade. In this example, the spread is three pips. On the 10k position, a pip on the EUR/USD currency pair is worth $1.

USD/CHF

2009-08-13T07:49:00.004-07:00

USD/CHF

In this example the USD is the base currency and thus the "basis" for the buy/sell. If you think the US dollar is undervalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in the Middle East and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.

GBP/USD

2009-08-13T07:49:00.003-07:00

GBP/USD

In this example the GBP is the base currency and thus the "basis" for the buy/sell. If you think the British economy will continue to be the leading economy among the G8 nations in terms of growth, thus buying the pound, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar. If you believe the British are going to adopt the Euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.

USD/JPY

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USD/JPY

In this example the US dollar is the base currency and thus the "basis" for the buy/sell. If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.

EUR/USD

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EUR/USD

In this example Euro is the base currency and thus the "basis" for the buy/sell. If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute a BUY EUR/USD order. By doing so you have bought Euros in the expectation that they will appreciate versus the US dollar. If you believe that the US economy is strong and the Euro will weaken against the US dollar you would execute a SELL EUR/USD order. By doing so you have sold Euros in the expectation that they will depreciate versus the US dollar.

Quoting Currency Pairs

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Quoting Currency Pairs

Currencies are quoted in pairs, such as EUR/USD or USD/JPY. The first listed currency is known as the base currency, while the second is called the counter or quote currency. The base currency is the "basis" for the buy or the sell. For example, if you BUY EUR/USD you have bought Euros (simultaneously sold dollars). You would do so in expectation that the Euro will appreciate (go up) relative to the US dollar.

How an FX Trade Works

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How an FX Trade Works

In the FX market you can buy or sell one currency for another. When you buy a currency, you are said to be "long" in that currency and when you sell a currency, you are said to be "short" in that currency. As the value of one currency rises or falls relative to another, traders decide to buy or sell currencies in order to make profits - since the objective is to earn a profit from their position. Placing a trade in the foreign exchange market is simple and the mechanics of a trade are virtually identical to those found in other markets. Because of the symmetry of currency transactions, you are always simultaneously long in one currency and short in another. An open position is one that is live and ongoing. As long as the position is open, its value will fluctuate in accordance with the exchange rate in the market. To close out your position, you conduct an equal and opposite trade in the same currency pair. For example, if you have gone long in one lot of EUR/USD you can close out that position by subsequently going short in one EUR/USD lot (at the prevailing bid price).

What is Forex Trading

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What is Forex Trading

Forex, FX, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another. FOREXYARD offers leading online trading platforms for individuals that wish to speculate on the exchange rate between two currencies. In doing so, speculators purchase or sell one currency for another with the hope of making a profit when the value of the currencies changes in favor of the speculator as a result of events that takes place across the globe. This market of exchange has more daily volume - both buyers and sellers - than any other market in the world. The FX market is available 24-hours a day, five days a week. Furthermore, the Forex Market is the largest financial market in the world with daily reported volume of over $1.4 trillion changing hands between buyers and sellers across the globe, making it one of the most exciting markets for trading. Although currency trading is inherently governmental (central banks) and institutional (commercial and investment banks), technological innovations, like the internet, have made it easy for individuals to take part in the currency trading markets and to trade via intermediaries online.

Currency Trading Summary

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Currency Trading Summary

While this online forex tutorial only represents a fraction of all there is to know about forex trading, we hope that you've gained some insight into this topic. We also encourage those of you who are interested in potentially trading in the online forex market to learn more about the complexities and intricacies that make this market unique.

Let's recap:

* The forex market represents the electronic over-the-counter markets where currencies are traded worldwide 24 hours a day, five and a half days a week. The typical means of trading forex are on the spot, futures and forwards markets.
* Currencies are "priced" in currency pairs and are quoted either directly or indirectly.
* Currencies typically have two prices: bid (the amount that the market will buy the quote currency for in relation to the base currency); and ask (the amount the market will sell one unit of the base currency for in relation to the quote currency). The bid price is always smaller than the ask price.
* Unlike conventional equity and debt markets, forex investors have access to large amounts of leverage, which allows substantial positions to be taken without making a large initial investment.
* The adoption and elimination of several global currency systems over time led to the formation of the present currency exchange system, in which most countries use some measure of floating exchange rates.
* Governments, central banks, banks and other financial institutions, hedgers, and speculators are the main players in the forex market.
* The main economic theories found in the foreign exchange deal with parity conditions such as those involving interest rates and inflation. Overall, a country's qualitative and quantitative factors are seen as large influences on its currency in the forex market.
* Forex traders use fundamental analysis to view currencies and their countries like companies, thereby using economic announcements to gain an idea of the currency's true value.
* Forex traders use technical analysis to look at currencies the same way they would any other asset and, therefore, use technical tools such as trends, charts and indicators in their trading strategies.
* Unlike stock trades, forex trades have minimal commissions and related fees. But new forex traders should take a conservative approach and use orders, such as the take-profit or stop-loss, to minimize losses.

Foreign Exchange Risk and Benefits

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Foreign Exchange Risk and Benefits

The Good and the Bad
We already have mentioned that factors such as the size, volatility and global structure of the foreign exchange market have all contributed to its rapid success. Given the highly liquid nature of this market, investors are able to place extremely large trades without affecting any given exchange rate. These large positions are made available to forex traders because of the low margin requirements used by the majority of the industry's brokers. For example, it is possible for a trader to control a position of US$100,000 by putting down as little as US$1,000 up front and borrowing the remainder from his or her forex broker. This amount of leverage acts as a double-edged sword because investors can realize large gains when rates make a small favorable change, but they also run the risk of a massive loss when the rates move against them. Despite the foreign exchange risks, the amount of leverage available in the forex market is what makes it attractive for many speculators.

The currency market is also the only market that is truly open 24 hours a day with decent liquidity throughout the day. For traders who may have a day job or just a busy schedule, it is an optimal market to trade in. As you can see from the chart below, the major trading hubs are spread throughout many different time zones, eliminating the need to wait for an opening or closing bell. As the

U.S.

trading closes, other markets in the East are opening, making it possible to trade at any time during the day

While the forex market may offer more excitement to the investor, the risks are also higher in comparison to trading equities. The ultra-high leverage of the forex market means that huge gains can quickly turn to damaging losses and can wipe out the majority of your account in a matter of minutes. This is important for all new traders to understand, because in the forex market - due to the large amount of money involved and the number of players - traders will react quickly to information released into the market, leading to sharp moves in the price of the currency pair.

Though currencies don't tend to move as sharply as equities on a percentage basis (where a company's stock can lose a large portion of its value in a matter of minutes after a bad announcement), it is the leverage in the spot market that creates the volatility. For example, if you are using 100:1 leverage on $1,000 invested, you control $100,000 in capital. If you put $100,000 into a currency and the currency's price moves 1% against you, the value of the capital will have decreased to $99,000 - a loss of $1,000, or all of your invested capital, representing a 100% loss. In the equities market, most traders do not use leverage, therefore a 1% loss in the stock's value on a $1,000 investment, would only mean a loss of $10. Therefore, it is important to take into account the risks involved in the forex market before diving in.

Differences Between Forex and Equities
A major difference between the forex and equities markets is the number of traded instruments: the forex market has very few compared to the thousands found in the equities market. The majority of forex traders focus their efforts on seven different currency pairs: the four majors, which include (EUR/USD, USD/JPY, GBP/USD, USD/CHF); and the three commodity pairs (USD/CAD, AUD/USD, NZD/USD). All other pairs are just different combinations of the same currencies, otherwise known as cross currencies. This makes currency trading easier to follow because rather than having to cherry-pick between 10,000 stocks to find the best value, all that FX traders need to do is “keep up” on the economic and political news of eight countries.

The equity markets often can hit a lull, resulting in shrinking volumes and activity. As a result, it may be hard to open and close positions when desired. Furthermore, in a declining market, it is only with extreme ingenuity that an equities investor can make a profit. It is difficult to short-sell in the U.S. equities market because of strict rules and regulations regarding the process. On the other hand, forex offers the opportunity to profit in both rising and declining markets because with each trade, you are buying and selling simultaneously, and short-selling is, therefore, inherent in every transaction. In addition, since the forex market is so liquid, traders are not required to wait for an uptick before they are allowed to enter into a short position - as they are in the equities market.

Due to the extreme liquidity of the forex market, margins are low and leverage is high. It just is not possible to find such low margin rates in the equities markets; most margin traders in the equities markets need at least 50% of the value of the investment available as margin, whereas forex traders need as little as 1%. Furthermore, commissions in the equities market are much higher than in the forex market. Traditional brokers ask for commission fees on top of the spread, plus the fees that have to be paid to the exchange. Spot forex brokers take only the spread as their fee for the transaction. (For a more in-depth introduction to currency trading, see Getting Started in Forex and A Primer On The Forex Market.)

foreign exchange rate

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foreign exchange rate

Rate at which one currency may be converted into another. also called rate of exchange or exchange rate or currency exchange rate.

Currency Trading

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Currency Trading

The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.

Daily currency fluctuations are usually very small. Most currency pairs move less than one cent per day, representing a less than 1% change in the value of the currency. This makes foreign exchange one of the least volatile financial markets around. Therefore, many currency speculators rely on the availability of enormous leverage to increase the value of potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity, foreign exchange brokers have been able to make high leverage an industry standard in order to make the movements meaningful for currency traders.

Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will.

The forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements.

The goal of this forex tutorial is to provide a foundation for investors or traders who are new to the foreign currency markets. We'll cover the basics of exchange rates, the market's history and the key concepts you need to understand in order to be able to participate in this market. We'll also venture into how to start trading foreign currencies and the different types of strategies that can be employed.

Forex Broker Go Out of Business?

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Forex Broker Go Out of Business?

Retail forex is a fairly new business, having started in 1998, and really only taken off in 2001. Initially, many forex brokers started with little capital. As the market has matured and become more mainstream, the requirements to stay in business have become more rigorous. The NFA (National Futures Association) is increasing capital requirements for US based firms – forex dealers will now need to have at least US$5 million in net excess capital.

This is a relatively small amount for a large firm, but only 1/3 of forex brokers will be able to meet these requirements. That leaves around 10 brokers in the US. The remainder will have to either find new capital or close their operations later in December when the new regulation takes effect.

The risk is that there may be delays in getting your money back if your broker is forced to close.

What is Forex Arbitrage?

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Forex arbitrage is a trading strategy where a speculator attempts to make a profit by exploiting the inefficiency in currency pairs. This inefficiency is always self correcting, so the window of opportunity for profiting from the spread is very limited.
How to Calculate the Arbitrage

In order to calculate the arbitrage traders use forex arbitrage calculators. There are a number of free forex calculators available for download on the internet. Prior to initiating trades, speculators should use free demo accounts to see if trading the arbitrage can be a profitable venture. A trader would need accounts with forex brokers in multiple locations around the world. Most arbitrage techniques require trading in two to three currency pairs.

Current account

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The balance of trade is the difference between a nation's exports of goods and services and its imports of goods and services, if all financial transfers and investments and the like are ignored. A nation is said to have a trade deficit if it is importing more than it exports.

In economics, the current account is one of the two primary components of the balance of payments, the other being the capital account. It is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid).

The current account balance is one of two major metrics of the nature of a country's foreign trade (the other being the net capital outflow). A current account surplus increases a country's net foreign assets by the corresponding amount, and a current account deficit does the reverse. Both government and private payments are included in the calculation. It is called the current account because goods and services are generally consumed in the current period.[1]

Positive net sales abroad generally contributes to a current account surplus; negative net sales abroad generally contributes to a current account deficit. Because exports generate positive net sales, and because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports.

The net factor income or income account, a sub-account of the current account, is usually presented under the headings income payments as outflows, and income receipts as inflows. Income refers not only to the money received from investments made abroad (note: investments are recorded in the capital account but income from investments is recorded in the current account) but also to the money sent by individuals working abroad, known as remittances, to their families back home. If the income account is negative, the country is paying more than it is taking in interest, dividends, etc. For example, the United States' net income has been declining exponentially since it has allowed the dollar's price relative to other currencies to be determined by the market to a point where income payments and receipts are roughly equal.[citation needed] The difference between Canada's income payments and receipts have been declining exponentially as well since its central bank in 1998 began its strict policy not to intervene in the Canadian Dollar's foreign exchange.[2] The various subcategories in the income account are linked to specific respective subcategories in the capital account, as income is often composed of factor payments from the ownership of capital (assets) or the negative capital (debts) abroad. From the capital account, economists and central banks determine implied rates of return on the different types of capital. The United States, for example, gleans a substantially larger rate of return from foreign capital than foreigners do from owning United States capital.

In the traditional accounting of balance of payments, the current account equals the change in net foreign assets. A current account deficit implies a paralleled reduction of the net foreign assets.

Nominal and real exchange rates

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The nominal exchange rate $e$ is the price in foreign currency of one unit of a domestic currency.
The real exchange rate (RER) is defined as , where $P f$ is the foreign price level and $P$ the domestic price level.

The RER is based on the GDP deflator measurement of the price level in the domestic and foreign countries ( $P, P f$ ), which is arbitrarily set equal to 1 in a given base year. Therefore, the level of the RER is arbitrarily set, depending on which year is chosen as the base year for the GDP deflator of two countries. The changes of the RER are instead informative on the evolution over time of the relative price of a unit of GDP in the foreign country in terms of GDP units of the domestic country. If all goods were freely tradable, and foreign and domestic residents purchased identical baskets of goods, purchasing power parity (PPP) would hold for the GDP deflators of the two countries, and the RER would be constant and equal to one.

Exchange rate deffination

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In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. It is the value of a foreign nation’s currency in terms of the home nation’s currency.[1] For example an exchange rate of 95 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 95 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 3.2 trillion USD worth of currency changes hands every day.

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

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

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

Quotes using a country's home currency as the price currency (e.g., EUR 0.63 = USD 1.00 in the euro zone) are known as direct quotation or price quotation (from that country's perspective) [1] and are used by most countries.

Quotes using a country's home currency as the unit currency (e.g., EUR 1.00 = USD 1.58 in the euro zone) are known as indirect quotation or quantity quotation and are used in British newspapers and are also common in Australia, New Zealand and the eurozone.

* direct quotation: 1 foreign currency unit = x home currency units
* indirect quotation: 1 home currency unit = x foreign currency units

Note that, using direct quotation, if the home currency is strengthening (i.e., appreciating, or becoming more valuable) then the exchange rate number decreases. Conversely if the foreign currency is strengthening, the exchange rate number increases and the home currency is depreciating.

Market convention from the early 1980s to 2006 was that most currency pairs were quoted to 4 decimal places for spot transactions and up to 6 decimal places for forward outrights or swaps. (The fourth decimal place is usually referred to as a "pip"). An exception to this was exchange rates with a value of less than 1.000 which were usually quoted to 5 or 6 decimal places. Although there is no fixed rule, exchange rates with a value greater than around 20 were usually quoted to 3 decimal places and currencies with a value greater than 80 were quoted to 2 decimal places. Currencies over 5000 were usually quoted with no decimal places (e.g. the former Turkish Lira). e.g. (GBPOMR : 0.765432 - EURUSD : 1.5877 - GBPBEF : 58.234 - EURJPY : 165.29). In other words, quotes are given with 5 digits. Where rates are below 1, quotes frequently include 5 decimal places.

In 2005 Barclays Capital broke with convention by offering spot exchange rates with 5 or 6 decimal places on their electronic dealing platform[2]. The contraction of spreads (the difference between the bid and offer rates) arguably necessitated finer pricing and gave the banks the ability to try and win transaction on multibank trading platforms where all banks may otherwise have been quoting the same price. A number of other banks have now followed this.