The exchange rate expresses the national currency's quotation in respect to foreign ones. For example, if one US dollar is worth 10 000 Japanese Yen, then the exchange rate of dollar is 10 000 Yen. If something costs 30 000 Yen, it automatically costs 3 US dollars as a matter of accountancy. Going on with fictitious numbers, a Japan GDP of 8 million Yen would then be worth 800 Dollars.
Thus, the exchange rate is a conversion factor, a multiplier or a ratio, depending on the direction of conversion.
In a slightly different perspective, the exchange rate is a price. If the exchange rate can freely move, the exchange rate may turn out to be the fastest moving price in the economy, bringing together all the foreign goods with it.
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Showing posts with label Currencies. Show all posts
Showing posts with label Currencies. Show all posts
Wednesday, May 12, 2010
Saturday, August 15, 2009
Start To Trade in Forex
Forex: Finding The Best Time To Trade
Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of people who traded in this financial market became successful and became very rich almost overnight.
The Forex market is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
For a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
Keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Here, if you know how, when, and what to trade, you can be sure that you can earn huge amounts of profit. It is a fact that a lot of people who traded in this financial market became successful and became very rich almost overnight.
The Forex market is the largest and the most liquid financial market in the world. Unlike the stock market and other financial market, Forex has no centralized location as it operates 24 hours a day at different locations around the world. Trades in this financial market are done through an electronic network.
Forex was only limited to large multinational corporations and financial institutions, such as banks. However, because of the advancement of the communications technology and also the existence of high speed internet, Forex in the late 90s is now available for everyone who is interested in trading in the Forex market.
For a beginner trader, is simply the buying and selling of different currencies of the world. This may seem simple enough for everyone, but you should also consider that a lot of inexperienced traders and some experienced traders have suffered huge financial losses in Forex.
Keep in mind that aside from the fact that Forex can give you a great money-making potential, Forex also has equal risks. Therefore, before you enter this market and trade, you should first consider a few things in order for you be successful in this money making venture.
First of all, you have to know how to trade currencies. In Forex trading, all you need is a personal computer with an active internet connection, a funded Forex account and a Forex trading system. There are numerous websites that offer Forex trading. In order to start trading, you have to open and fund an account first with your chosen website. After that, you can now start trading in the most liquid market in the world.
You need to have a fast internet connection in order to keep up with the updates and price movements and prevent slippages from happening. Another thing you have to consider is that as much as possible, you should register in a Forex website that offer dummy accounts so that you can practice your skills and strategies in Forex trading.
Traded Currencies
Forex: Traded Currencies
You can make a a decision on dealing this game. The thing you need to know is what to trade. The Forex market involved different currencies from all over the world. It is also traded in forms of currency pairs. Here are the different currency pairs that you should consider trading in the Forex market:
* EUR/USD * USD/JPY * GBP/USD * USD/CHF * AUD/USD * USD/CAD * NZD/USD * EUR/GBP * EUR/JPY * GBP/JPY * CHF/JPY * GBP/CHF * EUR/AUD
These are the most commonly traded currency pairs in the Forex market. It is up to you to determine which currency pair you want to trade depending on market conditions. If you do it right, you can be sure that you can earn a substantial amount of income.
The next and last thing you should consider is when you have to trade in the Forex market. Since the Forex market is open 24 hours a day, you can trade whenever you like. And, since it is the most liquid, you can get out whenever you like. It is just a matter of knowing if the market condition is profitable or if it is falling.
Forex traders are mostly speculators who try to predict which currency is going to increase in value and which currency will decrease in value. Speculators use Forex charts to spot a trend and determine when a particular currency will increase or decrease in value.
Now that you know how to trade in the Forex market, you can now open a funded account and start trading currencies.
Always remember that in all trades done in the financial market, you should also expect to suffer from losses. You should be prepared to deal with it and accept it. This is why you need a substantial amount of money to trade in Forex.
You can make a a decision on dealing this game. The thing you need to know is what to trade. The Forex market involved different currencies from all over the world. It is also traded in forms of currency pairs. Here are the different currency pairs that you should consider trading in the Forex market:
* EUR/USD * USD/JPY * GBP/USD * USD/CHF * AUD/USD * USD/CAD * NZD/USD * EUR/GBP * EUR/JPY * GBP/JPY * CHF/JPY * GBP/CHF * EUR/AUD
These are the most commonly traded currency pairs in the Forex market. It is up to you to determine which currency pair you want to trade depending on market conditions. If you do it right, you can be sure that you can earn a substantial amount of income.
The next and last thing you should consider is when you have to trade in the Forex market. Since the Forex market is open 24 hours a day, you can trade whenever you like. And, since it is the most liquid, you can get out whenever you like. It is just a matter of knowing if the market condition is profitable or if it is falling.
Forex traders are mostly speculators who try to predict which currency is going to increase in value and which currency will decrease in value. Speculators use Forex charts to spot a trend and determine when a particular currency will increase or decrease in value.
Now that you know how to trade in the Forex market, you can now open a funded account and start trading currencies.
Always remember that in all trades done in the financial market, you should also expect to suffer from losses. You should be prepared to deal with it and accept it. This is why you need a substantial amount of money to trade in Forex.
Thursday, August 13, 2009
Standard System
Forex: Gold-Exchange Standard System
The FX market was not always quick to respond to changing events. For most of the 20th century, the exchange rates were fixed, or kept constant, according to the amount of gold for which they could be exchanged. This was called the gold-exchange standard.
Under another system, the gold standard, U.S. households and businesses could exchange their dollars for gold. This practice was abandoned in 1933 during the Great Depression to allow freer expansion of money supply. However, foreign governments were still able to exchange their dollars for gold until 1971, when the United States terminated the gold-exchange standard entirely.
Under this system, the value of all currencies was fixed in terms of how much gold for which they could be exchanged.
For example, if one ounce of gold was worth 12 British pounds or 35 U.S. dollars, the exchange rate between dollars and pounds would remain constant at just under three to one.
There were many advantages of the gold-exchange system:
* It served as a common measure of value
* It helped keep inflation in check by keeping money supply in the gold-exchange standard economies fairly stable
* Long-term planning was easier as rate changes were infrequent
This system was put in place in 1944, when the leaders of allied nations met at Bretton Woods, New Hampshire, to set up a stable economic structure out of the chaos of World War II. The U.S. dollar was fixed at $35 per ounce of gold and all other currencies were expressed in terms of dollars.
The FX market was not always quick to respond to changing events. For most of the 20th century, the exchange rates were fixed, or kept constant, according to the amount of gold for which they could be exchanged. This was called the gold-exchange standard.
Under another system, the gold standard, U.S. households and businesses could exchange their dollars for gold. This practice was abandoned in 1933 during the Great Depression to allow freer expansion of money supply. However, foreign governments were still able to exchange their dollars for gold until 1971, when the United States terminated the gold-exchange standard entirely.
Under this system, the value of all currencies was fixed in terms of how much gold for which they could be exchanged.
For example, if one ounce of gold was worth 12 British pounds or 35 U.S. dollars, the exchange rate between dollars and pounds would remain constant at just under three to one.
There were many advantages of the gold-exchange system:
* It served as a common measure of value
* It helped keep inflation in check by keeping money supply in the gold-exchange standard economies fairly stable
* Long-term planning was easier as rate changes were infrequent
This system was put in place in 1944, when the leaders of allied nations met at Bretton Woods, New Hampshire, to set up a stable economic structure out of the chaos of World War II. The U.S. dollar was fixed at $35 per ounce of gold and all other currencies were expressed in terms of dollars.
Japan Yen
Forex: Swap Transaction How it works?
Suppose a U.S. company needs 15 million Japanese yen for a three-month investment in Japan.
* It may agree to a rate of 150 yen to a dollar and swap $100,000 with a company willing to swap 15 million yen for three months
* After three months, the U.S. company returns the 15 million yen to the other company and gets back $100,000, with adjustments made for interest rate differentials
In all of these transactions, market rates might change. However, the buyer and seller are locked into a contract at a fixed price that cannot be affected by any changes in the market rates. These tools allow the market participants to plan more safely, since they know in advance what their FX will cost. It also allows them to avoid an immediate outlay of cash.
Suppose a U.S. company needs 15 million Japanese yen for a three-month investment in Japan.
* It may agree to a rate of 150 yen to a dollar and swap $100,000 with a company willing to swap 15 million yen for three months
* After three months, the U.S. company returns the 15 million yen to the other company and gets back $100,000, with adjustments made for interest rate differentials
In all of these transactions, market rates might change. However, the buyer and seller are locked into a contract at a fixed price that cannot be affected by any changes in the market rates. These tools allow the market participants to plan more safely, since they know in advance what their FX will cost. It also allows them to avoid an immediate outlay of cash.
Thursday, August 6, 2009
Potential Profits
What is the contract size of each trade and how do you calculate profits ?
The minimum size of a contract of the major currencies is the value of $100,000 USD (1% margin=$1000). But the value of each currency relative to the USD is different each minute, so the actual US dollar value fluctuates, and that's where you make your profit. The usual contract size is about 100,000 Euros, 62,500 pounds, 187,500 Swiss Francs, 12.5 million Yen, all with an initial margin of $1000 on deposit, making it the cheapest way to own large quantities of assets.
For example, today Mr. and Mrs. Joe Public buy a FOREX contract of £62,500 at the exchange rate of $1.4225 (USD) per pound, while using for that purchase only US dollars of $1,000. Five hours later poor US economic indicators are released, the Fed lowers interest rates again, NYSE and NASDAQ both tumble, and the dollar falls 1.5 cent against the pound sterling.
The price of the pound is now worth $1.4375. After discussion with their broker, Mr. and Mrs. Joe Public quickly decide to close their contract, taking $937 profit and almost 100% return of their initial investment of only $1000 in buying one contract of £62,500 five hours ago. $1000 will enable you to buy (or sell) one contract of any major currency, making FOREX the quickest way to make a profit.
The minimum size of a contract of the major currencies is the value of $100,000 USD (1% margin=$1000). But the value of each currency relative to the USD is different each minute, so the actual US dollar value fluctuates, and that's where you make your profit. The usual contract size is about 100,000 Euros, 62,500 pounds, 187,500 Swiss Francs, 12.5 million Yen, all with an initial margin of $1000 on deposit, making it the cheapest way to own large quantities of assets.
For example, today Mr. and Mrs. Joe Public buy a FOREX contract of £62,500 at the exchange rate of $1.4225 (USD) per pound, while using for that purchase only US dollars of $1,000. Five hours later poor US economic indicators are released, the Fed lowers interest rates again, NYSE and NASDAQ both tumble, and the dollar falls 1.5 cent against the pound sterling.
The price of the pound is now worth $1.4375. After discussion with their broker, Mr. and Mrs. Joe Public quickly decide to close their contract, taking $937 profit and almost 100% return of their initial investment of only $1000 in buying one contract of £62,500 five hours ago. $1000 will enable you to buy (or sell) one contract of any major currency, making FOREX the quickest way to make a profit.
Monday, August 3, 2009
The Bretton Woods system
The Bretton Woods system began to weaken in the 1960s, when foreigners accumulated large amounts of U.S. dollars from post World War II aid and sales of their exports in the United States. There were concerns as to whether the U.S. had enough gold to redeem all the dollars.
With reserves of gold falling steadily, the situation could not be sustained and the U.S. decided to abandon this system. In 1971, President Nixon announced that U.S. dollars would no longer be convertible into gold. By 1973, this action led to the system of floating exchange rates that exist today. Currently, currencies rise and fall in value according to the forces of demand and supply.
With reserves of gold falling steadily, the situation could not be sustained and the U.S. decided to abandon this system. In 1971, President Nixon announced that U.S. dollars would no longer be convertible into gold. By 1973, this action led to the system of floating exchange rates that exist today. Currently, currencies rise and fall in value according to the forces of demand and supply.
Sunday, August 2, 2009
Trade Volume
Forex: Rate of Growth of Foreign Exchange Markets
Figures for daily turnover in foreign exchange trading
In the early 1970s, the daily turnover in foreign exchange markets was $18 billion.
Transaction volume increased more than fourfold between 1977 and 1980 and fourfold again between1980 and 1983. Trading doubled between 1983 and 1986, and tripled between 1986 and 1989, when it reached the sum of $590 billion. It increased by almost 40% between 1989 and 1992, when it amounted to $820 billion a day.
The 1995 daily foreign exchange trading figure of $1.19 trillion represents an increase of 45% on that for 1992 (or 30%, taking into account the depreciation of the dollar). The volume of foreign exchange trade has therefore increased by roughly 83 times in the last 30 years.
This massive increase in the volume of trade is due to the break up in the early 1970s of the Bretton Woods system of fixed parities among major currencies and a move to floating exchange rates. It is also due to the growing liberalisation of financial markets, and the introduction of electronic trading, which makes it possible to deal with a greater volume of trade.
FIGURES 1998:
BIS calculated that the global turnover in traditional foreign exchange markets in 1998 had reached an estimated daily average of $1.5 trillion, a growth of 26% on the figures for 1995. This slowing of the rate of growth is attributable to the introduction of the euro, and economic problems in Asia.
Global daily turnover in foreign exchange derivatives contracts traded over-the-counter was estimated at $961 billion in April 1998 (up a huge 66% since 1995). Exchange-traded currency derivatives amounted to another $12 billion daily.
The notional amount outstanding on all OTC (over-the-counter) foreign exchange derivatives in June 1998 was estimated at $22 trillion. The gross market value of these contracts was $982 billion. BIS calculated that the turnover in notional amounts of exchange-traded currency futures and options for 1998 was another $3.5 trillion.
Therefore the total figure for daily foreign exchange trading in 1998 can be estimated at $2.473 trillion, or $593.5 trillion for the year.
Figures for daily turnover in foreign exchange trading
In the early 1970s, the daily turnover in foreign exchange markets was $18 billion.
Transaction volume increased more than fourfold between 1977 and 1980 and fourfold again between1980 and 1983. Trading doubled between 1983 and 1986, and tripled between 1986 and 1989, when it reached the sum of $590 billion. It increased by almost 40% between 1989 and 1992, when it amounted to $820 billion a day.
The 1995 daily foreign exchange trading figure of $1.19 trillion represents an increase of 45% on that for 1992 (or 30%, taking into account the depreciation of the dollar). The volume of foreign exchange trade has therefore increased by roughly 83 times in the last 30 years.
This massive increase in the volume of trade is due to the break up in the early 1970s of the Bretton Woods system of fixed parities among major currencies and a move to floating exchange rates. It is also due to the growing liberalisation of financial markets, and the introduction of electronic trading, which makes it possible to deal with a greater volume of trade.
FIGURES 1998:
BIS calculated that the global turnover in traditional foreign exchange markets in 1998 had reached an estimated daily average of $1.5 trillion, a growth of 26% on the figures for 1995. This slowing of the rate of growth is attributable to the introduction of the euro, and economic problems in Asia.
Global daily turnover in foreign exchange derivatives contracts traded over-the-counter was estimated at $961 billion in April 1998 (up a huge 66% since 1995). Exchange-traded currency derivatives amounted to another $12 billion daily.
The notional amount outstanding on all OTC (over-the-counter) foreign exchange derivatives in June 1998 was estimated at $22 trillion. The gross market value of these contracts was $982 billion. BIS calculated that the turnover in notional amounts of exchange-traded currency futures and options for 1998 was another $3.5 trillion.
Therefore the total figure for daily foreign exchange trading in 1998 can be estimated at $2.473 trillion, or $593.5 trillion for the year.
FOREX
What is FOREX?
Foreign Exchange trading
(also called Forex, FX or currency trading) describes trading in the many currencies of the world. It is the largest market, which provides a large amount of liquidity to traders.
Each day the markets trade over $1.5 trillion, if you compare the New York Stock Exchange which trades $27 billion a day you can begin to see how massive this market really is.The spot Forex market trades are settled within two banking days.
There is no central exchange like futures, and most of the trades are done electronically. The big boy's in this game are the Banks, Hedge Funds and financial organisations.
The forex market
The volume in the foreign exchange market is massive, with around $4 trillion dollars being traded every single day. The international banks and financial investment companies are the main players but especially now with the internet and high speed connections, the market has opened up to the small private investors who are entering the market in their droves. The constant fluctuation in price between currencies provide a lucrative market for the shrewd investor.
Foreign Exchange trading
(also called Forex, FX or currency trading) describes trading in the many currencies of the world. It is the largest market, which provides a large amount of liquidity to traders.
Each day the markets trade over $1.5 trillion, if you compare the New York Stock Exchange which trades $27 billion a day you can begin to see how massive this market really is.The spot Forex market trades are settled within two banking days.
There is no central exchange like futures, and most of the trades are done electronically. The big boy's in this game are the Banks, Hedge Funds and financial organisations.
The forex market
The volume in the foreign exchange market is massive, with around $4 trillion dollars being traded every single day. The international banks and financial investment companies are the main players but especially now with the internet and high speed connections, the market has opened up to the small private investors who are entering the market in their droves. The constant fluctuation in price between currencies provide a lucrative market for the shrewd investor.
Currency trading
What is Currency trading?
Currency trading is simply buying and selling currencies and making a profit from a positive price change between two different currencies involved in a trade. The two currencies involved in a trade are known as the forex pair. The most common currency involved in forex trading is the US dollar which is involved in 85% of all trades.
A forex trader will monitor the financial markets and react to trends in the movement in price between one currency and another. He makes a profit if he buys or opens a trade at a low price and sells or closes at a higher price. The skill is being able to understand what is happening in the market and correctly anticipate the upward or downward movement of currency prices.
There are many tools available to help with the analysis of the market - the most common being a variety of charts which show historical trends and patterns. Increasingly, there are new trading software packages entering the market which automates much of this process
Currency trading is simply buying and selling currencies and making a profit from a positive price change between two different currencies involved in a trade. The two currencies involved in a trade are known as the forex pair. The most common currency involved in forex trading is the US dollar which is involved in 85% of all trades.
A forex trader will monitor the financial markets and react to trends in the movement in price between one currency and another. He makes a profit if he buys or opens a trade at a low price and sells or closes at a higher price. The skill is being able to understand what is happening in the market and correctly anticipate the upward or downward movement of currency prices.
There are many tools available to help with the analysis of the market - the most common being a variety of charts which show historical trends and patterns. Increasingly, there are new trading software packages entering the market which automates much of this process
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