Business cycle behaviour
Too many elements are at work for the exchange rate possessing a clearly-defined business cycle behaviour. To the extent that the exchange rate is determined by the trade balance, the exchange rate is counter-cyclical as the latter. At peaks, the trade deficit would depress the exchange rate, forcing it to depreciate.
If it is rather the interest rate that turns out to the main driver of the exchange rate, a possible pro-cyclicity of the interest rate would imply a pro-cyclical exchange rate.
In this scenario, recovery and boom are accompanied by rising interest rates and exchange rates. At peaks, we would see very strong currency. Together with domestic demand pressures, this would be the source of a high trade deficit.
If autonomous dynamics in the forex market are the main determinants of the exchange rate, then intense micro-fluctuations and long term tides would ride the exchange rate, possibly with central bank significant interventions.
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Showing posts with label Forex traders. Show all posts
Showing posts with label Forex traders. Show all posts
Tuesday, April 6, 2010
Sunday, August 16, 2009
The Right Software
Choosing the Right Foreign Currency Trading Software
It can' be denied though that there are lots of trading software programs available in the market today. Some of them come for free while others can push you to make a worthwhile investment. Amidst all of these, you should always remember to exercise due caution when choosing the foreign currency trading software which you will end up using. You should get the right program that can help boost your business.
One of the most important considerations you needed to make are the currencies you would want to grow. Your business in forex relies heavily on the currencies you are willing and most comfortable to trade. Should you want to dabble on other currencies to expand your expertise, make sure that the software you will choose would also be able to cover these currencies well enough especially if they are quite risky in terms of rate value.
Customer support is also an important aspect of forex that you should take note of. Your forex software should be able to provide you assistance at the most immediate time because the business thrives in a fast paced environment.
It can' be denied though that there are lots of trading software programs available in the market today. Some of them come for free while others can push you to make a worthwhile investment. Amidst all of these, you should always remember to exercise due caution when choosing the foreign currency trading software which you will end up using. You should get the right program that can help boost your business.
One of the most important considerations you needed to make are the currencies you would want to grow. Your business in forex relies heavily on the currencies you are willing and most comfortable to trade. Should you want to dabble on other currencies to expand your expertise, make sure that the software you will choose would also be able to cover these currencies well enough especially if they are quite risky in terms of rate value.
Customer support is also an important aspect of forex that you should take note of. Your forex software should be able to provide you assistance at the most immediate time because the business thrives in a fast paced environment.
Thursday, August 13, 2009
Networks of traders
The Money Makers
Banks are a major force in the FX market and employ a large number of traders. Trading between banks is done in two ways—through a broker or directly with each other.
Brokers:
If a U.S. bank trades with another bank, a FX broker may be used as an intermediary. The broker arranges the transaction, matching the buyer and seller without ever taking a position and charges a commission to both the buyer and seller. About a third of transactions are arranged in this way.
Direct:
Mostly banks deal with each other directly. A trader "makes a market" for another by quoting a two-way price i.e. he is willing to buy or sell the currency. The difference between the two price quotes (the spread) is usually no more than 10 pips, or hundredths, of a currency unit.
Most currencies are quoted in terms of how many units of that currency would equal $1. However, the British pound, New Zealand dollar, Australian dollar, Irish punt and the Euro are quoted in terms of how many U.S. dollars would equal one unit of those currencies.
The currencies of the world’s large, industrialized economies, or hard currencies, are always in demand and are actively traded. In terms of trading volumes, the FX market is dominated by four currencies: the U.S. dollar, the euro, the Japanese yen and the British pound. Together these account for over 80 percent of the market.
It is not always easy to find a market for all currencies. The demand for currencies of less developed countries, soft currencies, is a lot less than for the hard currencies. Weak demand internationally along with exchange controls may make these currencies difficult to convert.
Banks are a major force in the FX market and employ a large number of traders. Trading between banks is done in two ways—through a broker or directly with each other.
Brokers:
If a U.S. bank trades with another bank, a FX broker may be used as an intermediary. The broker arranges the transaction, matching the buyer and seller without ever taking a position and charges a commission to both the buyer and seller. About a third of transactions are arranged in this way.
Direct:
Mostly banks deal with each other directly. A trader "makes a market" for another by quoting a two-way price i.e. he is willing to buy or sell the currency. The difference between the two price quotes (the spread) is usually no more than 10 pips, or hundredths, of a currency unit.
Most currencies are quoted in terms of how many units of that currency would equal $1. However, the British pound, New Zealand dollar, Australian dollar, Irish punt and the Euro are quoted in terms of how many U.S. dollars would equal one unit of those currencies.
The currencies of the world’s large, industrialized economies, or hard currencies, are always in demand and are actively traded. In terms of trading volumes, the FX market is dominated by four currencies: the U.S. dollar, the euro, the Japanese yen and the British pound. Together these account for over 80 percent of the market.
It is not always easy to find a market for all currencies. The demand for currencies of less developed countries, soft currencies, is a lot less than for the hard currencies. Weak demand internationally along with exchange controls may make these currencies difficult to convert.
Traders
Forex: Trading Deal
Traders in the foreign exchange market make thousands of trades daily, buying and selling currencies while exchanging market information. The $1.2 trillion that is traded everyday may be used for varied purposes:
"Yoshi, it’s Maria in New York. May I have a price on twenty cable."
"Sure. One seventy-five, twenty-thirty."
"Mine twenty."
"All right. At 1.7530, I sell you twenty million pounds."
"Done."
"What do you think about the Japanese yen? It’s up 100 pips."
"I saw that. A few German banks have been buying steadily all day…."
* For the import and export needs of companies and individuals
* For direct foreign investment
* To profit from the short-term fluctuations in exchange rates
* To manage existing positions or
* To purchase foreign financial instruments
In the volatile FX market, traders constantly try to predict the behavior of other market participants. If they correctly anticipate their opponents’ strategies, they can act first and beat the competition.
Traders make money by purchasing currency and selling it later at a higher price, or, anticipating the market is heading down, selling at a high price and buying back at a lower price later.
Trader purchases a lot of currency = long on the currency (e.g. long dollar, long yen)
Trader sells a lot of a currency = short on the currency (e.g. short sterling)
To predict the movements of currencies, traders often try to determine whether the currency’s price reflects its fundamental value in terms of current economic conditions. Examining inflation, interest rates, and the relative strength of the country’s economy helps them make a determination.
Currency underpriced = price will go up
Currency overpriced = price will go down
Traders in the foreign exchange market make thousands of trades daily, buying and selling currencies while exchanging market information. The $1.2 trillion that is traded everyday may be used for varied purposes:
"Yoshi, it’s Maria in New York. May I have a price on twenty cable."
"Sure. One seventy-five, twenty-thirty."
"Mine twenty."
"All right. At 1.7530, I sell you twenty million pounds."
"Done."
"What do you think about the Japanese yen? It’s up 100 pips."
"I saw that. A few German banks have been buying steadily all day…."
* For the import and export needs of companies and individuals
* For direct foreign investment
* To profit from the short-term fluctuations in exchange rates
* To manage existing positions or
* To purchase foreign financial instruments
In the volatile FX market, traders constantly try to predict the behavior of other market participants. If they correctly anticipate their opponents’ strategies, they can act first and beat the competition.
Traders make money by purchasing currency and selling it later at a higher price, or, anticipating the market is heading down, selling at a high price and buying back at a lower price later.
Trader purchases a lot of currency = long on the currency (e.g. long dollar, long yen)
Trader sells a lot of a currency = short on the currency (e.g. short sterling)
To predict the movements of currencies, traders often try to determine whether the currency’s price reflects its fundamental value in terms of current economic conditions. Examining inflation, interest rates, and the relative strength of the country’s economy helps them make a determination.
Currency underpriced = price will go up
Currency overpriced = price will go down
Thursday, August 6, 2009
Center of trading
Forex: Should you get Involved in Forex Trading?
A forex market will be present when two countries are involved in trading, and when money is traded for goods, services or a combination of these things. Currency is the money that trades hands, from one to another. Often times, a bank is going to be the source of forex trading, as millions of dollars are traded daily. There is nearly two trillion dollars traded daily on the forex market.
If you are already involved in the stock market, you have some idea of what forex trading really is all about. If you, as an individual want to be involved in forex trading, you must get involved through broker, or a financial institution. Individuals are also known as spectators, even if you are investing money because the amount of money you are investing is minimal compared to the millions of dollars that are invested by governments and by banks at any given time.
This does not mean you can't get involved. Your broker or investment advisor will be able to tell you more about how you can be involved in forex trading. In the US, there are many regulations and laws in regards to who can handle forex trading for US citizens so if you are searching the internet for a broker, be sure you read the print, and the information about where the company is located and if it is legal for you to do business with that company.
A forex market will be present when two countries are involved in trading, and when money is traded for goods, services or a combination of these things. Currency is the money that trades hands, from one to another. Often times, a bank is going to be the source of forex trading, as millions of dollars are traded daily. There is nearly two trillion dollars traded daily on the forex market.
If you are already involved in the stock market, you have some idea of what forex trading really is all about. If you, as an individual want to be involved in forex trading, you must get involved through broker, or a financial institution. Individuals are also known as spectators, even if you are investing money because the amount of money you are investing is minimal compared to the millions of dollars that are invested by governments and by banks at any given time.
This does not mean you can't get involved. Your broker or investment advisor will be able to tell you more about how you can be involved in forex trading. In the US, there are many regulations and laws in regards to who can handle forex trading for US citizens so if you are searching the internet for a broker, be sure you read the print, and the information about where the company is located and if it is legal for you to do business with that company.
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