You have surplus funds with you and you want to park your money in some good investment vehicle. You think that you can take a risk to see your money growing. You don′t want to invest your money in a new business and would rather buy some shares of a profit-making company. Then investing in the stock market is a good decision but investing without proper knowledge of share trends may prove hazardous. This is where a stock broker comes into picture.
Any individual trading in stocks cannot directly go to the stock exchange and quote a price for a stock from the seller. He/she has to do it through a “middleman” known as the stock broker. These brokers may work individually, form a small firm, or become associated with bigger brokerage companies. The stock brokers operating in any particular stock exchange have to get themselves registered with that stock exchange.
Making profits from your investment depends more than 80% on the choice of a good stock broker with a strong acumen of the market. There are many brokers or brokerage firms that only carry out stock transactions for their clients without providing financial advice; they charge discounted rates from the clients. However, this is not the case for most. Stock brokers rather act as financial and investment advisors for individuals. They have a good understanding of the fluctuations in the market and are the most learned and professional people to make speculations about the market. For example, a good broker can speculate the price of tomorrow’s stocks by studying today’s market trends of countries that are at a different time zone. This is the most powerful trait of a stock broker. Before choosing any broker you should consider investigating his/her track record. His/her qualification also plays an important role. A broker advising you to short-sell your shares may not be the right option for you. He/she should be able to segregate your investment into low-, medium-, and high-risk stocks so that when the market tumbles your low- and medium-risk stocks don’t get affected much.
It is sometimes difficult to find a broker who understands the financial needs of an individual. Only profit-making attitude does not take a broker too far in career; he/she should love the financial market. Some individuals take decisions and carry out trading on their own. However, it is always advisable to engage the services of a stock broker for a new investor. With a broker in service, your financial tensions may well be of someone else!!
The remuneration of a broker is the salary paid by the brokerage firm and the commission paid by the stock transaction made by the clients. Thus, a broker makes money not out of the volume or number of transactions made by a client, but the profit arising from that trading. The stock brokers spend their days in a very competitive environment trying to learn as much as possible about the market and its trends, building up a huge clientele of successful investors, and trading stocks. Some brokers also provide online trade options, where individuals can trade 24 hours a day, but mostly without personal interaction with their agents. Most, however like to have a real stock broker providing them financial advice, teaching them why and how to invest in specific shares of specific companies, and acting as an advisor on when to carry out stock transactions to gain maximum profit out of each investment.
Friday, April 24, 2009
Stock Broker - Your Financial Advise
You have surplus funds with you and you want to park your money in some good investment vehicle. You think that you can take a risk to see your money growing. You don′t want to invest your money in a new business and would rather buy some shares of a profit-making company. Then investing in the stock market is a good decision but investing without proper knowledge of share trends may prove hazardous. This is where a stock broker comes into picture.
Any individual trading in stocks cannot directly go to the stock exchange and quote a price for a stock from the seller. He/she has to do it through a “middleman” known as the stock broker. These brokers may work individually, form a small firm, or become associated with bigger brokerage companies. The stock brokers operating in any particular stock exchange have to get themselves registered with that stock exchange.
Making profits from your investment depends more than 80% on the choice of a good stock broker with a strong acumen of the market. There are many brokers or brokerage firms that only carry out stock transactions for their clients without providing financial advice; they charge discounted rates from the clients. However, this is not the case for most. Stock brokers rather act as financial and investment advisors for individuals. They have a good understanding of the fluctuations in the market and are the most learned and professional people to make speculations about the market. For example, a good broker can speculate the price of tomorrow’s stocks by studying today’s market trends of countries that are at a different time zone. This is the most powerful trait of a stock broker. Before choosing any broker you should consider investigating his/her track record. His/her qualification also plays an important role. A broker advising you to short-sell your shares may not be the right option for you. He/she should be able to segregate your investment into low-, medium-, and high-risk stocks so that when the market tumbles your low- and medium-risk stocks don’t get affected much.
It is sometimes difficult to find a broker who understands the financial needs of an individual. Only profit-making attitude does not take a broker too far in career; he/she should love the financial market. Some individuals take decisions and carry out trading on their own. However, it is always advisable to engage the services of a stock broker for a new investor. With a broker in service, your financial tensions may well be of someone else!!
The remuneration of a broker is the salary paid by the brokerage firm and the commission paid by the stock transaction made by the clients. Thus, a broker makes money not out of the volume or number of transactions made by a client, but the profit arising from that trading. The stock brokers spend their days in a very competitive environment trying to learn as much as possible about the market and its trends, building up a huge clientele of successful investors, and trading stocks. Some brokers also provide online trade options, where individuals can trade 24 hours a day, but mostly without personal interaction with their agents. Most, however like to have a real stock broker providing them financial advice, teaching them why and how to invest in specific shares of specific companies, and acting as an advisor on when to carry out stock transactions to gain maximum profit out of each investment.
Any individual trading in stocks cannot directly go to the stock exchange and quote a price for a stock from the seller. He/she has to do it through a “middleman” known as the stock broker. These brokers may work individually, form a small firm, or become associated with bigger brokerage companies. The stock brokers operating in any particular stock exchange have to get themselves registered with that stock exchange.
Making profits from your investment depends more than 80% on the choice of a good stock broker with a strong acumen of the market. There are many brokers or brokerage firms that only carry out stock transactions for their clients without providing financial advice; they charge discounted rates from the clients. However, this is not the case for most. Stock brokers rather act as financial and investment advisors for individuals. They have a good understanding of the fluctuations in the market and are the most learned and professional people to make speculations about the market. For example, a good broker can speculate the price of tomorrow’s stocks by studying today’s market trends of countries that are at a different time zone. This is the most powerful trait of a stock broker. Before choosing any broker you should consider investigating his/her track record. His/her qualification also plays an important role. A broker advising you to short-sell your shares may not be the right option for you. He/she should be able to segregate your investment into low-, medium-, and high-risk stocks so that when the market tumbles your low- and medium-risk stocks don’t get affected much.
It is sometimes difficult to find a broker who understands the financial needs of an individual. Only profit-making attitude does not take a broker too far in career; he/she should love the financial market. Some individuals take decisions and carry out trading on their own. However, it is always advisable to engage the services of a stock broker for a new investor. With a broker in service, your financial tensions may well be of someone else!!
The remuneration of a broker is the salary paid by the brokerage firm and the commission paid by the stock transaction made by the clients. Thus, a broker makes money not out of the volume or number of transactions made by a client, but the profit arising from that trading. The stock brokers spend their days in a very competitive environment trying to learn as much as possible about the market and its trends, building up a huge clientele of successful investors, and trading stocks. Some brokers also provide online trade options, where individuals can trade 24 hours a day, but mostly without personal interaction with their agents. Most, however like to have a real stock broker providing them financial advice, teaching them why and how to invest in specific shares of specific companies, and acting as an advisor on when to carry out stock transactions to gain maximum profit out of each investment.
Stock Option Markets and Contracts
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.
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.
Stock Research Education
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.
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.
An Introduction to Stock Trading
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.
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.
Discount Brokerage
As an investor in the stock market, if you think that you do not need too much of hand-holding and you can do your own research, trading through a discount brokerage is the right option for you. Discount brokers offer to conduct the stock trading for you without providing you with financial advice and without influencing your investment decisions. The most important benefit that you derive out of investing though a discount brokerage is that they charge considerably less than the usual full-service brokerages. If new to the stock market, it is always advisable to go for “full- services, as this helps you to take wise decisions and gain from the insights of an experienced broker. As you become more conversant with the market and its trends, there is not a better option than a discount brokerage.
Sunday, April 19, 2009
ROLE OF THE EXCHANGE RATE
The exchange rate is a price—the number of units
of one nation’s currency that must be surrendered
in order to acquire one unit of another nation’scurrency. There are scores of “exchange rates”
for the U.S. dollar. In the spot market, there is an
exchange rate for every other national currency
of one nation’s currency that must be surrendered
in order to acquire one unit of another nation’scurrency. There are scores of “exchange rates”
for the U.S. dollar. In the spot market, there is an
exchange rate for every other national currency
WHAT “FOREIGN EXCHANGE” MEANS
“Foreign exchange” refers to money denominated
in the currency of another nation or
group of nations. Any person who exchanges
money denominated in his own nation’s
currency for money denominated in another
nation’s currency acquires foreign exchange.
That holds true whether the amount of the
transaction is equal to a few dollars or to
billions of dollars; whether the person
involved is a tourist cashing a traveler’s check
in a restaurant abroad or an investor
exchanging hundreds of millions of dollars for
the acquisition of a foreign company; and
whether the form of money being acquired
is foreign currency notes, foreign currencydenominated
bank deposits, or other shortterm
claims denominated in foreign currency.
A foreign exchange transaction is still a shift
of funds, or short-term financial claims, from
one country and currency to another.
Thus, within the United States, any money
denominated in any currency other than theU.S. dollar is, broadly speaking, “foreign
exchange.”
Foreign exchange can be cash, funds available
on credit cards and debit cards, traveler’s checks,
bank deposits, or other short-term claims. It is
still “foreign exchange” if it is a short-term
negotiable financial claim denominated in a
currency other than the U.S. dollar.
But, in the foreign exchange market described
in this book—the international network of major
foreign exchange dealers engaged in high-volume
trading around the world—foreign exchange
transactions almost always take the form of an
exchange of bank deposits of different national
currency denominations. If one bank agrees to
sell dollars for Deutsche marks to another bank,
there will be an exchange between the two parties
of a dollar bank deposit for a DEM bank deposit.
In this book, “foreign exchange” means a bank
balance denominated in a foreign (non-U.S.
dollar) currency.
in the currency of another nation or
group of nations. Any person who exchanges
money denominated in his own nation’s
currency for money denominated in another
nation’s currency acquires foreign exchange.
That holds true whether the amount of the
transaction is equal to a few dollars or to
billions of dollars; whether the person
involved is a tourist cashing a traveler’s check
in a restaurant abroad or an investor
exchanging hundreds of millions of dollars for
the acquisition of a foreign company; and
whether the form of money being acquired
is foreign currency notes, foreign currencydenominated
bank deposits, or other shortterm
claims denominated in foreign currency.
A foreign exchange transaction is still a shift
of funds, or short-term financial claims, from
one country and currency to another.
Thus, within the United States, any money
denominated in any currency other than theU.S. dollar is, broadly speaking, “foreign
exchange.”
Foreign exchange can be cash, funds available
on credit cards and debit cards, traveler’s checks,
bank deposits, or other short-term claims. It is
still “foreign exchange” if it is a short-term
negotiable financial claim denominated in a
currency other than the U.S. dollar.
But, in the foreign exchange market described
in this book—the international network of major
foreign exchange dealers engaged in high-volume
trading around the world—foreign exchange
transactions almost always take the form of an
exchange of bank deposits of different national
currency denominations. If one bank agrees to
sell dollars for Deutsche marks to another bank,
there will be an exchange between the two parties
of a dollar bank deposit for a DEM bank deposit.
In this book, “foreign exchange” means a bank
balance denominated in a foreign (non-U.S.
dollar) currency.
WHYWE NEED FOREIGN EXCHANGE
Almost every nation has its own national
currency or monetary unit—its dollar, its peso,
its rupee—used for making and receiving
payments within its own borders. But foreign
currencies are usually needed for payments
across national borders. Thus, in any nation
whose residents conduct business abroad or
engage in financial transactions with persons in
other countries, there must be a mechanism for
providing access to foreign currencies, so that
payments can be made in a form acceptable to
foreigners. In other words, there is need for
“foreign exchange” transactions—exchanges of
one currency for another.
currency or monetary unit—its dollar, its peso,
its rupee—used for making and receiving
payments within its own borders. But foreign
currencies are usually needed for payments
across national borders. Thus, in any nation
whose residents conduct business abroad or
engage in financial transactions with persons in
other countries, there must be a mechanism for
providing access to foreign currencies, so that
payments can be made in a form acceptable to
foreigners. In other words, there is need for
“foreign exchange” transactions—exchanges of
one currency for another.
trading foreign exchange: a changing market in a changing world
Major advances in technology, making
possible instantaneous real-time transmission of
vast amounts of market information worldwide,
immediate and sophisticated manipulation of
that information to identify and exploit market
opportunities,and rapid and reliable execution of
financial transactions—all occurring with a level
of efficiency and reduced costs not dreamed
possible a generation earlier.
Breakthroughs in the theory and practice of
finance, resulting not only in the development
of innovative new financial instruments and
derivative products, but also in advances in
thinking that have changed our understanding
of the financial system and our techniques for
operating within it.
The common theme underlying all of these
developments is the role of markets—the growth
and development of markets, enhanced freedom
and competition in markets, improvements in the
efficiency of markets,increased reliance on market
forces and mechanisms, and the creation of better
market techniques and instruments.
The interplay of these forces, feeding off each
other in a dynamic and synergistic way, created a
global environment of creativity and ferment. In
the 1970s, exchange rates became more volatile
and imbalances in international payments grew
much larger for well-known reasons: the advent of
a floating exchange rate system, deregulation,
and major macroeconomic shifts in the world
economy. That caused financing needs to
expand, which—at a time of rapid technological
advance—provided fertile ground for the
development of new financial products and
mechanisms. These innovations helped market
participants circumvent existing controls and
encouraged further moves toward deregulation,
which led to additional new products, facilitated
the financing of still larger imbalances, and
encouraged a trend toward institutionalization
of savings and diversification of investment.
Financial markets grew progressively larger and
more sophisticated, integrated, and efficient.
In that environment, foreign exchange trading
increased rapidly and changed intrinsically.
The market has expanded from one of banks to
one in which many other kinds of financial and
non-financial institutions also participate—
including nonfinancial corporations, investment
firms, pension funds, and hedge funds. Its
focus has broadened from servicing importers
and exporters to handling the vast amounts of
overseas investment and other capital flows that
currently take place. It has evolved from a series
of loosely connected national financial centers to
a single integrated international market that
plays a far more extensive and direct role in our
economies, affecting all aspects of our lives and
our prosperity.
possible instantaneous real-time transmission of
vast amounts of market information worldwide,
immediate and sophisticated manipulation of
that information to identify and exploit market
opportunities,and rapid and reliable execution of
financial transactions—all occurring with a level
of efficiency and reduced costs not dreamed
possible a generation earlier.
Breakthroughs in the theory and practice of
finance, resulting not only in the development
of innovative new financial instruments and
derivative products, but also in advances in
thinking that have changed our understanding
of the financial system and our techniques for
operating within it.
The common theme underlying all of these
developments is the role of markets—the growth
and development of markets, enhanced freedom
and competition in markets, improvements in the
efficiency of markets,increased reliance on market
forces and mechanisms, and the creation of better
market techniques and instruments.
The interplay of these forces, feeding off each
other in a dynamic and synergistic way, created a
global environment of creativity and ferment. In
the 1970s, exchange rates became more volatile
and imbalances in international payments grew
much larger for well-known reasons: the advent of
a floating exchange rate system, deregulation,
and major macroeconomic shifts in the world
economy. That caused financing needs to
expand, which—at a time of rapid technological
advance—provided fertile ground for the
development of new financial products and
mechanisms. These innovations helped market
participants circumvent existing controls and
encouraged further moves toward deregulation,
which led to additional new products, facilitated
the financing of still larger imbalances, and
encouraged a trend toward institutionalization
of savings and diversification of investment.
Financial markets grew progressively larger and
more sophisticated, integrated, and efficient.
In that environment, foreign exchange trading
increased rapidly and changed intrinsically.
The market has expanded from one of banks to
one in which many other kinds of financial and
non-financial institutions also participate—
including nonfinancial corporations, investment
firms, pension funds, and hedge funds. Its
focus has broadened from servicing importers
and exporters to handling the vast amounts of
overseas investment and other capital flows that
currently take place. It has evolved from a series
of loosely connected national financial centers to
a single integrated international market that
plays a far more extensive and direct role in our
economies, affecting all aspects of our lives and
our prosperity.
HOW THE GLOBAL ENVIRONMENT HAS CHANGED
Since the early 1970s, with increasing
internationalization of financial transactions,
the foreign exchange market has been
profoundly transformed, not only in size, but
in coverage, architecture, and mode of
operation. That transformation is the result of
structural shifts in the world economy and in
the international financial system. Among
the major developments that have occurred
in the global financial environment are the
following:
A basic change in the international monetary
system, from the fixed exchange rate “par
value” requirements of Bretton Woods that
existed until the early 1970s to the flexible
legal structure of today, in which nations can
choose to float their exchange rates or to
follow other exchange rate regimes and
practices of their choice.
w A tidal wave of financial deregulation
throughout the world, with massive elimination
of government controls and restrictions
in nearly all countries, resulting in greater
freedom for national and international
financial transactions, and in greatly increased
competition among financial institutions, both
within and across national borders.
A fundamental move toward institutionalization
and internationalization of
savings and investment
with funds managers
and institutions around the globe having
vastly larger sums available, which they are
investing and diversifying across borders
and currencies in novel ways and in ever
larger amounts as they seek to maximize
returns.
A broadening and deepening trend toward
international trade liberalization, within a
framework of multilateral trade agreements,
such as the Tokyo and the Uruguay Rounds of
the General Agreement on Tariffs and Trade,
the North American Free Trade Agreement,
and U.S. bilateral trade initiatives with China,
Japan, and the European Union.
internationalization of financial transactions,
the foreign exchange market has been
profoundly transformed, not only in size, but
in coverage, architecture, and mode of
operation. That transformation is the result of
structural shifts in the world economy and in
the international financial system. Among
the major developments that have occurred
in the global financial environment are the
following:
A basic change in the international monetary
system, from the fixed exchange rate “par
value” requirements of Bretton Woods that
existed until the early 1970s to the flexible
legal structure of today, in which nations can
choose to float their exchange rates or to
follow other exchange rate regimes and
practices of their choice.
w A tidal wave of financial deregulation
throughout the world, with massive elimination
of government controls and restrictions
in nearly all countries, resulting in greater
freedom for national and international
financial transactions, and in greatly increased
competition among financial institutions, both
within and across national borders.
A fundamental move toward institutionalization
and internationalization of
savings and investment
with funds managers
and institutions around the globe having
vastly larger sums available, which they are
investing and diversifying across borders
and currencies in novel ways and in ever
larger amounts as they seek to maximize
returns.
A broadening and deepening trend toward
international trade liberalization, within a
framework of multilateral trade agreements,
such as the Tokyo and the Uruguay Rounds of
the General Agreement on Tariffs and Trade,
the North American Free Trade Agreement,
and U.S. bilateral trade initiatives with China,
Japan, and the European Union.
Monday, April 6, 2009
Foreign currency
The forex selection bazaar emerged as an over-the-counter (OTC) monetary vehicle for huge banks, monetary units and large worldwide corporations to evade against overseas currency revelation. Same as the forex market, the forex selection market is measured as an "inter-bank" marketplace. However, with overabundance of real-time fiscal information and forex choice dealing software accessible to most depositors with the help of the Internet service, Nowadays, the forex choice market includes an progressively more huge number of persons and organizations who are contemplating and/or hedging overseas currency revelation through telephone or Internet web site forex exposure platforms.
Most of the forex alternative trading is carried out through telephone as there are very few forex agents offering the online forex choice of trading platforms. Definition of forex seleciton - A forex selection is a monetary currency agreement that gives the forex choice purchaser the right and not the commitment, to trade a specific forex mark agreement (the underlying) at a particular outlay (the strike fee) on or prior to a particular date (the finishing date). The sum of the forex selection purchaser offers payment to the forex alternative vendor for the forex selection agreement rights is known as the forex selection "premium."
Either the Forex alternative Buyer - the purchaser, or possessor, of an overseas exchange alternative has the selection to retail the overseas currency alternative contract before ending, or he or she may select to grasp the overseas currency alternatives contract in anticipation of termination and implement the rights to obtain a location in the fundamental spot overseas currency. The work of exercising the overseas currency alternative and captivating the consequent underlying location in the overseas currency mark market is called as "assignment" or as "assigned" a mark position.
The preliminary financial compulsion of the overseas currency alternative purchaser is to disburse the finest to the vendor directly when the overseas currency alternative is initially acquired. Formerly the payment is made, the overseas currency alternative holder does not have other monetary obligation until the overseas currency selection becomes offset or terminate.
Coming towards the finishing date, the identify purchaser can implement the right to acquire the fundamental overseas currency mark position at the overseas currency alternative's strike cost, and a holder can apply the right to retail the underlying overseas currency spot place at the overseas currency selection strike value. Most overseas currency selections are not activated by the purchaser, and counterbalance the market before ending.
A overseas currency selection expires of no value if, at a time the overseas currency option expires, the strike price is "out-of-the-money." In simplest terms, a foreign currency alternative is "out-of-cash" if the fundamental overseas currency spot value is inferior to a overseas currency identify option's hit price, or the original overseas currency mark price is elevated than a put alternatives strike value. Once a overseas currency alternative has terminated worthless, the overseas currency selection agreement itself ends up and neither the purchaser nor the vendor possess any additional compulsion to the second party.
In forex Japanese currency (Yen, JPY)
Note 1 - The currency of Japan is the Yen (¥). There are 4 different types of notes and 6 different types of coins in circulation: Notes include 1,000, 2,000, 5,000 and 10,000 Yen notes whereas coins include 1, 5, 10, 50, 100 and 500 Yen coins. Cash is easily the most common method of transaction in Japan, however credit cards are widely accepted in many places. While travelers' checks (in Yen or US dollars) are generally not easily accepted at small shops and restaurants most banks will easily exchange them. Yen can be changed in many places including international airports, foreign exchange banks, and other authorized money changers. Currency exchange counters are conveniently open during normal business hours at all airports.
Note 2 - In 2006, the Japanese Yen was considered to be one of the currency market's largest disappointments. If one has only been watching the value of USDJPY, which finished the year less than a percent away from where it started trading, the Yen's "disappointment" may have been hard to notice. Rather, the Yen saw most of it value decrease against the Euro and British pound , with the currency lowering 10 percent versus the Euro and 12 percent versus The Pound.
In fact, the devaluation of the Yen - japanese currency - was so drastic that it drove the EUR/JPY to an all-time high and the GBP/JPY to an 8 year high. The massive discrepancy between the Yen's performance against the dollar versus the Yen's performance against all other major currencies develop from the uncertainty that has accompanied the US economy throughout the past year. However when looking at the Yen's performance against the other major currencies, it paints a way more accurate picture about how the market feels about the Yen compared to the U.S Dollar.
After the Bank of Japan made no further changes following their only interest rate hike in July, traders quickly realized that interest rates would continue at their low values throughout the year, making carry trades against the valuable non-US dollar pairs still a solid investment. In the near future, we will start to see the Japanese economy make gains from a weak Yen, which will allow for another rate hike by the Bank of Japan, while simultaneously increasing the risk of carry trade unwinding and reserve diversification.
Note 3 - Following the United States Dollar, the Euro and the Pound Sterling, The Yen is widely used around the world as a reserve currency. The Yen has the ISO 4217 code of JPY and 392 while the Latin symbol for it is ?. Large quantities of yen are often counted in multiples of 10,000 (man, ¥) in the same way that values in the United States are often quoted or rounded off to hundreds or thousands. In 1870 , coins were introduced to the Japanese economy. Silver coins in denominations of 5, 10, 20 50 sen and 1 yen were distributed in addition to gold coins consisting of Yen in the amounts of 2, 5, 10 and 20 yen. In 1871, Gold 1 yen were introduced followed by copper 1 rin, 1 and 2 sen in 1873. The distribution of the Yen banknotes started in 1872, only two short years following the currency's conception. Throughout the Yen's history, denominations have ranged between 10 sen and 10,000 yen.
Before and during World War II, several different authorities such as the Ministry of Finance and the Imperial Japanese National Bank issued banknotes in yen. It is also interesting to note that several countries comprising The Allied forces also issued some Japanese banknotes shortly after the war. Since then however, the Bank of Japan has become the only authority with permission to issue banknotes. Five series of Yen have been issued since World War II. The current series, Series E, contains notes condidting of ¥1000, ¥5000, and ¥10,000 values.
Forex--demo --account --
Because Forex is not an aided trading where traders can get forecast and opinions from all kinds sources as comparison, anyone who want to jump in the Forex bandwagon must first learn to use the trading softwares and reading trends on their own. Unfortunately, many people either dive in blindly or trade paper trading in Forex demo account for real transactions before its time.
According to Jay Norris, head of Brewerfx.com and Forex expert, in forexfactory.com, "Two things I hear a lot in this business:
#1) I wish I would have started out demo trading.
#2) I wish I would have stayed in my demo account longer."
Obviously, someone in the first scenario can avoid paying the hefty 'tuition fee' if one choose to learn the ropes in a Forex demo account. On the other hand, the second situation prove that even when one is well-versed in Forex, it always pays to test out trading theories and strategies for errors using a Forex demo account before graduating to trading live.
Now that a Forex guru has forewarned you on these two common Forex mistakes, which ultimately only point to one thing really, you really ought to do the right thing and sign up for a Forex demo account. Virtually every established broker extends a free Forex software to prospective clients for a typical 30 days trial period before they are given the option to upgrade to a live trading account. Along with the free software is the demo credit that enable you to trade following live analysis as in any real trading and learn without risking your money.
A Forex demo account is the only way one get real, 'in the trench' battle experience without getting burned. You start by getting familiarized with the features and interface on the forex platform, and this can vary from one software utility to another. Next, you'll be asking for quotes and selling based on market fluctuation and trends with information that is updated as it happens. In quoting from inecobank.am, "It's a good idea to place at least 20 demo trades on each platform before trading actual money, just so you can master the specifics of order entry on each platform."
However, another authority on Forex trading, John Callingham observed on www.tradelikethepros.com that "...many have criticized the lack of realism with the use of paper credits...", implying demo traders to be treating their paper trades like a game or even gambling, instead of placing them after careful study of data such as in an actual trade. This inevitably happen in a Forex demo account as they can never feel the loss, even when big amounts are involved since it's not real, and it's not theirs. To overcome this, one must treat a demo account like a live account and bid amounts like they would likely bid in reality.
The fact that forex is a lucrative channel of investment that's active 24 hours a day for 365 days in a year has attracted many investors, yet more often than not, losses can happen to those who rush in. While there are no guarantee, perfecting your skills and generating constant profit from a Forex demo account before entering the live arena is crucial to one's Forex success. Although one may not warrant another, the latter is never possible without the former.
brokerage company
Brokerage houses are also known as brokerage firms. These are basically legal and licensed companies which have the authority to sell and purchase securities and stocks. These act as intermediaries in between the sellers and the buyers. The demands of the clients with respect to the stocks and their respective investment are carried on by the brokers employed by the brokerage houses.
The services of the brokers are conferred on the basis of commissions. Different brokerage firms have different commission types and amounts. The services which are offered by a particular firm are dependent on the concept of price per trade. For example, any brokerage firm which might be charging lesser fees would turn out to be slow in the execution of services when compared with any higher charging firm. In the same manner, the firms which charge higher have more personalized services.
Some of the other fees which are included in the commissions are as follows
- Closing of account
- Transferring assets
- Wiring money
Some of the firms also charge the fees when the accounts are inactive. They also demand the IRA custodian fees payment. Along with it, the annual service fees are also coupled. Explaining the functioning of OTC stocks, Jeffery B.Little in his book "Understanding Wall street" explained that the client needs to pay for the up and down in the market.
Several different types of investment products are provided by the brokerage firms. Some of them prefers specialization in only few products to emancipate their efficiency. The most common ones are
- Corporate bonds
- Government bonds
- Mutual funds
- Stocks
- Options
- OTC bulletin stocks
There are several methods of trading available and they depend on the brokerage firms' convenience. Some of the simpler methods are telephones and internet.
The online brokers deal with online investments in both forex trading and stock exchanges. Some of the firms which have the facilities of online brokers are
- Schwab
- Fidelity
- eTrade
- Ameritrade
- Financial
The online sites of the brokerage firms have the following incorporations like
- Stock quotes
- Trade information
- Historical performance of different stocks
- History of the companies
- Financial status of different companies
The banking services are also provided by the brokerage firms. Some of the services are
- Cheque writing to ATM card and visas
- Money market sweeps
The rate of interest of money market account is comparatively higher in the brokerage firms.
Apart from these services, some of the brokerage houses also provide with market research and other investment strategies.
Amine Bouchentouf, in the book "High powered investing, all in one dummies" states the given ways on which the broker should be selected.
1. Reasonable prices: each brokerage house has its own pricing criteria. Thus one should always compare the prices before selecting the right firm. The pricing is normally based on the money on account, trades done per quarter, number of shares traded etc.
2. Good service: the firms should not put you on call waiting and voice mail.
3. Their website should be informative and user friendly.
4. Account opening incentives should be provided.
But unfortunately the popularity of the forex markets has resulted into higher forex scams. Its sad to witness one's entire hard earned money gets wiped out due to the busting of the brokerage firms. So, its very important for the forex investors to be more careful and make flawless selection of the brokerage firms on the basis of authenticity and reliability so that ultimate financial freedom can be enjoyed.
Forex Incidents
Forex hedging has emerged as one of the colloquial rescuing strategies for forex investors, individual investors, portfolio managers and corporations for protecting capitals. It is simply the purchase of insurance policy with respect to the currency position.
- The Canadian dollar faces a heavy fall against the US dollar since March 2007 due to the drastic decreases in the cost of crude oil.
- Even the value of Indian Rupees faces a heavy cut after huge capital was pulled way from the market by the foreign investors due to the global financial crunch.
- In spite of the recent highs attained by the Japanese yen, it falls against other currencies. This was basically caused due to the massive cutting of the rates.
Thus, hedging has emerged as the urgent need for forex traders, with such rampant rises and falls in forex industry.
A derivative, a reliable investment instrument, provides deeper insight to the forex traders regarding the capacity of the backup plans.
The two major kinds of derivatives used in forex hedging are:
- Futures
- Options
1. Futures contract is one of the derivatives used by the forex traders for hedging. This follows the exchange agreement in which currencies are exchanged on a particular day, depending solely on the last second value of the closing date just like stocks, the currency futures are thereby sold in any market.
Example: If a forex trader chooses to use dollars for the respective longer position of euros in the current market (say 1.2700). What if the price drops? He then decides to have a short position of 1.2650. He believes that this hot would compensate the loss faced by the longer position. But then, there is no guarantee that the market would witness a rise after the short has been decided by the investor. Thus, to avoid the risk, the investor should go for short(USD/CHF) and long trading with EUR/USD. This creates the currency pairing of EUR/CHF with the 2 different pairs.
2. Internationally dealt businesses employ the other form of forex hedging.
For example, any company with higher number of customers in Europe will definitely be troubled if euro weakens. Obviously, then the earlier conversion rate of euros to dollars wont be applicable. But then it adopts a longer position in rates of dollars, when with respect to euros, it might recoup all the losses. In case, the fall in the rates of dollars is considered, the increased value of euros would cause increase in the profits. Thus, any kind of threat which the company might have faced gets neutralized.
At the same time, it's clever to stick to long for a particular currency pair, offering higher interests. After it, the pair which does not demand interest can be kept for short. Thus, creation of hedge in between the two currencies can be done through options.
Let's imagine, the investor takes the long at 116.00 of USD/JPY. Then, a further long for a put option of strike price is taken at 115.50. For break even, the price needs to go at least 20 pips. At the same time, if the price does not sink lesser than the 115.50, option cost would be lost. Put options would turn quite worthy enough the price goes down than 114. So subtracting the profit on options and loss on position, the investor faces a only loss of 70 pips. Thus, he is hedged, saving himself from stupendous loss.
Though hedging might sound as fool proof, it does not reduce the concept of risk return takeoff. Thus, hedging is not utilized for making money but to lessen the potential losses which might be caused. Thus, it should be adopted with concern.
Friday, April 3, 2009
home business opportunities
Forex trading is nowadays a home business opportunities. Anyone with an internet connexion can make money online trading the forex market. Well that's not completely true. You need an internet connexion, some dollars (few hundreds to start), and some trader skills.
So if you don't want to learn the forex basics and how to manage the risks, you shouldn't even think of trading currecies yourself. Of course you can practice. Almost all of the Forex brokers online will allow you to open a demo account, or practice account. You will get something like $10,000 or more and see how you are doing.
Demo accounts is the first account you should register if you're new to forex trading. It's risk-free. You're trading the real-time forex but the money is not real. You may practice for three or six monthes, maybe a year before trading a "live" account. Of course you can buy a book, teaching you some techniques. You should also look for forex tutorials on the internet. You will find really good informations, just use Google.
If you have enough money you can also invest open a forex managed account. This kind of account is managed by a professional trader. Lot of brokers now offer this feature. You don't need any particular skill since you don't trade yourself. The broker will take a percentage of your net profit. I have personnally noted that a 20% is generally taken by the broker. You may think that this percentage is high, but you are not taking any risk. You are not spending hours in front of the charts waiting for the biggest opportunity of the day.
Automated forex trading accounts. I was interested at a moment. I never really tried this kind of accounts. Well actually, this option can be offered in two ways. You download a software that analyses the market, then trades when it detects good opportunities. Again, you don't have anything to do, except setting it up with your own parameters. If you decide to try this, set the software to trade your practice account first.
The second way in automated forex trading accounts doesn't involve you to download a software. All you have to do is to transfer your funds to the broker. The broker then uses his own autotrading software. We can suppose that their software will trade with trading signals, signals sent by another software...
Trading signals are very valuable. If you decide to trade the forex, signals can really help you. Subscription for trading signals can be from $100 to $600 depending of the subscription lenght, and the broker or signals provider. Signals tell you he exact entry and exit points. You know which pair to trade, when to trade, and the estimated profit.
Signals are a great resource for every trader. May be you can see how much profit you make from them.
Forex trading is a real money making opportunity. But it's not a game. Risk management and emotions control are the main skills of a trader. If you decide to try forex trading, you must read and practice a lot. Don't invest what you can't afford to lose. If you or your family need money, don't risk it.
currency trading success tips
1. You are responsible
You need to take responsibility for your actions only you can give yourself success. Don't follow anyone else blindly.
2. Desire to Succeed
All the great traders have a burning desire to succeed and learn the right way to succeed and this involves getting a trading edge.
3. Work Smart - The amount of effort you put into currency trading has no bearing on how successful you will be and you can easily do all your trading in under an hour a day which leads onto:
4. Simple Systems are best
Many traders think the more complex a system is the more better it will perform, but the opposite is true.
Most of the top trading systems are simple. Why?
Because they are more robust in the fact of brutal market conditions.
5. Don't day trade
This is the biggest myth of currency trading. You will lose the odds are against you read our other articles and you will see why this is a guaranteed way to lose.
6. Don't follow the herd
Most of your most successful trades will be uncomfortable as the majority will not agree with. Keep in mind that's no bad thing as most currency traders lose
7. Discipline
Many traders have good trading methods but they lack discipline to apply the method this is normally because they are following someone else's system without having confidence in it. Which leads on to, you guessed..
8. Confidence
You must have confidence in your ability to make money longer term from the method you are using which means knowing exactly how and why it works.
9. Patience
Many traders think they always need to be in the market and want the excitement but there is no correlation between this and making money.
The big trends only come a few times a year so be patient wait for them and hold them
10. Risk Management
All traders know that money management is one of the keys to trading so you need a money management system that allows you to maximize risk and reward.
11. Be Realistic
Don't be in to much of a hurry to make money or you will lose it quickly be patent and realistic in your trading aims.
12. What's your edge?
By a trading edge we mean, what makes your system likely to succeed when 90% of traders fail to make money?
If you don't know what your edge is you don't have one and will lose.
Currency trading success looks easy to achieve but it is not. Of course you can succeed but you need to approach it in the right way, with the right method and have the confidence and discipline to succeed.
basics of forex trend
Forex trend following can be very lucrative as for the technical trader forex markets offer some great long term trends and profits for those who trend follow correctly.Lets look at the basics of forex trend following.
Trend following means longer term
Before we start we are going to look at long term trend following and this means catching trends that last for weeks or months.
Were not interested in day trading here, the odds are against you doing this and short term moves are random so don't try it - you will lose your money.
Spotting the trend
For forex trend following start with the weekly chart this will give you the big picture and you can spot trends that last for weeks months or years here.
Next move to the daily chart and try and spot support and resistance that is on both charts. The weekly chart gives you the big picture and the daily gives you entry levels.
Methods for trend following
Perhaps the best place to start is with a breakout method.
It's a fact that most major currency moves start from new highs and the advantage of a breakout method is that you can trade with confirmation of a trend in motion.
We have written about breakout methods in other articles simply look them up, there is not enough room here to explain in detail.
You can use just charts but we like to use a couple of timing indicators to judge the strength of the breakout and for this look no further than the stochastic indicator which is the ultimate timing indicator in our view.
It's available free on internet charting services and is easy to understand and apply.
Be very selective
Don't trade just for the sake of trading.
In forex trend following the big moves only come a few times a year so wait for them.
It's these trades that make the big profits, so be patient.
Money management.
A breakout method makes money management fairly easy.
Breakouts are either false and fail quickly, or you get a strong trending move.
When setting stops in long term trend following, don't trail it to quickly to lock in profits.
Your looking to hold these trades for weeks or even months, so be prepared to suffer the emotions of seeing large dips in open equity and keep the bigger picture in mind.
If you are new to trading long term forex trend following is a good way to start.
Global Forex Trading
Global Forex Trading (GFT) is a leading online currency dealer, helping individuals access the marketplace that was previously available only to large banks and professionals. The company differentiates itself in the market by developing proprietary trading software and tools for its customers.
The Challenge:
GFT needed to increase its click-through rate and brand exposure. It chose Live Search and partnered with a media specialist from Microsoft adCenter to optimize its accounts, including:
- Selection of relevant keywords
- Higher ad positioning.
- Variations of ad creative.
- Addition of contextual distribution.
- Expansion into Canadian and UK markets.
The Results:
GFT’s campaign optimization techniques resulted in:
- Conversions increasing over 300 percent.
- CTR more than doubling after optimization.
- Impressions increasing by 250 percent.
Start Today
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Thursday, April 2, 2009
options and Forex
Futures, options and Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, options and Forex may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The high degree of leverage available in Forex trading means that small price movements will have a much greater impact on account performance and can result in large losses as well as gains. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Investment Group, LLC, or its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. All securities are offered through Brewer Financial Services, LLC, member FINRA/SIPC.
FOCUS TOWARD G-20
The U.S. Dollar finished the day lower against most majors with the exception of the Japanese Yen. Renewed interest in higher-yielding currencies following Monday’s hard break in the equity markets supplied the bearishness. Traders seemed a little more optimistic today about the global economy.
Yesterday’s rally in the Dollar was triggered when the U.S. rejected financial aid pleas by General Motors and Chrysler. While the decision may have seemed harsh, traders were a little more optimistic on Tuesday that a viable plan could be worked out even if it involves bankruptcy.
Additional optimism and confidence was provided by the news that the World Bank will create a new $50 billion fund to fight the decline in global trade and to encourage trading between nations.
The Euro traded higher in light trading and short-covering following Monday’s hard break. Renewed trader demand for more risk encouraged traders to lighten up on the short-side on perceptions that Monday’s reaction to the U.S. government’s rejection of plans to bailout GM and Chrysler may have been overdone to the downside.
News that the World Bank will create a fund to stimulate global trade provided additional support for the Euro because it took some of the heat off the European Central Bank to provide additional aid to weaker European Union nations.
Gains were limited as traders were hesitant to push this market much higher ahead of the European Central Bank’s expected 50 basis point interest rate cut on April 2.
British Pounds closed up on short-covering in light trading. The rally was definitely not being driven by the U.K. economy as it is still showing signs of a widening and deepening recession. A falling housing market, declining employment and the lack of consumer spending are three reasons why the British economy is not even close to a recovery.
Tuesday’s rally was triggered by increased demand for higher risk and optimism over a new plan by the World Bank to provide stimulus to the global economy. Gains were limited by the possibility of new quantitative easing plans by the Bank of England.
Stronger equity markets and firmer commodity markets supported the Canadian Dollar on Tuesday. News that the GDP contracted in the fourth quarter in 2008 and is expected to worsen even further in the first quarter of 2009 encouraged some selling. Industrial prices rose for the first time since August 2008 mainly on the strong surge in metals and energy markets. These reports contradicted each other leading to a flat trade.
Concerns are building that the Bank of Canada is poised to make another interest rate cut later in the month. This may limit gains to the upside as traders will be reluctant to chase any rallies. This should be the last cut of the year and will likely lead to quantitative easing in a few months. Look for the BoC to make a statement later in the month outlining its plan.
The Japanese Yen traded weaker all day as traders reacted negatively to a bearish employment report. Investors also reacted negatively to the news that the Japanese government is proposing a third economic stimulus plan in an attempt to revive its struggling economy.
Predictions are for this new $600 billion plus stimulus package to create new demand for Japanese goods as well as about 2 million new jobs. Traders sold the Yen as this new plan amounts to flooding the market with cash to jump start the economy.
The Bank of Japan and the Japanese government want to see a weaker Yen to encourage demand for Japanese exports. Choosing to provide stimulus is not what the market expected. Most traders are looking for something more dramatic such as quantitative easing or intervention. Stimulus takes too long to move through the economy. Easing and intervention would have had a more dramatic effect on the currency and would have sent a stronger message to the global community.
The new fiscal year begins in Japan on April 1. Don’t be surprised if the Yen gets hit hard as traders are expected to begin chasing higher yields after selling Yen.
The weaker Dollar helped encourage short-covering in the Swiss Franc. The dominant trend remains down however. This negative tone was set by the Swiss National Bank weeks ago when it told market participants that it favors a weaker currency. Traders are likely to be looking for rallies to sell as the odds seem to favor more downside movement over the short-run.
The AUD USD traded better on Monday in light trading. Although the yield is attractive to investors, some traders feel the recent rally is overdone and vulnerable to a correction. The main focus should be on reviving the economy. Look for the Aussie to continue to weaken over the near-term especially if the stock market falls apart. Poor economic reports may cause the Reserve Bank of Australia to schedule quantitative easing or an intervention in an effort to jumpstart the economy.
The New Zealand Dollar traded higher most of the day but collapsed into the close of the New York session. Talk is circulating that the Reserve Bank of New Zealand is poised to intervene soon. This talk stopped the rally in its tracks. The economy is the wildcard for this market. Production is down, unemployment up and the housing sector is worsening. This means the RBNZ is going to have to act aggressively to prevent a freefall in the economy.
DISCLAIMER: Futures, options and Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, options and Forex may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The high degree of leverage available in Forex trading means that small price movements will have a much greater impact on account performance and can result in large losses as well as gains. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Investment Group, LLC, or its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
Yesterday’s rally in the Dollar was triggered when the U.S. rejected financial aid pleas by General Motors and Chrysler. While the decision may have seemed harsh, traders were a little more optimistic on Tuesday that a viable plan could be worked out even if it involves bankruptcy.
Additional optimism and confidence was provided by the news that the World Bank will create a new $50 billion fund to fight the decline in global trade and to encourage trading between nations.
The Euro traded higher in light trading and short-covering following Monday’s hard break. Renewed trader demand for more risk encouraged traders to lighten up on the short-side on perceptions that Monday’s reaction to the U.S. government’s rejection of plans to bailout GM and Chrysler may have been overdone to the downside.
News that the World Bank will create a fund to stimulate global trade provided additional support for the Euro because it took some of the heat off the European Central Bank to provide additional aid to weaker European Union nations.
Gains were limited as traders were hesitant to push this market much higher ahead of the European Central Bank’s expected 50 basis point interest rate cut on April 2.
British Pounds closed up on short-covering in light trading. The rally was definitely not being driven by the U.K. economy as it is still showing signs of a widening and deepening recession. A falling housing market, declining employment and the lack of consumer spending are three reasons why the British economy is not even close to a recovery.
Tuesday’s rally was triggered by increased demand for higher risk and optimism over a new plan by the World Bank to provide stimulus to the global economy. Gains were limited by the possibility of new quantitative easing plans by the Bank of England.
Stronger equity markets and firmer commodity markets supported the Canadian Dollar on Tuesday. News that the GDP contracted in the fourth quarter in 2008 and is expected to worsen even further in the first quarter of 2009 encouraged some selling. Industrial prices rose for the first time since August 2008 mainly on the strong surge in metals and energy markets. These reports contradicted each other leading to a flat trade.
Concerns are building that the Bank of Canada is poised to make another interest rate cut later in the month. This may limit gains to the upside as traders will be reluctant to chase any rallies. This should be the last cut of the year and will likely lead to quantitative easing in a few months. Look for the BoC to make a statement later in the month outlining its plan.
The Japanese Yen traded weaker all day as traders reacted negatively to a bearish employment report. Investors also reacted negatively to the news that the Japanese government is proposing a third economic stimulus plan in an attempt to revive its struggling economy.
Predictions are for this new $600 billion plus stimulus package to create new demand for Japanese goods as well as about 2 million new jobs. Traders sold the Yen as this new plan amounts to flooding the market with cash to jump start the economy.
The Bank of Japan and the Japanese government want to see a weaker Yen to encourage demand for Japanese exports. Choosing to provide stimulus is not what the market expected. Most traders are looking for something more dramatic such as quantitative easing or intervention. Stimulus takes too long to move through the economy. Easing and intervention would have had a more dramatic effect on the currency and would have sent a stronger message to the global community.
The new fiscal year begins in Japan on April 1. Don’t be surprised if the Yen gets hit hard as traders are expected to begin chasing higher yields after selling Yen.
The weaker Dollar helped encourage short-covering in the Swiss Franc. The dominant trend remains down however. This negative tone was set by the Swiss National Bank weeks ago when it told market participants that it favors a weaker currency. Traders are likely to be looking for rallies to sell as the odds seem to favor more downside movement over the short-run.
The AUD USD traded better on Monday in light trading. Although the yield is attractive to investors, some traders feel the recent rally is overdone and vulnerable to a correction. The main focus should be on reviving the economy. Look for the Aussie to continue to weaken over the near-term especially if the stock market falls apart. Poor economic reports may cause the Reserve Bank of Australia to schedule quantitative easing or an intervention in an effort to jumpstart the economy.
The New Zealand Dollar traded higher most of the day but collapsed into the close of the New York session. Talk is circulating that the Reserve Bank of New Zealand is poised to intervene soon. This talk stopped the rally in its tracks. The economy is the wildcard for this market. Production is down, unemployment up and the housing sector is worsening. This means the RBNZ is going to have to act aggressively to prevent a freefall in the economy.
DISCLAIMER: Futures, options and Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, options and Forex may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The high degree of leverage available in Forex trading means that small price movements will have a much greater impact on account performance and can result in large losses as well as gains. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Investment Group, LLC, or its subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions or technological issues may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
dollar down vs euro
Yen down sharply as Japan fiscal year comes to an end
* Euro gains vs dollar; European stocks rise 2 pct
* Focus on G20, ECB meeting; euro gains seen limited (Recasts, updates prices, adds quotes, data; changes byline, dateline, previous London)
By Steven C. Johnson
NEW YORK, March 31 (Reuters) - The yen fell on Tuesday as the end of Japan's fiscal year and more poor economic data spurred investors to deploy funds abroad while stocks rose, helping the euro gain on the dollar ahead of a G20 meeting.
The yen, which rose a day earlier as risk aversion and year-end pressure prompted Japanese investors to bring money home, reversed course on Tuesday as traders closed the books on the fiscal year. A spike in Japanese unemployment also put pressure on the currency.
The dollar was last trading up 1.2 percent at 98.41 yen and was on track for an 8.7 percent gain in the first three months of the year, the yen's worst quarter since 2001.
The world financial crisis has devastated Japanese exports and led to a sharp contraction in the fourth quarter, leaving Prime Minister Taro Aso's government vulnerable to collapse.
"Fiscal year-end had been holding people back from selling yen. But the fundamentals are absolutely horrendous, there's policy gridlock, and this lets Japanese investors continue to invest money abroad in droves," said Samarjit Shankar, global FX strategy director at The Bank of New York-Mellon in Boston.
* Euro gains vs dollar; European stocks rise 2 pct
* Focus on G20, ECB meeting; euro gains seen limited (Recasts, updates prices, adds quotes, data; changes byline, dateline, previous London)
By Steven C. Johnson
NEW YORK, March 31 (Reuters) - The yen fell on Tuesday as the end of Japan's fiscal year and more poor economic data spurred investors to deploy funds abroad while stocks rose, helping the euro gain on the dollar ahead of a G20 meeting.
The yen, which rose a day earlier as risk aversion and year-end pressure prompted Japanese investors to bring money home, reversed course on Tuesday as traders closed the books on the fiscal year. A spike in Japanese unemployment also put pressure on the currency.
The dollar was last trading up 1.2 percent at 98.41 yen
The world financial crisis has devastated Japanese exports and led to a sharp contraction in the fourth quarter, leaving Prime Minister Taro Aso's government vulnerable to collapse.
"Fiscal year-end had been holding people back from selling yen. But the fundamentals are absolutely horrendous, there's policy gridlock, and this lets Japanese investors continue to invest money abroad in droves," said Samarjit Shankar, global FX strategy director at The Bank of New York-Mellon in Boston.
EURO USD Forex Trading Tips
Rate holds point of indecision so far today; late break fails to attract more bids but still solid above the 100 day MA. Traders note strong offers above the 1.3330 area but bids are absorbing those for now with a foothold over the 1.3300 handle to signal a short-squeeze.
Rate has two-way action suggesting a try for stops above. Rate likely has stops building in both directions but shorts have taken minor control of the market as the rate gives back gains over the 1.3400 area last week late. Action remains two-way; any move lower is likely supported on dips.
Overhead resistance of 1.3330/50 area now back in play; expect sellers in that area on a rally. Possibly more official and semi-official bids overnight with traders noting Middle-eastern names on the bid. Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view.
EUR/USD Daily
Resistance 3: 1.3400/10
Resistance 2: 1.3380
Resistance 1: 1.3330
Latest New York: 1.3240
Support 1: 1.3150
Support 2: 1.3100
Support 3: 1.3080
Data due Thursday: All times EASTERN (-5 GMT)
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
10:00am EUR ECB President Trichet Speaks.
Rate has two-way action suggesting a try for stops above. Rate likely has stops building in both directions but shorts have taken minor control of the market as the rate gives back gains over the 1.3400 area last week late. Action remains two-way; any move lower is likely supported on dips.
Overhead resistance of 1.3330/50 area now back in play; expect sellers in that area on a rally. Possibly more official and semi-official bids overnight with traders noting Middle-eastern names on the bid. Long-term bulls are likely still in control of the market and this significant pullback is a buying opportunity in my view.
EUR/USD Daily
Resistance 3: 1.3400/10
Resistance 2: 1.3380
Resistance 1: 1.3330
Latest New York: 1.3240
Support 1: 1.3150
Support 2: 1.3100
Support 3: 1.3080
Data due Thursday: All times EASTERN (-5 GMT)
7:45am EUR Minimum Bid Rate
8:30am EUR ECB Press Conference
10:00am EUR ECB President Trichet Speaks.
AS 11 till 2011
IApr 1 India Inc can now breath a sigh of relief as the government has deferred the implementation of mandatory provisioning by firms for forex losses and gains on the basis of market value of their financial assets till 2011, when the country has to converge with global reporting norms.
"We have issued a notification and it is now optional for companies to show forex losses as per Schedule IV or AS 11,"a senior MCA official said. Amid India Inc lobbying hard for relaxing implementation of the accounting standard 11, a government advisory panel had suggested that the AS should not be enforced till 2011, which the government has agreed to. The National Advisory Committee on Accounting Standards had proposed that AS 11 should not be enforced till 2011 due to volatile forex. However, the Institute of Chartered Accountants of India had opposed the move and said the regulations should not be changed to suit the needs of a few companies. According to the AS 11, firms are required to make mandatory mark-to-market provisioning in the profit and loss account for foreign exchange related gains and losses.
"We have issued a notification and it is now optional for companies to show forex losses as per Schedule IV or AS 11,"a senior MCA official said. Amid India Inc lobbying hard for relaxing implementation of the accounting standard 11, a government advisory panel had suggested that the AS should not be enforced till 2011, which the government has agreed to. The National Advisory Committee on Accounting Standards had proposed that AS 11 should not be enforced till 2011 due to volatile forex. However, the Institute of Chartered Accountants of India had opposed the move and said the regulations should not be changed to suit the needs of a few companies. According to the AS 11, firms are required to make mandatory mark-to-market provisioning in the profit and loss account for foreign exchange related gains and losses.
AS-11 dilution
We reported this last week on the day when the NACAS meeting took place, it’s the national committee that sets accounting standards and its setup under the provisions under the company law and reports to the ministry of corporate affairs. NACAS at that time had informally taken a decision to amend AS-11 but that informal decision had to be endorsed by the ministry and the ministry has accepted apparently those recommendations made by NACAS. This is still source based and that notification still has to be made public because I am told it was issued yesterday, this is very good news for corporate India.
I am sure we are familiar with the kind of currency volatility India Inc has seen in the last 18 months from almost Rs 45 to a dollar to Rs 38 or so and then back again to Rs 50-52 have played on corporate balance sheets and profitability. It’s been very difficult for corporate
There are two very key amendments, exactly the same that we reported as recommended by NACAS this last week and they are that companies will be allowed to capitalize forex losses on capital assets instead of charging them to revenue and thereby an immediate impact on the P&L and companies can create a special reserve for a transitory account to park MTM forex losses and amortize them upto 2011 March 31st and the day after that we converge with IFRS and so it has to be that day as the last day.
This will come as very good news for all Indian companies many of whom were facing very severe losses on account of forex volatility and it comes just in time just before the earnings seasons start. So, all companies can account for these amendments when they put their balance sheets and their financial earnings together. Everyone in corporate India will be happy but one constituency is going to be very unhappy that is the Institute of Chartered Accountants of India (ICAI), you will recall last week we pointed out that the president of the ICAI has opposed to any dilution of AS-11, and this is what he told us right after that meeting last week.
Forex losses may be passé as govt plans
Corporate
MCA has issued notification diluting AS-11. The notification says that forex losses on capital assets can be capitalised and Mark-to-Market (MTM) forex losses or gains can be parked in special account. Notification will be made public on Thursday.
forex losses till ’11
In a big relief to India Inc, the Government is believed to have accepted the recommendations of the National Advisory Committee on
Accounting Standard (NACAS) to defer the mandatory implementation of accounting standard 11 (AS-11) that deals with foreign exchange differences.
According to official sources, the government will shortly issue a notification, giving corporates an option to not report numbers as per AS11 that stipulates them to recognise foreign exchange losses in the profit and loss (P&L) accounts every year. "The Government has agreed with the recommendations of NACAS that suggested deferring the implementation of AS-11 to 2011," the sources said.
AS-11 deals with mark-to-market provisioning in corporate profit and loss accounts for foreign exchange-related gains and losses. Refusing to take a hit on their profits, many corporates were complying with Schedule VI of the Companies Act that allows them to forego AS11. Already reeling under recession, a majority of the firms are reluctant to show the losses originating from rupee-dollar rate fluctuations in their balance sheets as it will further damage their credibility.
Accounting Standard (NACAS) to defer the mandatory implementation of accounting standard 11 (AS-11) that deals with foreign exchange differences.
According to official sources, the government will shortly issue a notification, giving corporates an option to not report numbers as per AS11 that stipulates them to recognise foreign exchange losses in the profit and loss (P&L) accounts every year. "The Government has agreed with the recommendations of NACAS that suggested deferring the implementation of AS-11 to 2011," the sources said.
AS-11 deals with mark-to-market provisioning in corporate profit and loss accounts for foreign exchange-related gains and losses. Refusing to take a hit on their profits, many corporates were complying with Schedule VI of the Companies Act that allows them to forego AS11. Already reeling under recession, a majority of the firms are reluctant to show the losses originating from rupee-dollar rate fluctuations in their balance sheets as it will further damage their credibility.
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