ABOUT FOREX

FINANCE

2007-11-02T01:17:00.000-07:00

FINANCE studies and addresses the ways in which individuals, businesses, and organizations raise, allocate,

and use monetary resources over time, taking into account the risks entailed in their projects. The

term "finance" may thus incorporate any of the following:

* The study of money and other assets;
* The management and control of those assets;
* Profiling and managing project risks;
* The science of managing money;
* As a verb, "to finance" is to provide funds for business or for an individual's large purchases

(car, home, etc.).

The activity of finance is the application of a set of techniques that individuals and organizations

(entities) use to manage their money, particularly the differences between income and expenditure

and the risks of their investments.

An income that exceeds its expenditure can lend or invest the excess income. On the other hand, an

entity whose income is less than its expenditure can raise capital by borrowing or selling equity

claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial

intermediary, such as a bank or buy notes or bonds in the bond market. The lender receives interest,

the borrower pays a higher interest than the lender receives, and the financial intermediary pockets

the difference.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from

lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow

borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators

of money flows in space.

A specific example of corporate finance is the sale of stock by a company to institutional investors

like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it

part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares

outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the

stock, the company receives cash, which it uses to expand its business in a process called "equity

financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the

company's capital structure.

Finance is used by individuals (personal finance), by governments (public finance), by businesses

(corporate finance), etc., as well as by a wide variety of organizations including schools and non-

profit organizations. In general, the goals of each of the above activities are achieved through the

use of appropriate financial instruments, with consideration to their institutional setting.

foreign exchange market

2007-11-02T01:16:00.000-07:00

foreign exchange market is a zero sum game in which there are many experienced well-capitalized

professional traders (e.g. working for banks) who can devote their attentions full time to trading. An

inexperienced retail trader will have a significant information disadvantage compared to these

traders.

Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of

Gambler's Ruin. In a fair game (one with no information advantages) between two players that

continues until one trader goes bankrupt, the player with the lower amount of capital has a higher

probability of going bankrupt first. Since the retail speculator is effectively playing against the

market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt.

The retail trader always pays the bid/ask spread which makes his odds of winning less than those of

a fair game. Additional costs may include margin interest, or if a spot position is kept open for

more than one day the trade must be "resettled" each day, each time costing the full bid/ask

spread.

Forex scam

2007-11-02T01:13:00.000-07:00

Forex scam

is any trading scheme used to defraud individual traders by convincing them that they can expect

to gain an unreasonably high profit by trading in the foreign exchange market [1]. This market

would be a zero-sum game were it not for the fact that there are brokerage commissions, which

technically make forex a "negative-sum" game. "The market has long been plagued by swindlers

preying on the gullible," according to the New York Times [2].

These scams might include churning of customer accounts for the purpose of generating

commissions, selling software that is supposed to guide the customer to large profits,[3]

improperly managed "managed accounts",[4] false advertising,[5] Ponzi schemes and outright

fraud.[6] It also refers to any retail forex broker who indicates that trading foreign exchange is a low

risk, high profit investment.[7]

The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign

exchange market in the United States, has noted an increase in the amount of unscrupulous activity

in the non-bank foreign exchange industry.[8]

An official of the National Futures Association was quoted[9] as saying, "Retail forex trading has

increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also

increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission

has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who

lost $300 million, mostly in managed accounts. CNN also quoted Godfried De Vidts, President of

the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their

customers and they should make sure customers understand what they are doing. Now if people

go online, on non-bank portals, how is this control being done?"

The highly technical nature of retail forex industry, the OTC nature of the market, and the loose

regulation of the market, leaves retail speculators vulnerable. Defrauded traders and regulatory

authorities can find it very difficult to prove that market manipulation has occurred since there is no

central currency market, but rather a number of more or less interconnected marketplaces provided

by interbank market make

Foreign exchange market

2007-11-02T01:12:00.000-07:00

The foreign exchange market is unique because of

* its trading volume,
* the extreme liquidity of the market,
* the large number of, and variety of, traders in the market,
* its geographical dispersion,
* its long trading hours: 24 hours a day (except on weekends),
* the variety of factors that affect exchange rates.
* the low margins of profit compared with other markets of fixed income (but profits can be

high due to very large trading volumes)

According to the BIS,[1] average daily turnover in traditional foreign exchange markets is estimated

at $3,210 billion. Daily averages in April for different years, in billions of US dollars, are presented

on the chart below:

This $1.88 trillion in global foreign exchange market "traditional" turnover was broken down as

follows:

* $1,005 billion in spot transactions
* $362 billion in outright forwards
* $1,714 billion in forex swaps
* $129 billion estimated gaps in reporting

In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.

Exchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile

Exchange and are actively traded relative to most other futures contracts. Forex futures volume has

grown rapidly in recent years, and accounts for about 7% of the total foreign exchange market

volume, according to The Wall Street Journal Europe (5/5/06, p. 20).

Average daily global turnover in traditional foreign exchange market transactions totaled $2.7

trillion in April 2006 according to IFSL estimates based on semi-annual London, New York, Tokyo

and Singapore Foreign Exchange Committee data. Overall turnover, including non-traditional

foreign exchange derivatives and products traded on exchanges, averaged around $2.9 trillion a

day. This was more than ten times the size of the combined daily turnover on all the world’s equity

markets. Foreign exchange trading increased by 38% between April 2005 and April 2006 and has

more than doubled since 2001. This is largely due to the growing importance of foreign exchange

as an asset class and an increase in fund management assets, particularly of hedge funds and

pension funds. The diverse selection of execution venues such as internet trading platforms has also

made it easier for retail traders to trade in the foreign exchange market. [4]

Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one

another, there is no central exchange or clearing house. The biggest geographic trading centre is

the UK, primarily London, which according to IFSL estimates has increased its share of global

turnover in traditional transactions from 31.3% in April 2004 to 32.4% in April 2006. RPP

The ten most active traders account for almost 73% of trading volume, according to The Wall

Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the

market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the

price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-

maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of

currencies, usually 0–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203.

Minimum trading size for most deals is usually $100,000.

These spreads might not apply to retail customers at banks, which will routinely mark up the

difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travelers'

checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide

(i.e. 0.0003). Competition has greatly increased with pip spreads shrinking on the major pairs to as

little as 1 to 2 pips.

Market participants
Financial markets

Unlike a stock market, where all participants have access to the same prices, the forex market is

divided into levels of access. At the top is the inter-bank market, which is made up of the largest

investment banking firms. Within the inter-bank market, spreads, which are the difference between

the bid and ask prices, are razor sharp and usually unavailable, and not known to players outside

the inner circle. As you descend the levels of access, the difference between the bid and ask prices

widens (from 0-1 pip to 1-2 pips only for major currencies like the Euro). This is due to volume. If a

trader can guarantee large numbers of transactions for large amounts, they can demand a smaller

difference between the bid and ask price, which is referred to as a better spread. The levels of access

that make up the forex market are determined by the size of the “line” (the amount of money with

which they are trading). The top-tier inter-bank market accounts for 53% of all transactions. After

that there are usually smaller investment banks, followed by large multi-national corporations

(which need to hedge risk and pay employees in different countries), large hedge funds, and even

some of the retail forex market makers. According to Galati and Melvin, “Pension funds, insurance

companies, mutual funds, and other institutional investors have played an increasingly important

role in financial markets in general, and in FX markets in particular, since the early 2000s.” (2004) In

addition, he notes, “Hedge funds have grown markedly over the 2001–2004 period in terms of

both number and overall size” Central banks also participate in the forex market to align currencies

to their economic needs.

[edit] Banks

The interbank market caters for both the majority of commercial turnover and large amounts of

speculative trading every day. A large bank may trade billions of dollars daily. Some of this trading

is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the

bank's own account.

Until recently, foreign exchange brokers did large amounts of business, facilitating interbank

trading and matching anonymous counterparts for small fees. Today, however, much of this

business has moved on to more efficient electronic systems, such as EBS (now owned by ICAP),

Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Dukascopy - Swiss FX

Marketplace, FXMarketSpace, Bloomberg, and TradeBook(R). The broker squawk box lets traders

listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is

noticeably smaller than just a few years ago.

[edit] Commercial companies

An important part of this market comes from the financial activities of companies seeking foreign

exchange to pay for goods or services. Commercial companies often trade fairly small amounts

compared to those of banks or speculators, and their trades often have little short term impact on

market rates. Nevertheless, trade flows are an important factor in the long-term direction of a

currency's exchange rate. Some multinational companies can have an unpredictable impact when

very large positions are covered due to exposures that are not widely known by other market

participants.

Retail forex

2007-11-02T01:11:00.000-07:00

High leveraged

The idea of margin (leverage) and floating loss is another important trading concept and is perhaps

best understood using an example. Most retail Forex market makers permit 100:1 leverage, but

also, crucially, require you to have a certain amount of money in your account to protect against a

critical loss point. For example, if a $100,000 position is held in Eur/USD on 100:1 leverage, the

trader has to put up $1,000 to control the position. However, in the event of a declining value of

your positions, Forex market makers, mindful of the fast nature of forex price swings and the

amplifying effect of leverage, typically do not allow their traders to go negative and make up the

difference at a later date. In order to make sure the trader does not lose more money than is held in

the account, forex market makers typically employ automatic systems to close out positions when

clients run out of margin (the amount of money in their account not tied to a position). If the trader

has $2,000 in his account, and he is buying a $100,000 lot of EUR/USD, he has $1,000 of his $2,000

tied up in margin, with $1,000 left to allow his position to fluctuate downward without being closed

out.

Typically a trader's trading platform will show him three important numbers associated with his

account: his balance, his equity, and his margin remaining. If trader X has two positions: $100,000

long (buy) in EUR/USD, and $100,000 short (sell) in GBP/USD, and he has $10,000 in his account,

his positions would look as follows: Because of the 100:1 leverage, it took him $1,000 to control

each position. This means that he has used up $2,000 in his margin, out of a $10,000 account, and

thus he has $8,000 of margin still available. With this margin, he can either take more positions or

keep the margin relatively high to allow his current positions to be maintained in the event of

downturns. If the client chooses to open a new position of $100,000, this will again take another

$1,000 of his margin, leaving $7,000. He will have used up $3,000 in margin among the three

positions. The other way margin will decrease is if the positions he currently has open lose money. If

his 3 positions of $100,000 decrease by $5,000 in value (which is fairly common), he now has, of his

original $7,000 in margin, only $2,000 left.

If you have a $10,000 account and only open one $100,000 position, this has committed only

$1,000 of your money plus you must maintain $1,000 in margin. While this leaves $9,000 free in

your account, it is possible to lose almost all of it if the speculation loses money.

A Forex swap (or FX swap)

2007-11-02T01:08:00.000-07:00

a forex swap (or FX swap) is an over-the-counter short term interest rate derivative instrument. In emerging money markets, forex swaps are usually the first derivative instrument to be traded, ahead of forward rate agreements.
Foreign Exchange

A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.

Currency swaps can be negotiated for a variety of maturities up to at least 10 years. Unlike a back-to-back loan, a currency swap is not considered to be a loan by United States accounting laws and thus it is not reflected on a company's balance sheet. A swap is considered to be a foreign exchange transaction (short leg) plus an obligation to close the swap (far leg) being a forward contract.

Currency swaps are often combined with interest rate swaps. For example, one company would seek to swap a cash flow for their fixed rate debt denominated in US dollars for a floating-rate debt denominated in Euro. This is especially common in Europe where companies "shop" for the cheapest debt regardless of its denomination and then seek to exchange it for the debt in desired currency.

EXCHAGE RATE

2007-11-02T01:02:00.000-07:00

EXCHAGE RATE

(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. For example an exchange

rate of 123 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 123 is worth

the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some

estimates, about 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 rate quotation is given by stating the number of units of a price 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 1.3 (USD per EUR), the price currency is USD and the unit currency is

EUR.

Quotes using a country's home currency as the price currency (e.g., 0.50593 = $1 in the UK) 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., $1.97656 = £1 in the UK) 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.

When looking at a currency pair such as EUR/USD, many times the first component (EUR in this

case) will be called the base currency. The second is called the counter currency. For example :

EUR/USD = 1.33866, means EUR is the base and USD the counter, so 1 EUR = 1.33866 USD.

Currency pairs are given with four decimal places, except JPY with two decimal places (EUR/USD :

1.3386 - EUR/JPY : 165.29). In other words, quotes are given with 5 digits. Where rates are below 1,

quotes frequently include 5 decimal places.

forex traders to execute trades

2007-11-02T01:01:00.000-07:00

Buy Or Short-sell Anytime
When trading stocks, short-selling is only allowed with an uptick, so it can be very frustrating for

traders to wait and see their stocks trend downward, while waiting for an uptick. In the futures

market, there is a limit down/limit up rule which kicks in when the contract value declines or

increases by more than a certain percentage from the previous day's close. However, in the forex

market, you can short a currency pair anytime without having to wait for any upticks, and this

translates to a more efficient and instant order execution.

Profit In All Market Conditions - bull, bear or sideways
With forex, you can have the freedom to long or short currency pairs whenever the opportunity

comes, since there are no exchange-enforced restrictions on daily activities, like for stocks or

futures.

Flexible Leverage
The forex market offers the highest leverage available for any market. Leveraged trading allows

forex traders to execute trades up to $500,000 with an initial margin of only $5000. That means you

get as high as 100-to-1 leverage or more, offered by most online forex firms on standard-sized

accounts. However, it is important to note that while this type of leverage allows investors to

maximize their profit potential, the potential for loss is equally large. The good thing is, it is up to

you to select the amount of leverage that you are most comfortable with.

Advantages of Forex

2007-11-02T01:00:00.000-07:00

The Most Liquid Market On The Planet

According to the Central Bank Survey of the forex market conducted by the Bank for International

Settlements, as at 2004, daily trading volume reached an all-time record high of $1.9 trillion, up

58% from 2001. Do you know that this humongous daily trading volume is about 20 times that of

the New York Stock Exchange and the Nasdaq combined?
With about 80 percent of foreign exchange transactions having a dollar leg, you don't have to

worry about liquidity issues when trading any of the these big-economy currencies, which are

namely, USD, GBP, Euro, CHF, JPY, CAD, AUD and NZD. However with stocks, futures, options or

commodities, you tend to be restricted by their illiquidity especially during after-hours.

Limited Slippage
Most brokers guarantee fills on stop-loss and limit orders on up to a certain number of standard

lots, and provide instantaneous trade executions from real-time quotes which are displayed on the

screen. There is usually no discrepancy between the displayed price and the execution price during

normal market conditions. However, you may be subjected to slippage when you trade during

news or during periods of high volatility.

In the futures and stock markets, execution price can be vague because all orders must be done

through the exchange, and slippage and partial fills are common especially in the futures market

due to the chaotic open-outcry system.

FX Options Trade Alert

2007-11-02T00:56:00.000-07:00

FX Options Trade Alert

Learn to trade your views on the strength or weakness of the U.S. Dollar. Trading Central's FX Options Trade Alert provides options trading ideas for major currencies like the euro, British pound, Japanese yen, and Canadian dollar. The alerts are based on technical analysis that identifies patterns in the foreign currency market. Subscribers receive timely options trading ideas, complete with in-depth analysis for each trade. The alerts are distributed as market opportunities arise.
Trading Central is an independent technical analysis company certified with the Investorside Research Association.

A Global 24-hour Market

The Forex market is unique in that traders can access a 24-hour market very conveniently, without having to wait for the markets to open. At any time, there is always a major financial center open where banks, hedge funds, corporations, and individual speculators are trading currencies. Traders can trade during anytime of the day or night, and do not have to wait for any markets to be opened before placing their trades. This is particularly beneficial to people who hold nine-to-five jobs since they can trade it without any problems in the evening or night. In stock or futures markets, you can only actively trade for less than 7 hours a day.

Forex Technical Report

2007-11-02T00:52:00.000-07:00

Interesting view on Forex trading

Recently I read a very intersting article on forex trading. It is exactly what was my experience in forest 7 months of trading. Even tough I am fully aware that 7 months means in trading that I was still a newbie, I spent a significant time online attached to Metatrader windows. Trying everything, from system to signals, from news to economic reports. And yes, I was doing small but steady profit which was giving me a reason to continue. Untill I did a fatal mistake, trying fight the trend without stop loss.

I hope, that my HYIP investments will go on well, so far is looking very good and I plan a comeback.
EUR/USD Open 1.4425 High 1.4451 Low 1.4415 Close 1.4433

After having reached the psychological resistance at 1.4500 the upward trend of the Euro stopped and the currency couple corrected. If the above level is successfully broken again next psychological resistance levels would be at 1.4545 and 1.4595. In downward direction support is given around 1.4430, followed by 1.4369 and 1.4277.
Technical resistance levels: 1.4497 1.4545 1.4595
Technical support levels: 1.4430 1.4369 1.4277

Trading range: 1.4410 - 1.4485
Trend: Upward
Buy at 1.4422 SL 1.4392 TP 1.4472

Yesterday we made +15 pips profit on EUR/USD from the following signal:
8:16 GMT Buy EUR/USD at 1.4428 SL 1.4402 TP 1.4478 exited at 8:32 GMT

FOREX RATES

2007-11-02T00:48:00.000-07:00

Forex Trader's Bill of Rights

The Forex Trader’s Bill of Rights (2005) is a non-fiction book about the foreign currency trading market, published by OANDA_Corporation. It is primarily a call to arms for currency traders to call for greater transparency and accountability within the market. The overleaf provided with the printed version of the book states: “Big banks and confederated brokerages have overcomplicated forex: trading costs are inflated, unnecessary risk abounds, and the system is grossly unfair.” Essentially, the book elaborates on this premise, detailing ways in which traders are being unfairly treated and encouraging them to take action.

OANDA is a company that provides currency trading tools for investors, travelers, and businesses. As such, there is an unavoidable marketing aspect to this publication. However, OANDA is not mentioned throughout the book. There has been a clear effort to maintain a relatively neutral point of view. The back cover does state “OANDA is a leading provider of online currency trading…FXTrade…enables all currency investors to change the way forex trading is done”.

The authors believe currency investors have 10 basic rights which are being violated: each short chapter deals with one of these rights. They are:
1. The right to immediate, uncensored access to the marketplace
2. The right to trade real spot
3. The right to know
4. The right to trade whenever you want
5. The right to equal treatment
6. The right to choose and manage risk
7. The right to understand cost
8. The right to learn – on your own, or through free exchange with other traders
9. The right to full disclosure
10. The right to pay and receive interest

1) The right to immediate, uncensored access to the marketplace Chapter one argues that when trading traditionally (with banks etc.,) execution and price are affected by who you are (size of your order/ relationship with your market maker etc.), the amount of greed on the part of the market maker, and manual intervention which can delay the trade. The chapter calls for transparency, fairness, and efficiency for traders from market makers.

2) The right to trade real spot
Chapter two addresses unnecessary delays in settlement of trades, which according to the authors increase risk for investors.

3) The right to know
The third chapter states that market makers share information based on who you are: in some cases they share information that should not be shared; in other cases they do not share information that should be publicly available. This leads to an unfair advantage.

4) The right to trade whenever you want
The chapter asserts that market makers may advertise 24 hour trading but they close the books on Friday. However, world events which affect currency price occur on weekends. The argument continues that since the technology for 24/7 trading is available, it should be offered by all market makers.

5) The right to equal treatment
Chapter five argues that every trader should be given the same price and spread, and that market makers should not discriminate between traders.

6) The right to choose and manage risk
Traders are encouraged to use a market maker who does not require high minimums, lets them trade any amount, and provides immediate settlement as a way of minimizing risk.

7) The right to understand cost
It is reasoned that traders have the right to understand spreads, as well as who gets a “cut” and why. This chapter also includes a profitability calculator.

8) The right to learn – on your own, or through free exchange with other traders
This chapter covers multiple ways to learn about trading, and test new strategies, including trading games offered by online market makers and other sources of Internet information.

9) The right to full disclosure
The book claims that a lack of transparency in pricing, execution, and after the trade needs to addressed. Market makers should publish statistics regarding real spreads and prices and traders should demand that they do this.

10) The right to pay and receive interest
It is argued that continuous interest should be introduced, which would make for price flows that are less volatile.