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What is Euro-Dollar

noreply@blogger.com (Sarah Johnson) — Fri, 17 Feb 2012 00:58:28 PST

What is Euro-Dollar

We’ve explained that when US Dollar deposits are re-deposited outside America it is known as Euro-dollar. Same Euro-yen when it is re-deposited outside Japan. The bank balance in the UK of our familiar pound sterling would also take on the name of Euro-sterling when re-deposited outside Great Britain, Collectively; then, we can say that Euro currencies are deposits in currencies that are re-deposited outside the home countries of the currencies concerned. Although generally known as Euro-dollar, it is also know locally as, Asian dollar in Singapore. We also talk of petrodollar alluding to the huge amounts dollars accumulated by oil producing countries that keep on recycling in the Eurocurrency market.

Euro dollar

noreply@blogger.com (Sarah Johnson) — Thu, 16 Feb 2012 10:37:01 PST

The International Money Market, Euro Currency, Euro-dollar.

Dealing in foreign exchange inevitably require some amount of knowledge about money markets. In reality, the borderline between money market and foreign exchange markets is getting thinner, because the operation of the foreign exchange market quite often takes us to the money market. For instance, selling a currency forward may involve buying it in the spot market and depositing in the money market at London or Paris or wherever it is found convenient for security and yield. Emergence of Euro-currency since the late fifties has added new dimensions as well as greater depths to international money market.

Euro Currency, Euro-dollar.

It is important to make clear at the outset that Euro-currency are not European currencies as the name seems to suggest,. Nor it must be thought that Europe is the only place where this market for Euro-currency exists. Euro-currency are the collective name for Euro-dollar, Euro-sterling, and Euro-yen etc. The term Euro is a legacy from the 1950s when these so-called Euro-currencies, especially Euro-dollar, made their appearance in the money market in Europe.

When we talk about say, Euro-dollar, it must be remembered that it is the real U.S dollar ; that is, the ordinary US dollar which we keep as deposits with banks in the USA. Like the Holy Roman which was neither holy, nor Roman, nor an empire the so-called Euro-dollar market is neither European nor a market for dollars. Nor is the Euro-yen domiciled in Europe, it is the ordinary Japanese yen that does not owe its origin to Europe.

Links for 2012-02-14 [Digg]

Wed, 15 Feb 2012 00:00:00 PST

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US stocks fall as Greek bailout debate winds on
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Links for 2012-02-13 [Digg]

Tue, 14 Feb 2012 00:00:00 PST

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The foreign exchange

noreply@blogger.com (Sarah Johnson) — Sat, 11 Feb 2012 07:17:03 PST

The phenomenal growth of volume of transactions in the foreign exchange market

The business house, international investors and multinationals operate to meet their requirement for spot or forward currencies. They deal directly with the banks by placing orders for sale of specified currencies. Commercial banks are the main players in the market. They buy and sale in response to the clients requirement or on their own account as permitted by the open position. Central bank may participate in the market to influence the exchange rates especially when it apprehends a draw down of the foreign currency reserves or to toward off speculative pressure. The central bank also enters the market to make or receive payments in the foreign exchange.

The phenomenal growth of volume of transactions in the international foreign exchange market is very big, and is getting bigger, so to say, by leaps and bounds. Phenomenal growth of international trade and most of all cross country movement of fund and international reserves have all contributed to unprecedented rise in the foreign exchange market. International financial statistics, a publication of IMF, put the level of world exports in 1950 as only US dollar $57.20 billion. Within a space of about 30 years it rose to $1,508.20 billion in 1979. by 2004 it reached $7430.20 billion. Even if we adjust the numbers for inflation the rise in word trade is phenomenal in relation to, say early this century when world trade had barely crossed $ 3 billion mark.

Links for 2012-02-10 [Digg]

Sat, 11 Feb 2012 00:00:00 PST

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Fri, 10 Feb 2012 00:00:00 PST

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Links for 2012-02-03 [Digg]

Sat, 04 Feb 2012 00:00:00 PST

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Links for 2012-02-02 [Digg]

Fri, 03 Feb 2012 00:00:00 PST

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Foreign Exchange Market

noreply@blogger.com (Sarah Johnson) — Thu, 02 Feb 2012 06:29:08 PST

Foreign Exchange Market

The foreign exchange market is not like the one we encounter in our every day lives, sometimes with a morbid fear of losing the battle for balancing our personal budgets. Foreign exchange market, like those for money, are markets in the abstract sense. In these markets buyers and sellers need not meet face to face not at least in these days of high-tech communications, internet, fax, telephone and the fast vanishing wire service – with instant round the clock monitoring services like SWIFT, Reuters, Knight Ridder and Tele rate.

It is not that the foreign exchange market has become completely impersonal. In the early stage of the evolution of foreign exchange market there emerged meeting places know as ‘bourse’ to conduct dealings in foreign exchange. In the seventeenth century, traders, bankers and money changers developed the practice of settling cross border debts at the fairs held in important commercial centres. Bills of exchange were an important medium for settlement of payments in these fairs. A French trader, for instance, could buy at the Milan fair a sterling bill for, say pound 10,000.00 drawn on London to pay his debt to a British exporter from whom he has bought or intends to buy some merchandise. An analogy of this practice is also seen in some country even today. For instance, buy what is known some countries as ‘hundi’ to transfer money to other countries for a variety of reasons. A hundi, in reality has all the characteristics of a real bill of exchange but, because of exchange control and money laundering, its use for transfer of fund to and from abroad is illegal.

Today foreign exchange market can be described as the over the counter (OTC) market. There is no specified place for the participant to meet and execute the deals. It is an informal arrangement among the participants who are in touch with each other through telephone, telex, SWIFT, Internet and other means of communications. The term foreign exchange market actually refers to the wholesale segment of the market where dealings take place between banks and financial institutions or the fund managers. The retail segment refers to the dealings that take place between banks and their customers.

Links for 2012-02-01 [Digg]

Thu, 02 Feb 2012 00:00:00 PST

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Exchange Rates

noreply@blogger.com (Sarah Johnson) — Tue, 31 Jan 2012 06:14:30 PST

Exchange Rates

Let us call the currency (other than US Dollar) for which the exchange rates is to be calculated as the foreign currency. Suppose a customer tenders a foreign currency bill for purchase by the bank. When the customer tenders a dollar bill, the bank disposes of the dollar acquired from the customer in the inter bank market at the market buying rate and therefore the inter bank buying rate for dollar forms the basis for quoting dollar buying rate to the customer. In case of a foreign currency being tendered by the customer, the bank should first get foreign currency converted to US dollar in the international market. In other words, it has to buy dollar in the international market against foreign currency. the bank can do so at the market selling rate for dollar. Therefore the merchant rate for the foreign currency would be calculated by crossing the dollar selling rate against the foreign currency in the international market.

Foreign Exchange-Best Forex Trading Info

noreply@blogger.com (Sarah Johnson) — Fri, 20 Jan 2012 06:45:18 PST

Foreign Exchange

The foreign exchange dealing of a bank with its customer is known as merchant business and the exchange rate at the transaction takes place is the ‘merchant rate’. The merchant business in which the contract with the customer to buy or sell foreign exchange is agreed to and executed on the same day is known as ‘ready transaction’ or ‘cash transaction’. As in the case of inter bank transactions, a ‘value next day’ contract is deliverable on the next business day and a‘spot contract’ is deliverable on the second succeeding business day following the date of the contract. Most of the transactions with customers are on ready basis. In practice, the terms ‘ready’ and ‘spot’ are used synonymously to refer to transactions concluded and executed on the same day.

Foreign Exchange Transactions

Foreign exchange dealing is a business in which foreign currency is the commodity. It was seen earlier that foreign currency is not a legal tender. The foreign currency can be considered as the commodity in foreign exchange dealings.

Purchase and Sale transactions of foreign exchange transaction:

Any trading has two aspects 1. Purchase. 2. Sale. A trader has to purchase goods from his suppliers which he sells to his customers. Likewise, the bank purchases as well as sells its commodity, -- the foreign currency.

Two points need be constantly kept in mind while talking of a foreign exchange transaction:

1. The transaction is always talked of from the bank’s point of view

2. The item referred to is the foreign currency. Therefore, when we say a purchase, we imply that the bank has purchased, and it has purchased foreign currency. Similarly, when we say a sale , we imply that the bank has sold; ans it has sold foreign currency. In a purchase transaction the bank acquires foreign currency and parts with home currency. In a sale transaction the bank parts with foreign currency acquires home currency.

Why merchants often need forward covers for exchange rate fluctuation?

noreply@blogger.com (Sarah Johnson) — Mon, 26 Dec 2011 09:43:42 PST

A forward contract to buy or sell foreign currency can be compared to an insurance policy against possible losses arising from exchange rate fluctuation between the date of the contract and date of delivery of the contracted amount of the said currency. For example, an exporter in USA forward contracts to sell a firm in London certain amount of electronic goods at a price of USD10000.00. Before agreeing to this price, the exporter calculates his cost of raw material and other overhead expenditure and adds a reasonable margin for profit satisfies that the proceeds of USD10000.00 would cover this amount. He bases his calculation on the exchange rate prevailing as on the date of his quotation. For example, if the exchange rate on the date is USD2.40 per sterling pound, he expects to receive 2.4 X 10000.00 on the execution of the contract. The exchange rate is not stable even under the best of circumstances. By the time the exporter execute his contract and receives the payment, say after a lapse of 3 months, the exchange rate might turn against him. This uncertainty about the rate that would prevail on a future date is know as the exchange risk. For the exporter, the exchange risk is that the foreign currency in which the transaction is designated may depreciate in future and may bring less than the expected amount of money in term of local currency .

The importer too faces exchange risk when the transaction is designated in a foreign currency. The risk is that the foreign currency may appreciate in value and he may be compelled to pay in local currency an amount higher that that was originally contemplated generally make arrangements for loan for payment for the imports. If the foreign currency appreciates subsequent to the arrangement of the loan, the importer may find that the resources are not sufficient to meet the import bill putting him in a difficult situation.

Technical Analysis

noreply@blogger.com (Sarah Johnson) — Sun, 25 Dec 2011 04:57:27 PST

Technical Analysis

Forex market is vigorously changing market. If anyone like to entering forex trade then analysis is a tools for deciding about trade. As analysis is a continuous process, anyone need to do the same even after entering a trade.

In Forex trading you need both fundamental analysis and technical analysis for success.Technical Analysis can be considered as the colors on the canvas of Fundamental Analysis. Demand and supply of particular currency, health of economy or region are the basics of price movement in the forex market. But when currency pair traded for speculative investment many other reasons or factors are concern. Those factors in fact are driving the direction of the price movement in forex market.

Price movement in forex market for day trading or short term forex trading depends on psychological aspects, sentiment, technical analysis etc. Forex market mood is important for traders and it is possible any body with the help of technical indicators for technical analysis. Traders may learn about thinking and behaving of other trading floors with the help of technical analysis. It also help us to understand how the market is turning. Trading decision is the key of all success in forex market. Many traders use technical analysis indicators for their daily trading round the world.

There are many time frame charts in technical indicators. These charts are given completely deferent pictures for deferent time frame. Such as an hourly forex chart is given deferent pictures from weekly charts. Sometime if an hourly chart indicate to buy but daily chart may indicate to sell. Successful trading decision needs to combine technical indicators as well as fundamental analysis with current economic issue.

Currency swap and Interest rate swap

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:47:11 PST

Currency swap and Interest rate swap

Forward transaction are either outright or swap. An outright involves forward purchase or sale of a currency at a forward rate which express the actual price of one currency against another for delivery on specified value date. Forward rate are quoted as outright because it is easily understood by the customers and officials working in the forex departments. However, as transactions pick up and exchange rates become more responsive to the changes in the international markets, it will be convenient to use margin in forward quotations. Besides, it is the margin which is more relevant in the swap market.

A swap, which is common in developed market involves purchase or sale of a currency spot with a reverse deal in the forward market or simultaneous purchase and sale of forward currencies with different maturities. The difference between the two is called swap margin or swap rate. The swap transactions are normally done by banks to cover their own exchange risks.

In short we can say under a swap deal the bank buys and sells specified foreign currency simultaneously for different maturities. Thus swap deal may involve:

1. Simultaneous purchase of spot and sale of forward or vice versa.

2. Simultaneous purchase and sale , both forward but for different maturities. For instance, the bank may buy one month forward and sells two months forward. Such a deal is known as ‘forward to forward swap’.

A swap deal is done in the market at a difference from the ordinary deals. In the ordinary deal the following factors enter into the rates:

1. The difference between the buying and selling rates.

2. The forward margin, i.e. the premium or discount.

In the swap deal the first is ignored and both buying and selling are done at the same rate. Only the foreword margin enters into the deal as swap difference. In other words the swap rate is the difference between the rate of exchange used in the two trades. A bank may for instance, sell US$1 million against Yen 60.30 million spot value coupled with the purchase of US$ 1.00 million for delivery in 3 months time against Yen 60.50 million. Here the dollar is sold forward at the rate of US$1.00 = Yen 60.30 and forward purchase is at Yen 60.50 the swap rate is 0.20 or 2000 points.

Forward Contract

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:13:06 PST

Booking of Forward Contract

The stages involved of booking and utilization of a forward contract may be summarized as follows.

The transaction of booking of forward contract is initiated with the customer inquiring of his bank the rate at which the required forward currency is available. In fact forward contract is a financial derivative. Before quoting a rate the bank should get details about

1. the currency

2. the period of forward cover, including the particulars of option and

3. the nature and tenor of the instrument.

For instance, when the customer says simply dollar, the bank should ascertain whether it is US dollar or Canadian dollar or Australian dollar. Similarly, if it is a bill transaction, it should be ascertained whether it is sight or 30days bill etc. Sometimes usance bills, is calculated from sight or from bill of lading.

If the rate quoted by the customer, he is required to submit an application to the bank along with documentary evidence to support the application, such as sale contract. While preparing the forward contract, following points are to be noted.

Contract must be state the first and last dates of delivery, it is not permissible to state in contract ‘delivery one week’ or ‘delivery one month’ or delivery ‘three months forward’, etc.

When more than one rate for bills with deferent deliveries are mentioned, the contract must state the amount against each rate.

No usance option may be stated in any contract for the purchase of bills. That is the contract should not give option to the customer to tender sight bill or in the alternative 30 days bill etc. it can be either sight bill or a usance bill of a specified usance as mentioned in the contract.

Derivative: options and its use, call option and put option

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:10:35 PST

Options and its use ,call option and put option

An exporter who expects to execute the contract and receive foreign exchange after six months may enter into a put option for six months which entitles him to sell the foreign currency on maturity at an agreed predetermined price (strike price). If on maturity the spot price for the currency is more favorable to the exporter he may choose not to exercise his right of selling under the contract. He can instead sell in the market at the spot rate.

Similarly, an importer may enter into call option entitling him to buy the foreign currency on a future date.

Options contract is useful especially in covering exchange risk under contingent conditions like when the company enters into a bid. The exchange risk will arise only if the contract is awarded and foreign currency exposure arises. Other methods of hedging, such as forward contracts, will prove costly if the contract is not awarded and forward booked has to be cancelled.

Call Option

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:09:48 PST

Call option and Put Option

A contract under which the option buyer has the right to purchase the specific currency is the call option. A contract conferring the right to the buyer to sell the specified currency is the put option. Generally the US Dollar is the base currency and the other currency of the contract is the foreign currency that is being bought or sold. For instance in a dollar/yen call option, the buyer acquires the right buy yen against dollar. Similarly, in a dollar/mark put option, the buyer acquires the right to sell mark against dollar.

The consideration for the seller to offer the right to the buyer is the premium. Thus premium is the fee payable by the buyer of the option to the seller at the time of entering into the contract. The premium paid is not refundable whether the buyer ultimately exercises his right or not.

The exchange rate which the currency are agreed to be exchanged under the option contract is strike price. The market price for option is not a single price. Varying prices maybe quoted each at a different premium. The premium charged would vary according to the market perception about the future exchange rate for the currency.

Types of Instruments:

Three types of options are available. These are:

1. OTC options

2. Exchange Traded Options

3. Options on Futures

Over the counter (OTC) options are available with individual banks. They are tailor made to the requirements of the buyer with regard to the maturity, price and size of the contract. The buyer of the option bears the counterparty risk, i.e. the risk that the seller of the option, the bank may fail to fulfill its obligation under the contract. Normally this type of option is confined to contract of large volumes and between big players. Since this is non-standard variety the premium charged may also be higher.

Exchange traded options are physical currency options traded at an organized exchange. That is similar to the OTC option; the buyer acquires the right to buy or sell the foreign currency but for standard maturities and in standard amounts. Thus it is akin to futures contracts and traded on the exchange. The contract is with the clearing house of the exchange and hence the counterparty risk is minimized.

Options on futures give the buyer of the option the right to buy/sell specific number of futures on specified exchange. Depending upon the strike price prevailing the buyer may exercise his option or forgo it. If the buyer of a call option exercises his option, he will receive a long future contract in the currency. That is, he will become the buyer of the future contract in the exchange. Then the future contract will be subject to other regulations like margin, marking to market, etc.

Execution of Contracts: Whether the buyer will exercise his right under the option contract depends upon the spot rate for the currency prevailing on the due date of the contract. Based on the prevailing spot price, the option contract may be considered

(a) In the money

(b) Out of the money, or

In-the-money Options:

An Option is in-the-money when it would be advantageous for the holder of the option to exercise his right. Thus, a call option is in-the-money if on the maturely date the spot price for the currency being bought is higher than the strike price under the option contract. For instance, let us say that strike price under the contract is US$0.65 per mark and in the market spot price for mark is US$0.67. It would be advantageous for the buyer of the option to exercise his option and obtain marks at US$0.65 and thereby save US$0.02 per mark.

An put option, on the other hand, is in-the-market, if at maturity the spot price for the underlying currency is cheaper than the strike price under the contract. The difference between the option price and the spot price at maturity, which is in favor of the buyer is known as the intrinsic value of the option.

Out-of-the-money Options:

An option is out-of-the-money, if it is not advantageous for the buyer to exercise his right. A call option is out-of-the market if the spot price for the currency bought under option is lower than the strike price agreed under the contract. A put option is out-of-the money on the maturity date, where the spot price for the currency sold is higher than the strike price under the option contract. When the option is out of the money, the buyer does not exercise his right and the seller stands to gain by the premium he received under the contract.

At the money Options: An option contract is at the money when the strike price is equal to spot rate for the currency concerned on the due date of the contract. It makes no deference to either of the parties whether the buyer exercises his option or not.

Option

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:08:31 PST

Option

An option confers on the buyer the eligibility to buy or sell a sum of foreign currency at a pre determined rate on a future date, without investing him with an obligation to do so. On the due date, buyer of the option may elect to buy or sell as per his entitlement or he may choose to let it go unused. Either of the decision is binding on the seller, who has no such discretion.

Essentially this type of contract serve the similar purpose as a forward exchange contract., viz, to firm up the future payment/receipt in a foreign currency with regard to exchange rate in terms of the local currency. The difference between the foreword contract and option is that under foreword contract , the customer is expected to deliver/receive the foreign exchange on the due date at the foreword rate irrespective of the spot rate prevailing. Under an option contract , on the due date , the customer can make a reassessment of the situation and seek either execution of the contract or its non- execution as may be advantageous to him.

Features of option contracts:

Parties: There are two parties of this type of contract – the option buyer and the option seller. Option buyer is the holder of the right under the contract to buy or sell one specific currency against another specific currency. Normally it would be the exporter or importer or the corporate treasurer who would be buying the option from the seller.

Option seller also known as the writer, is the one who makes the right available to the buyer. He should deliver or accept delivery of the currency concerned when the right is exercised by the option buyer. Normally the writer of the option will be the bank which provides this instrument to its customer. The seller of the option is always at a disadvantageous position because the buyer will exercise his right only if the prevailing exchange rate is favorable to him. This also means that the rate is unfavorable to the seller.

Derivative

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:06:46 PST

Financial Derivative

Apart from the traditional role of buying and selling foreign currencies on spot and forward basis, foreign exchange markets offer also other instruments like options, futures and swaps. Along with forward contracts, these new instruments are called financials derivatives as their value is derived from the value of some other underlying financial contract or asset. Of these new instruments, currencies futures and options are designed basically to afford protection from exchange risk. Swaps and interest rate futures are used for protection against interest rate risk.

Derivative: Currency futures

A future contract is a form of forward contract in that it conveys the right to purchase or sell a specified quantity of a foreign currency at a fixed exchange rate on a specified future date. It is a financial derivative. Whereas in a forward contract the quantum of foreign currency and the due date are determined by the customer, in a futures contract these are standardized. While forward contract can be entered into by a person will any bank at any place, the futures contract can be entered into only with the financial futures exchange. Thus a futures contract may be deemed as an agreement entered into with the specified futures exchange to buy or sell a standard amount of foreign currency at a specified price for delivery on a specified future date. Both derivative have some deference in-between.

Best Forex Trading need Technical Analysis

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 09:02:38 PST

Best Forex Trading need Technical Analysis

If you like to make profit from forex trading in shortest period of time then Forex technical analysis is best way. It is easy and simple anyone at home analysis price movement. In fact using forex chart is the basis of technical analysis.
If you are following price movement and find out rhythmic high adds chart patterns then you may trade for profit and this is possible using forex technical analysis. Further it is not essential to look at news. The reasons is all the news will effect the prices straight away due to instant communications round the globe.
Chart patterns are easy to understand visual and repetitive. In chart patterns all trading indicators are visual . So it is not necessary to learn any complicated equations.

U.S. Dollar and other major Currencies in forex market

noreply@blogger.com (Sarah Johnson) — Mon, 30 Jan 2012 05:56:28 PST

U.S. Dollar and major Currencies in forex trading

1) The U.S. Dollar.

Economy of the United States is biggest of the world. So that US dollar is dominated all over the forex market. United states dollar is an universal assess to evaluate any other currency traded on currency market. Every currencies are usually quoted in U.S. dollar terms. Many countries have international economic and political unrest but under any condition United States can maintain a better economic condition. So that US dollar is a safe-haven currency. The southeast asian nations faced economic crisis during 1997-1998 but US dollar was stable. As it was indicate d, the U.S. dollar became the top currency toward the end of the Second World War along the Breton Woods Accord, as the other currencies were virtually pegged against it. Euro, which was introduced in 1999 decreased the dollar’s importance only slightly.
The other major currencies traded against the U.S. dollar are the euro, Japanese yen, British pound, and Swiss franc.

2) The Japanese Yen.

Japanese yen secured third position in forex traded currency. In terms of international presence Japanese has smaller than U.S Dollar or Euro. Around the glob Japanese yen is very liquid practically around the clock. The natural demand to trade the yen concentrated mostly among the Japanese keiretsu, the economic and financial conglomerates. The Nikkei index, Japanese stock market and the real estate market are catalyst of Japanese yen.

3) The British Pound.

The currency of reference was pound till end of World War II. The currency is heavily traded against the euro and the U.S. dollar, but has a spotty presence against other currencies. Prior to the introduction of the euro, both the pound benefited from any doubts about the currency convergence. After the introduction of the euro, Bank of England is attempting to bring the high U.K. rates closer to the lower rates in the euro zone. At present British pound is a major traded currency in forex market.

4) The Swiss Franc.

The Swiss Franc is not include in European Monetary Union and G-7 countries. Relatively swiss economy is small but its currency is well traded in forex market. Both Switzerland and Germany have close economic relationship. If there are any political uncertainty in the east Swiss franc is favored generally over the euro.

Technical analysis

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 08:59:52 PST

Technical analysis

In the Forex market there are many rate and techniques, however it is possible to make a big profit but you will study forex technical analysis. Behavior of forex market can explain using technical analysis. This tools uses for forecasting price and movement of currencies. If you would like to get your self successful easy forex traders then both the analysis technical analysis and fundamental analysis – you may apply for your decisions making process. It will bring the best result.

In this type of analysis predicting is possible with the help of tools, indicators and market charts. A pictorial presentation of forex market movement visible that ease traders to make right decision for right moment.
Forex technical analysis is the method of predicting that describes the possible outcomes of market with the helps of tools, indicators and market charts of past. Charts and indicators give a pictorial representation of forex market movements which help the investors to take right trading judgments. Trends of price of currencies is illustrate of this technical analysis. Market historical data in relation with price and movement of currencies pairs both help traders for making right decision.
Technical analysis help investors to make forecast for future market trends that makes investor to choose right time to invest or not to invest in forex market. In fact price movement of currencies is basic to explain market under technical analysis. Using these analysis traders can reduce probabilities of losses.
Many short-term investors depend on technical analysis due to its usefulness. In addition these days this approaches become more popular due to forecasting capabilities. But it is wiser to make right decision with technical analysis keeping in mind historical market data and current international news.

Best Forex Trading: Spot rate and Forward rate

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 08:35:42 PST

Spot rate and Forward rate.

The transactions in the inter-bank market may take place for settlement:
1. on the same day; or
2. two days later; or
3. some day later; say after a month

Where agreement to buy and sell is made on and executed on the same date, the transaction is known as cash or ready transaction. It is also known as value today.
The transaction where the exchange of currencies takes place two days after the date of the contract is known as the spot transaction. For instance, the contract is made on Monday, the delivery should take place on Wednesday. If Wednesday is a holiday, the delivery will take place on the next day; i.e Thursday.

The transaction in which the exchange of currencies takes place at a specified future date, subsequent to the spot date, is known as a forward transaction. The forward transaction can be for delivery one month or two months or three month, etc. A forward contract for delivery one month means the exchange of currencies will take place after one month from the date of contract and so on.

When forward rate is the same as the spot rate for the currency, it is said to be ‘at par’ with the spot rate. But this rarely happens. More often the forward rate for a currency may be costlier or cheaper than its spot rate. The difference between the forward rate is know as the ‘forward margin’ or ‘swap point’. The forward margin may be either at premium or at ‘discount’ . If the forward margin is at premium, the foreign currency will be costlier under forward rate than under the spot rate. If the forward margin is at discount the foreign currency will be cheaper for forward delivery than for spot delivery.
Under direct quotation, premium is added to spot rate to arrive at the forward rate. This is done both purchase and sale transactions. Discount is deducted from the spot rate to arrive at the forward rate.

Forex Rates: Factors Affecting Forward Rates

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 08:27:33 PST

Forex Rates: Factors Affecting Forward Rates

There are many factors that one way or the other affect the forward rates, or rather forward or swap margins. Generally, forward rate of a currency in relation to another is a function of interest rate differential between the two currencies. In other words, the forward margin, be it premium or discount, tends to be equal to the differential between interest rates of the two currencies concerned. If 2 month sterling deposit in London yields 12% per anum and dollar deposit for the same period yields 9% p.a. , the swap or forward, margin will tend to be equal to 3% on an annualized basis. With interest differential being 3% p.a. the sterling will be dealt in the forward market at a discount of 3 % p.a. or near about in relation to US dollar. Conversely, the premium for US dollar will tend to be around 3% in relation to sterling. It is however , naive to suggest that interest rate differential always dictates the forward margin. In fact, interest rates and forward margins influence each other. For instance, if sterling deposit earns interest at 12% and dollar deposit at 8% p.a. the investors, with invest able dollars will try to switch from dollar to sterling by spot purchase and forward sale of sterling. Oversupply of sterling in the forward market coupled with increased demand for forward dollar will naturally widen the discount. At the same time influx of sterling in pursuit of higher interest rate would tend to reduce its interest rate while outflow of dollar will create shortage and increase interest rates. The two way adjustment process will thus restore the equation between interest differential or what we call ‘interest parity’ and forward margin at an equilibrium level.

Forex Rate: Forward Contract, Currency Swap and Spot Rate

noreply@blogger.com (Sarah Johnson) — Sat, 26 Nov 2011 09:48:07 PST

Forex Rate: Forward Contract, Currency Swap and Spot Rate

Understanding rate and other concept s are not difficult to new investors in this arena rather then very interesting . Theories, models, ideas, concepts, terms in forex market for new investors are seems to be sort of problem to understand. But if we think it’s a game to acquire knowledge about forex for making money online that will help us understand forex easily. Here we discuss some forex rate and concepts so that we can realize the market easily.

Forward Contract

A forward contract is a transaction between a bank and another party – a customer or another bank – involving of a foreign currency against local currency at an agreed exchange rate on a specified future date or within an agreed time frame. This definition brings into focus some important features of forward contract transactions. First, the amount , the rate of exchange and the value date are agreed upon in advance at the time the deal is concluded. Second, no money is paid or received until the settlement date; sometimes, though, the bank may ask for a margin deposit from customer. The only thing that distinguishes a forward contract transaction from the spot rate transaction is that a spot deal is settled immediately while a forward contract deal is settle on a future date or within a definite time frame at an agreed rate. In the narrow sense, spot rate too have an element of forward contract deal in that spot sale normally involves delivery after two days.
Foreword contract transactions are either ‘outright’ or ‘Currency Swap’. An outright involves foreword purchase or sale of a currency at a foreword rate which expresses the actual price of one currency against another for delivery on a specified value date. However , as the volume of transactions picks up and exchange rate s become more responsive to the changes in the international markets, it will be convenient to use margin in forward quotations. Besides, it is the margin which is more relevant in the Currency Swap market.

Currency Swap

A Currency Swap, which is common in forex market, involves purchase or sale of a currency spot with a reverse deal in the forward contract market or simultaneous purchase and sale of forward currency with different maturities. The difference between the two is called Currency Swap margin or Currency Swap rate. the Currency Swap transactions are normally done by banks to cover their own exchange risks. In short we can say that under a Currency Swap
deal the bank buys and sells specified foreign currency simultaneously for different maturities. Thus a Currency Swap deal may involve:
1. Simultaneous purchase of spot and sale of forward or vice versa; or
2. Simultaneous purchase and sale, both forward but for different maturities.
A Currency Swap deal is done in the market at a difference from the ordinary deals. In the ordinary deal the following factors enter into the rates:
i. The difference between the buying and selling rates;
ii. The forward margin i.e. the premium or discount.
In most Currency Swap deals, the two exchanges are made the same time with the same counter party but from or sale spot to one counter party and sale to or buy out right forward from another party. This is called engineered Currency Swap compared to ‘pure’ Currency Swap. In Currency Swap market spot rate is not very important. What is important is Currency Swap rate: the premium or discount received for the forward sale of the currency which is being bought spot.

Foreign Exchange Rates: Some Basics

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 08:09:29 PST

Foreign Exchange Rate (Forex) : Some Basics

Foreign Exchange (Forex) Market is the trading of currencies. The foreign exchange market –Forex Market- is not a single place like NY Stock Exchange (NYSE). It is a widely decentralized 24 hour-a-day market, made up of banks and traders communicating electronically. The retail market is between individuals, non financial companies, non bank financial institutions and other customers of banks. The wholesale market is the trading between banks. This accounts for 60% or more of the total trading.
Scope of the Market:
About half the daily forex trading is done between banks in London and New York. Most of the trading involves U.S currency. Sometimes the intent is to trade one foreign currency for another and the U.S. currency is only involved as an intermediate step. When this is done the dollar is called a vehicle currency.
Foreign Exchange Rate: Some Basics
The exchange rate is the price of one country’s money in terms of another country’s money. The ‘Spot’ exchange rate is the price for immediate exchange. Immediate usually means within two working days. This amount is to about 33% of all trading. The ‘forward’ exchange rate is the price for exchange to take place at some specific time in future, often 30, 90, 140 days. This amount is to about 11% of all trading. A ‘Swap’ is a ‘package trade’ that includes both spot exchange of two currencies and a contract to the reverse forward exchange a short time later. This is useful when the parties to the swap have only a short term need for the currency. This amount is to about 56% of all trading.
Exchange rate quotation:
Quoted currency means the currency that is variable in an exchange rate quotation, base currency means that is fixed. Thus if ₤1= CAD 117.00, here sterling Pound is base currency and the CAD is the quoted currency.
Types of quotation:
In direct quotation base currency is the Foreign currency and quoted currency is the Domestic Currency and quoted Currency is the Foreign Currency (CAD1=US$0.0144).
In American terms Base currency is any currency other then USD and quoted Currency is USD( CAD1=$0.01444). In European Terms Base currency is the USD and quoted Currency is any Currency other than USD ($1=CAD75.00)
Reciprocal Quotations:
Currency can be quoted in terms of number of units of A per unit of B or, alternatively, the number of unit B per Unit of A. The two rates represents equal value and are reciprocals of each other. To convent from one method to the other, one simply divides the number 1by the rate.
Example: USD1/CAD69.50 = 1/69.50 CAD/USD
= 0.0143 CAD/USD
Cross Rate: A cross rate may be defined as an exchange rate that is calculated from two other rates. In practice, cross-rate is the exchange rate between 2 non US$ currencies.
Forward Rates: It is an exchange Rate for the transaction to be happened at some future date, but agreement for the transaction is to be done today. Forward rate is quoted either at premium (+) or at discount rate (-) over spot rate. In case of direct quotation, premium will be added to and discount will be subtracted from spot rate. The reverse is for indirect quotation.
Quotation of Forward Rates:
Forward at Premium (pm)
Forward at Discount (dis)
Forward at ‘par’ meaning the Forward Rate at Parity with Spot Rate.
Premium and Discount
The quoted currency is said to stand at a premium in the forward market if it is more expensive in the future than it is now in term of the base currency. Conversely the base currency may be said to stand at a discount relative to the quoted currency.

Currency Trading: Pips, Lots & Stop-Loss Orders

noreply@blogger.com (Sarah Johnson) — Sat, 17 Dec 2011 08:03:23 PST

Currency Trading: Pips, Lots & Stop-Loss Orders

What are Pips?

In the currency trading it is vital things to understand what is a pip because you must be apply pips in estimate your profits or losses. Elaboration of ‘pip’ is ‘Percentage in Point, sometimes referred as ‘point’. A pip is the smallest price movement of a traded currency. For most currencies a pip is 0.0001 or 1/100 of a cent. The value of a pip changes based upon the size of your account, because the size of your account affects how much currency you can leverage. A standard full size trading account is 100,000 units of the base currency. If you are trading in USD, a standard account has a value of $100,000 USD. Though it seems that value of a pip is very low but it take consideration that most currencies are traded in lots of $100 000. For that amount a pip is $10. When a currency moves from a value of 1.4511 to 1.4514, it moved 3 pips. When a pip has a value of $10, you have gained $30.There is an exception for quotations for Japanese Yen against other currencies. For currencies in relation to Japanese Yen a pip is 0.01 or 1 cent. Then if you are trading USD/JPY in $100 000 lots, one pip will be equivalent to $1000.

What is Lot?

Lot means the minimal traded amount for each currency transaction. For the Regular Accounts one lot equals 100 000 units of the base currency. You can also open a Mini Account and trade in mini lot sizes that are 10 000 units of the base currency.

What is Pip Spread ?

Spread is related to pips. It is very importance for forex traders. There is always difference between the selling and buying price of a given currency pair. There are two types of price of currency, i.e. ask price and bid price. The ask price of a currency at which you want to buy on other hand bid price is that price at which you want to sell. For example, the EUR/USD is quoted at 1.4505 bid and 1.4508 ask. In this case the spread is 3 pips. The pip spread is your cost of doing business here. In the case above it means you sustain a paper loss equal to 3 pips at the moment you enter the trade. Your contract has to appreciate by 3 pips before you break even. The lower the pip spread the easier is it for you to profit. Generally the more active and bigger the market, the lower the pip spread. The smaller and exotic markets tend to have a higher spread. Most brokers will be offering different spreads for different currencies. The account which are operated small amount of money usually they have higher spreads. On other hand of which account operated good amount of money, they have lower spread. You may find a broker offering a pip that is lower because it is sound for your profit though low pip spread is not everything for currency trading. Everybody want to make profit trading as well as protect his fund. In this connection you may understand currency trading strategy and basics of them.

Your currency Trading strategies:

You may invest in currency trading both your own sources of fund and loan from other sources. Though currency trading allows you to pull more funds than you actually have, this can be a double edged sword. While you can make profits on funds that you pull (rather than own), you can also have losses amplified as well. There are some ways, however, to manage your risk when trading Forex. If you are interested in trading Forex, you should have a definite trading strategy. You must educate yourself to know when to enter and exit the market and what kind of movements to anticipate. You can also place something known as a stop loss order. You can minimize your risk by placing stop-loss orders. When currency price reaches a certain point a stop-loss order ensure your position to exit. If you are taking a long position, you would place the stop loss order below current market price. For a short position, you would place a stop loss order above current market price. This technique allows you to manage your risk and, just as the name suggests, stop your losses at a certain point. In fact it is a safeguard for your investment in currency trading. You must have a mechanism in your trading strategy to protect your fund effectively and efficiently.

Currency trading seems to be sort of complex but when you educate enough yourself for fundamental principles, basics and trading strategies you will find currency trading is one of the exciting ways to make money.

Forex technical analysis and fundamental analysis

noreply@blogger.com (Sarah Johnson) — Sat, 26 Nov 2011 09:30:50 PST

Forex technical analysis and fundamental analysis

In the forex trading market we may differentiate traders on basis of their analytical system. Some of them are used forex technical analysis and other are used forex fundamental analysis. So we can say to there are two types of traders in forex trading market and both of them use different approach for their own analysis. Moreover it is interesting that both type of traders may use same currency pairs at the same time. It may happen in the same direction but way of trading is different. Stock market and forex trading market are similar by way of response to news publish in media.

Forex fundamental analysis and trading may effect on economical and political news in mass media all over the world. Optimistic news and pessimistic news both are affect the market. Based on news all over the world currency pairs react in the market. Besides this, wealth and strength of a economy is vital reasons for currency movement. For example, currently USA is not good enough in exports as well as unemployment rate is increasing so dollar may perhaps go down. The better of country’s economical data the higher its currency goes in relation to other currencies, and vice versa. Innovative traders should seek to get the best forex news so that they swiftly provide real time updates.

Some trading information or forex news have some shortfall. There are many powerful and influential market player in this forex trading market such as Corporations and Bank. They might be interpreting news releases what they like or not. Those big market players influence whole forex trading market for their multibillion dollar trading. Sometimes news releases can be confusing; hence you cannot rely absolutely on what some elected official or a politician has comment over the satiations.

Historical movement of currency and their patterns is main characteristics of Forex trading in relation with technical analysis. Many market players often believe the behavior of currency movement repeat in the future as it in the past.

Some sort of particular figures and chart patterns in forex pairs' movements that are recurrent in the course of time. Forex technical trading based on some analysis and identification of trading chart patterns and in addition of geometrical figures. Head and shoulders, double top or double bottom, trend and channel lines resistance and support level are well-liked chart patterns. A good number of traders whose idea and judgment stands on this kind of forex analysis frequently shift forex pair in a certain direction. Trend analysis uses a good number of technical traders. They also provide work for accumulation and volume etc. These also assist to predict future moves and enter the market.

There are lots of positive points of technical trading but it also have some drawback. Sometime it may produce false signals. Technical trading often the effect of world news and even ideally looking chart patterns get disrupted. If you do not trade during the important news publications over world media you may avoid of that effect thought there are sort of good indicator.

Making profit from Short Term Forex Trading

noreply@blogger.com (Sarah Johnson) — Sat, 26 Nov 2011 09:28:52 PST

Making profit from Short Term Forex Trading

Making profit from Short Term Forex Trading is doable if you are a real Forex Trader. You goal is boost your wealth surrounded by shortest doable calculate. So initially, we aspire to fit the Forex System with the aim of presents itself as an fiscal endeavor. Take part in the way of foreign chat transactions with several of them, be inflicted with permanently been interested in banks with the aim of wanted to grow hub, and it was single natural with the aim of the Forex was born. Forex is a contraction of the stretch Anglo-Saxon Foreign Exchange submits with the aim of the perception of exchanges with other countries. The particularity of this top matter involves the perception with the aim of we will be inflicted with to think on fluctuations in the regard of various currencies of the states of comprehensive promote.
Both Short Term Forex Trading and long stretch Forex trading you can get on to money. Do not be mistaken with the aim of you can single create wealth from fleeting stretch forex trading and not long stretch forex trading. Inside point, you can make on to money from both type of trading stylishness . The repayment of fleeting stretch forex trading strategy are the skill to win you money surrounded by a shorter calculate frame. Inside addition, you will be spared from the swift fee movement with the intention of occurs all through news relief which is could you repeat that? The long stretch trades be inflicted with to survive. Because of the fleeting stretch nature of all trade, the access and exit spot should be well timed and by the book executed and this is everywhere generally traders lost their money in fleeting stretch trades.
If you enter a trade too yet to be of schedule, at this time is a distinguished opportunity with the aim of you will be stopped made renowned due to false indicate. If you enter a trade too in the exhausted of night, the promote has stirred quite a allocation and at this time is a distinguished opportunity with the aim of it may possibly reverse. Therefore having a skilled access is very valuable pro your accomplishment in fleeting stretch Forex trading.
Your Entry Map:
1) Drawing Trend Line : The trend line is lone of the commonly used access practice. A allocation of broadcast like to rush into a trade and look with to enter their stain before to a trend line break occurs. Inside the take aim, they discover the promote being repelled by the trend line and did not break through it. Therefore waiting pro a convincing trend line break is a must before to you enter your stain. Inside the explanation the world over you be inflicted with missed the golden opportunity to enter your trade by the breach of the trend line, you should permanently pass the calculate pro the promote to retrace back to retest the trend line to enter your stain.
2) Using MACD Technical Indicator : You may possibly aid the crossover of this indicator to place access. Whenever you be inflicted with the setup with the aim of is according to my trading training.
Having a skilled access is single semi the game; you need to be inflicted with a skilled exit to complete the strategy. There is thumbs down top in having a skilled access but your exit is too far away which is unrealistic. Inside the take aim, the fee reverses and takes back all the profit and eventually stops you made renowned.
Your Exit Map:
1) Using Support and Resistance: The support and resistance are splendid seats to exit a stain as these are ordinarily the world over the promote will occur across with approximately sort of repulsive force. You may possibly exit your stain by the next-door major support or resistance. Inside point you can furthermore make on to aid of Fibonacci levels as well as pivot points .
2) Using MACD Technical Indicator: Similar to how you aid this indicator pro access, you can aid the flip ended of the histogram to exit your stain.
With a well defined access and exit strategy, you will be able to create wealth from fleeting stretch forex trading. To discover made renowned more in this area the various strategies you can aid pro fleeting stretch trading.The Forex trader therefore working on the currency promote to a comprehensive extent.It is a promote with the intention of takes place on the international stage, logically. Logically, the Forex trader, who presents himself as the fiscal operator focusing on the alteration of all currencies, is in fact a layer, since it is the banks of major countries with the intention of be inflicted with a monopoly on the management of money. Inside order to advance liquidity in the promote, it will be to compare the two currencies and anticipate their schedule to invest and advertise in the preeminent doable way. For this reson you will get on to money both long stretch and fleeting stretch forex trading.

Make Money online using Best Forex Trading Way

noreply@blogger.com (Sarah Johnson) — Sat, 26 Nov 2011 09:27:04 PST

Make Money online using Best Forex Trading

The risk of Forex Trading business is huge, like a battle. Winner takes all, loser for nothing, even if the failure does not mean we do not have to, successful but very few can be recognized by the community of concern is small, the actual Industrial business, we invest is very difficult. Financial markets are easy to change a person's life in the market. Especially the international foreign exchange trading is the world's largest market. Daily liquidity of financial markets, as of August 2010 by the World BIS official statistics, the size of daily foreign exchange transactions over "4000000000000" throughput. Daily exchange rate will have a huge difference, for each country, banks, corporations, agencies, funds, including to our own individual, there is huge profit taking opportunities.

Unpredictable foreign exchange trading is not a mysterious thing, it's difficult to people who do not want to learn quickly to become the riches of the people. As long as we seriously study and sum up, learning the financial markets and related trading technology, the huge profits that we ordinary people can still do the ranks of gold.

Join to ensure that you can learn the skills to make money really adapt to survive the industry Participants basic requirements

1. Love of financial knowledge, a college education, study hard spirit, able to withstand the boring process of learning Forex Trading.

2. Please use the mailbox to send and receive messages used to facilitate the learning content, as well as correcting sent to your mailbox within.

3. Flexible approach to training, network teaching and field training, ready to dial our phone inquiry. Actual foreign exchange trading training program are as follows:

Part I: Foreign Exchange Basics

Part II: Part III model transactions: Trading Technical Analysis

Part IV: Common chart patterns

Part V: use of technical analysis indicators

Part VI: fundamentals analysis and technical analysis

Part VII: The main impact of foreign exchange rate data disk

Part VIII: Part IX transaction overview article:

Though in this arena have some sort of risk but till have more opportunity to make money online using Forex Trading.