Forex& History Adventure Of Pakistan

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samiurrehman41@yahoo.com (Sami Ur Rehman) — Sun, 4 Oct 2009 03:39:00 -0700

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Forex Futures

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:52:00 -0700

What Does Forex Futures Mean?
An exchange-traded contract to buy or sell a specified amount of a given currency at a predetermined price on a set date in the future. All forex futures are written with a specific termination date, at which point delivery of the currency must occur unless an offsetting trade is made on the initial position.
Investopedia explains Forex Futures
Forex futures serve two primary purposes as financial instruments. First, they can be used by companies or sole proprietors to remove the exchange-rate risk inherent in cross-border transactions. Second, they can be used by investors to speculate and profit from currency exchange-rate fluctuations.

Forex Market Hours

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:52:00 -0700

What Does Forex Market Hours Mean?
The hours during which forex market participants are able to buy, sell, exchange and speculate on currencies. The forex market is open 24 hours a day, five days a week. International currency markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors around the world. Because this Market operates in multiple time zones, it can be accessed at almost any time.
Investopedia explains Forex Market Hours
The international currency market isn't dominated by a single market exchange but involves a global network of exchanges and brokers around the world. Forex trading hours are based on when trading is open in each participating country:

New York 8am to 5pm EST
Tokyo 7pm to 4am EST
Sydney 5pm to 2am EST
London 3am to 12 noon EST

How Long Does the Effect Last?

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:51:00 -0700

According to a study by Martin D. D. Evans and Richard K. Lyons published in the Journal of International Money and Finance (2004), the market could still be absorbing or reacting to news releases hours, if not days, after they are released. The study found that the effect on returns generally occurs in the first or second day, but the impact does seem to linger until the fourth day. The impact on order flow, on the other hand, is still very pronounced on the third day and is still observable on the fourth day.

What Are the Key Releases?

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:50:00 -0700

When trading news, you first have to know which releases are actually expected that week. There are many ways to do this, but Daily FX provides a very comprehensive calendar. Second, it is key for you to know which data is important. The Daily FX calendar bolds the important releases and also lists the "consensus" figures. Generally speaking, these are the most important economic releases for any country:
1. Interest rate decision
2. Retail sales
3. Inflation (consumer price or producer price)
4. Unemployment
5. Industrial production
6. Business sentiment surveys
7. Consumer confidence surveys
8. Trade balance
9. Manufacturing sector surveys
Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment.
The list in Figure 2 ranks the most market-moving data for the U.S. in 2007, on both a 20-minute and a daily basis. The difference in reaction is generally attributed to the depth of the data. Some releases provide barely more information than the headline number, while others provide extensive tables that can be subject to different interpretations. Keep in mind that U.S. dollar data tends to be the most important in the FX market because the dollar is involved in 90% of all currency trades

Great Advantages

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:50:00 -0700

One of the great advantages of trading currencies is that the forex market is open 24 hours a day (from 5pm EST on Sunday until 4pm EST Friday). Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which responds not only to U.S. economic news, but also to news from around the world. With at least eight major currencies available for trading at most currency brokers and more than 17 derivatives of them, there is always some piece of economic data slated for release that traders can use to inform the positions they take. Generally, no less than seven pieces of data are released daily from the eight major currencies or countries that are most closely followed. So for those who choose to trade news, there are plenty of opportunities. Here we look at which economic news releases are released when, which are most relevant to forex (FX) traders, and how traders can act on this market-moving data.

Forex Basics

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:49:00 -0700

The following is an introduction to some of the basic terms and concepts used in forex trading.
Foreign Exchange : The simultaneous buying of one currency and selling of another.
Foreign Exchange Market : An informal network of trading relationships between the world's major banks and other market participants, sometimes referred to as the 'interbank' market. The foreign exchange market has no central clearinghouse or exchange, and is considered an over-the-counter (OTC) market.
Spot Market : Market for buying and selling currencies for settlement within two business days (the value date). USD/CAD = 1 day. Most dealers will automatically roll over your open positions, allowing you to hold a position for an indefinite period of time.
Rollover : The process whereby the settlement of a transaction is rolled forward to the next value date. The cost of this process is based on the interest rate differential between two currencies.
Exchange Rate : The value of one currency expressed in terms of another. For example, if the exchange rate for EUR/USD is 1.3200, 1 Euro is worth US$1.3200.
Currency Pair : The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.
Base Currency : The first currency in the pair.
Counter Currency : The second currency in the pair. Also known as the terms currency.
ISO Currency Codes :
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
Currency Pair Terminology
EUR/USD = "Euro"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"
The following pairs might also be referred to by the following nicknames:
EUR/USD = "Fiber"
USD/JPY = "Gopher"
EUR/GBP = "Chunnel"
GBP/CHF = "Geppy"
Market Maker :A market maker makes a market for a particular financial instrument, providing liquidity and a two-way price quote. A market maker takes the opposite side of your trade.
Broker : A firm that matches buyers and sellers for a fee or a commission.
Counterparty : One of the participants in a transaction.
Sell Quote : The quote on the left is the price at which you can sell currency. (Also known as the bid price). e.g. For EUR/USD 1.3200/03, you can sell 1 Euro for US$1.3200.
Buy Quote : The quote on the right is the price at which you can buy currency. (Also known as the ask or offer price). e.g. For EUR/USD 1.3200/03, you can buy 1 Euro for US$1.3203.
Spread : The difference between the sell quote and the buy quote. If the quote for EUR/USD reads 1.3200/03, the spread is 3 pips. In order to break even, the currency must shift in your direction by an amount equal to the spread.
Pip : Price Interest Point. The smallest price increment a currency can make. Also known as points. e.g. 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.
Pip Value : The value of a pip. 1 pip = $10 for EUR/USD, GBP/USD, AUD/USD & NZD/USD with 100k lots, or $1 per pip with 10k lots. To calculate the pip value of other currency pairs, use a pip value calculator .
Tick : Minimum change in price
Lot : The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base currency, or 10,000 units for a mini.
Standard Account : Trading with standard lot sizes
Mini Account : Trading with mini lot sizes
Margin : The deposit required to open a position. A 1% margin requirement allows you to open a $100,000 position with a $1,000 deposit.
Leverage : The amount of times the value of your transaction exceeds your margin. e.g. 100:1 leverage implies a 1% margin.
Long Position : A position whereby the trader profits from an increase in price. (Buy low, sell high)
Short Position : A position whereby the trader profits from a decrease in price. (Sell high, buy low)
Market Order : An order at the current market price
Entry Order : An order that is executed when the price touches a pre-specified level
Limit Entry Order : An order to buy below the market or sell above the market at a pre-specified level, believing that the price will reverse direction from that point.
Stop-Entry Order : An order to buy above the market or sell below the market at a pre-specified level, believing that the price will continue in the same direction from that point.
Limit Order :An order to take profits at a pre-specified level
Stop-Loss Order : An order to limit losses at a pre-specified level
OCO Order : One Cancels Other. Two orders whereby if one is executed, the other is cancelled.
Manual Execution : The order is executed with human intervention.
Automatic Execution : The order is executed automatically by computer without human intervention or involvement.
Slippage : The difference in pips between the order price and the price the order is filled at.
Example Transaction : Assume you have a trading account of $20,000 and you have chosen to use 100:1 leverage on your account. The current quote for EUR/USD is 1.3225/28. You place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to strengthen against the dollar. At the same time you place a stop-loss order at 1.3203, and a limit order at 1.3328.The value of this trade is $132,280 (100,000 * 1.3228) but because you are using 100:1 leverage, you only need to deposit 1% of the total, which is $1322.80 ($132,280 * 0.01).The Euro strengthens against the dollar as expected, rising to 1.3328 where your limit order is reached. Your position is closed. You have made 100 pips.Your total profit for this trade is $1,000 (100,000 * (1.3328 - 1.3228)), and the return on your investment is 75.6% ($1000/$1322.80).

Forex stock global market

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:48:00 -0700

Stock market - stock market is the market, where buyer and seller of any company assemble stocks from the market and they trade their stocks in the premises of company. It means, exchanging the securities among the seller or buyer. AMEX (American Stock Exchange) is the place where sellers or buyers do stock trading

Forex advice and advisory services

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:47:00 -0700

Forex market trading is a difficult task and therefore, the beginners need proper advice and helps for reliable sources. The Forex advice and the advisory services are the basic advice providers who help the beginners in the forex field. The forex advisory services are also referred as the signal providers as they offer valuable data to the trader consumers

Interbank forex

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:46:00 -0700

Interbank forex - Forex is one of the largest markets for trading, where interbank forex is decentralized market. In decentralized market, no records are kept like centralized market. An individual and company keep their privacy with them self. Broker and dealer are the pillars of market; they do their trading like buying and selling securities and currency with privacy.

Forex factory

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:45:00 -0700

Forex Factory is used to prepare your trading session. An individual or organization can do preparation of next day for trading. It provides the message board and news release for other members. You can also get technical analysis of the market from forex factory. There are three major services are provided by forex factory.
1. Calander,
2. News,
3. Forum.

Forex made easy

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:45:00 -0700

FOREX MADE EASY- is a simple trading mechanism that anyone can implement. Available in the form of books and software, it is a trend recognition method for the (spot) Forex market helping everyone from seasoned traders to amateurs in spotting the everyday buying and selling pressure. The software uses the red light/green light trend to analyze the market drifts and helps in finding the entry and exit points for the currency pairs.

Forex interest

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:44:00 -0700

Forex interest - crediting and debiting is done on a daily basis at 4 pm EST with interest being paid on the account balance held at that time. If the countries currency that a trader buys has a greater interest than that of the pair then Forex rollover interest is credited to the traders account, and vice versa. Rollover fee is deducted from the traders account, if the trader sells the currency having a higher interest rate and vice versa. The effect of rollover interest is magnified with marginal trading since the ineterst is calculated with respect to the trader's full position, not to his traded amount.

Timeline of Foreign Exchange

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:43:00 -0700

In recent years, as commercial companies have been faced with a currency environment that has been more volatile, financial institutions and investors have found a new area to focus on. The foreign exchange markets have become much larger than any other market for investment that exists. Every day, it is estimated that over 1,200 billion USD is traded. A total that exceeds the world wide total of the bond market and the stock market combined
1) 1944 - Bretton Woods Accord is established after World War II to help stabilize the global economy.
2) 1971 - Smithsonian Agreement is established which provided greater fluctuation bands for currencies.
3) 1972 - In an effort to move away from the dependency the European community had acquired on the U.S. dollar, the European Joint Float was established.
4) 1973 - The official switch to a free floating currency system was made after both the European Joint Float and the Smithsonian Agreement failed.
5) 1978 - In a joint effort to help other countries gain independence from the U.S. dollar, the European Monetary System was introduced to other countries.
6) 1978 -The IMF officially mandated the free-floating currency system.
7) 1993 -A world wide free-floating currency system is established when the European Monetary System failed.

Free-floating currencies and fixed exchange rates

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:43:00 -0700

When major global currencies such as the U.S. dollar are referred to as free floating, it means that their values are independent of the values of other currencies. Value is determined by the supply and demand of the currency and there are no set standards regarding intervention that need to be observed. Free-floating currencies can be traded by any one and are the most popular choice of trading.Along with computers and technology, capital movements across borders accelerated in the 1980's. This advent extended the market though the United States, Asian and European time zones. New technology made it possible for private investors to enter into a market that had once been dominated by larger institutions and banks. During the 1980's, foreign exchange transactions were around $70 million per day, within just two decades; they had soared to over $1.5 trillion each day and had a speculative volume of almost 95 percent.Throughout the preceding decades, foreign exchange trading continued to develop into the largest global market in the world. Most countries have removed all restriction on capital flows and have left the market forces free to adjust the foreign exchange rates based up their individual perceived values. But, the practice of using a system of fixed rate exchanges has by no means been completely done away with.A brand new system of fixed exchange rates was introduced by the EEC in 1979, the European Monetary System. But, this attempt to fix the monetary exchange rates was almost done away with through 1992 and 1993, when economic pressures resulted in devaluations of several weak European currencies. Europe continued to work toward a stable currency by not only fixing them, but by replacing many of their currencies with the Euro beginning in 2001.The project had become fairly advanced by 1998 and fixed levels of exchange and the final structure were decided. However, a three year period followed in which devaluation candidates could literally be attacked with little risk before the final introduction of the Euro came in this millennium.The events that occurred in South East Asia toward the end of 1997 increased the relevance of the lack of sustainability that comes with fixed foreign exchange rates. One currency after another became devalued again the U.S. dollar, which left other fixed exchange rates appearing to be very vulnerable, particularly in South America

The Bretton Woods Accord

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:42:00 -0700

The Bretton Woods Accord was a major transformation in the way money was exchanged around the world. It began near the end of World War II and was the result of an agreement between France, Great Britain and the United States. The meeting was held at the United Nations' Monetary and Financial Conference with the goal of designing a new economic order.This location was designated as the meeting place because at the time, the U.S. was the only country in which a war wasn't being fought. And, many European countries had been nearly destroyed by war. Before World War II, the major currency by which most of the world's currencies were compared was Great Britain's British Pound.When the Nazi's started their campaign against Britain, this practice changed due to their major effort in counterfeiting the currency. The stock market crash in 1929 had resulted in the U.S. dollar having very little value. However, World War II stabilized its value and helped it become the monetary standard. The main purpose of the Bretton Woods Accord was to establish a stable economic environment around the globe so countries could re-establish themselves.The world's major currencies became pegged by the U.S. dollar and could only fluctuate as much as one percent in value either lower or higher. Anytime that the exchange rate of a particular currency would approach the allowed fluctuation, intervention from the countries central bank would bring the rate back into the standard range. By associating the U.S. dollar with gold, which at the time was $35 per ounce, the Forex situation was also stabilized.At the Bretton Woods conference, John Maynard Keynes had suggested a new world reserve currency would be much better than a system that was built upon the U.S. dollar. But, this suggestion was quickly rejected. The exchange rates finally settled upon helped to reinstate the standard of gold by setting the dollar at the current per ounce price and then setting the other major currencies to the dollar. This system was meant to be a permanent standard for exchanging currencies.National economies began to move in different directions during the 1960's, placing and increasing amount of pressure on the Bretton Woods system. Through a series of adjustments to the system, it remained in effect for some time. However, in August 1971 U.S. President Nixon suspended the conversion of gold and the system collapsed. At a time when pressure was also increasing on trade deficits and the U.S. budget, the dollar became unsuitable as the only international currency.

Trending nature of currencies.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:41:00 -0700

Major currencies are still dominated by central banks, national financial policies and macro trends. This means that currency traders enjoy markets that have a greater tendency to trend than most markets. I have seen some compelling data on this trending characteristic of the currency markets. (Special note – if anyone has seen recent data on the trending nature of currencies, please let me know at drbarton@iitm.com. Most of the research I have is a few years old.

Most brokers have very good trade execution software.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:41:00 -0700

There are only a handful of stock brokers that have execution platforms that offer order-cancels-order type controls and other contingent orders. I’ve looked at several forex-based platforms, and forex brokers place a premium on putting high levels of functionality into traders’ hands. This makes business sense – if you find it easier to execute your strategy, you’re likely to trade more often. This is one area where the equities world could learn a thing or two from their forex counterparts.

Profit potential in both rising and falling markets

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:40:00 -0700

In every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling FX market. The ability to sell currencies without any limitations is one distinct advantage over equity trading. It is much more difficult to establish a short position in the US equity markets, where the Uptick rule prevents investors from shorting stock unless the immediately preceding trade was equal to or lower than the price of the short sale.

Equal access to market information

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:39:00 -0700

Professional traders and analysts in the equity market have a definitive competitive advantage by virtue of that fact that they have first access to important corporate information, such as earning estimates and press releases, before it is released to the general public. In contrast, in the Forex market, pertinent information is equally accessible, ensuring that all market participants can take advantage of market-moving news as soon as it becomes available

Unregulated.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:38:00 -0700

The FOREX market is generally regarded as an unregulated market although the operations of major dealers, such as commercial banks in money centers, are regulated under the banking laws. The conduct and operation of retail FOREX brokerages are not regulated under any laws or regulations specific to the FOREX market, and in fact many of such establishments in the United States do not even report to the Internal Revenue Service (IRS). The currency futures and options that are traded on exchanges such as Chicago Mercantile Exchange (CME) are regulated in the way other exchange-traded derivatives are regulated

No one can corner the market.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 22:38:00 -0700

The FOREX market is so vast and has so many participants that no single entity, even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks are becoming increasingly ineffectual and short-lived, and thus central banks are becoming less and less inclined to intervene to manipulate market prices.

Inter-bank market.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 21:20:00 -0700

The backbone of the FOREX market consists of a global network of dealers (mainly major commercial banks) that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The FOREX market operates in a manner similar to the way the NASDAQ market in the United States operates, and thus it is also referred to as an 'over the counter' or OTC market.

Always a bull market.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 21:19:00 -0700

A trade in the FOREX market involves selling or buying one currency against another. Thus, a bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies and a trader profits by selling the currency against other currencies. In either case, there is always a bull market trading opportunity for a trader

The margin size.

samiurrehman41@yahoo.com (Sami Ur Rehman) — Fri, 11 Sep 2009 21:18:00 -0700

The size of credit "shoulder" (margin) in Forex market is defined only by the agreement between the client and that bank or broker firm which provides to him an output on the market, and makes 1:33, 1:50 or 1:100, for example. On Forex market the traditional size of "shoulder" 1:100, i.e., having brought the mortgage in 1000 dollars, the client can make transactions for the sum, equivalent 100 thousand dollars. Use of an opportunity of crediting, together with strong variability of quotations of currencies, also does this market highly remunerative and highly risky. A leverage ratio of up to 400 is typical compared to a leverage ratio of 2 (50% margin requirement) in equity markets. Of course, this makes trading in the cash/spot forex market a double-edged sword the high leverage makes the risk of the down side loss much greater in the same way that it makes the profit potential on the upside much more attractive.