It is also good to understand the means be which the
currency conversion is expressed. The comparison is usually
made in a ratio known as the cross-rate. In this
configuration, the two currencies are listed in an XXX/YYY
ratio, with the XXX position referred to as the base currency.
The base currency is usually expressed as a whole number,
while the YYY position is expressed as the decimal that most
closely matches the based currency rate. It is sort of like
making reference to miles per gallon or rotations per minute
on a car – a direct comparison of one to the other in the
form of a ratio.
The smallest fraction, or decimal, in which a currency can be
traded, is called a pip and this is usually the degree to which
a cross-rate is expressed. For example, if the British pound
sterling can be traded in thousandths, the currency will be
expressed to the third decimal place. The U.S. dollar is
often expressed to the hundredth of a cent (the fourth
decimal place).
In one cross-rate expression example, one U.S. dollar may
be equivalent to 117.456 Japanese yen. This ratio would be
expressed as 1.000/117.456. The base currency is almost
always expressed as a single unit (as in one dollar as
opposed to ten dollars), and frequently that unit of
measurement is the U.S. dollar. Since the whole number
value (or big figure, as it is referred to) of the secondary
currency, or the currency in the YYY position in terms of
conversion changes so infrequently, often only the decimal
portion of the number is mentioned in the Foreign Exchange
Market.
Therefore, in the ratio above, you may hear that the yen is
trading at .456, with no mention at all of the 117 whole yen
that is shown in the ratio. This is because the exchange rate
may vary from 117.456 to 117.423, but not to 119.024.
Experiencing a change in the big figure – the whole number
ahead of the decimal – unless it was only because the
number was already within a few thousandths, would
represent much too large a shift in value for a single tradingperiod and would be a rare occurrence that could cause the
entire market to make a drastic swing in one direction or the
other.
The most common currencies found in Forex are the U.S.
dollar, the British pound sterling, the Euro, the Japanese
yen, and the Australian dollar. In the past, there would
have been many more currencies to keep track of (such as
the franc, the lira, or the Deutschmark). However, with the
consolidation of most of the European market trading on
Forex to the Euro, many currencies have been eliminated,
making trade on Forex for other lands less complicated.
If you purchase a commodity in a particular currency, and
that currency’s value falls against the U.S. dollar, you can
actually make money by selling that same commodity in
dollars. The same is true in reverse should the value of a
foreign currency increase against a U.S. dollar. Of course,
you can only take advantage of such a situation should the
commodity be traded in both currencies and both markets in
question. We will discuss this process, as well as other ways
to take advantage of the Foreign Exchange Market (like
arbitrage) in more depth in future chapters.
Once you are able to discern a base value of each particular
currency and its conversion rate against others traded on
Forex, you will be able to more closely monitor the change
in currency conversion, including its inconsistency and
volatility. Such ideas will not seem so “foreign”, and you
will be caught up and knowledgeable right along with the
pros. Then, you will need to learn how to read, understand,
and ultimately interpret additional market trends.
Tuesday, February 24, 2009
Forex:Working With Multiple Currencies
Since Forex is the Foreign Exchange Market, you obviously
cannot expect everyone within the market to trade in U.S.
dollars (and why not, you might ask? – but remember that
not everyone covets the U.S. dollar). With so many
variables and volatile currencies being exchanged, how can
you know a good buy or sell when you see one without
complete awareness of the value of foreign currency?
The first step is to find a source that will give you a basic
idea of the current exchange rate between your domestic
currency and the foreign currency in question. You should
do this as a base listing for any currency that with which you
might become involved. Of course, this will not be
consistent down to the cent or fraction of a particular
currency throughout an entire business day, but at least you
will have your starting point from which to begin, almost like
North on a compass. Such sources can be found all over the
Internet, as well as through many brokers, both on line and
in person.
cannot expect everyone within the market to trade in U.S.
dollars (and why not, you might ask? – but remember that
not everyone covets the U.S. dollar). With so many
variables and volatile currencies being exchanged, how can
you know a good buy or sell when you see one without
complete awareness of the value of foreign currency?
The first step is to find a source that will give you a basic
idea of the current exchange rate between your domestic
currency and the foreign currency in question. You should
do this as a base listing for any currency that with which you
might become involved. Of course, this will not be
consistent down to the cent or fraction of a particular
currency throughout an entire business day, but at least you
will have your starting point from which to begin, almost like
North on a compass. Such sources can be found all over the
Internet, as well as through many brokers, both on line and
in person.
Forex Today
While some countries have still not accepted the currency as
their own (such as Britain, who still uses the sterling pound),
the process of currency conversion has been simplified
without the large number of various currencies that were
previously dealt with. Instead of dozens of currencies, the
main countries trade in five – U.S. dollars, Australian
dollars, British pounds sterling, the Euro, and the Japanese
Yen.
Today, the Foreign Exchange Market is international and
worldwide. The market is open 24 hours a day, 5 days a
week, to accommodate all of the time zones for all of the
major players. These now include most of Europe, the
United States, and Asian markets, especially Japan. Even
Australia has joined the international trading markets, and
since such nations are halfway around the world from some
of the other top players, time zones obviously must be taken
into consideration.
Another completely separate but perhaps more important
concern with trading in Forex is understanding how trade
works in multiple currencies. How can you compare the
value of a stock across international lines if the values are
expressed in two separate, non-equivalent currencies? And
how do you measure gains and losses when conversion rate
is constantly changing?
their own (such as Britain, who still uses the sterling pound),
the process of currency conversion has been simplified
without the large number of various currencies that were
previously dealt with. Instead of dozens of currencies, the
main countries trade in five – U.S. dollars, Australian
dollars, British pounds sterling, the Euro, and the Japanese
Yen.
Today, the Foreign Exchange Market is international and
worldwide. The market is open 24 hours a day, 5 days a
week, to accommodate all of the time zones for all of the
major players. These now include most of Europe, the
United States, and Asian markets, especially Japan. Even
Australia has joined the international trading markets, and
since such nations are halfway around the world from some
of the other top players, time zones obviously must be taken
into consideration.
Another completely separate but perhaps more important
concern with trading in Forex is understanding how trade
works in multiple currencies. How can you compare the
value of a stock across international lines if the values are
expressed in two separate, non-equivalent currencies? And
how do you measure gains and losses when conversion rate
is constantly changing?
The History Of Forex
When foreign trade began, it was not an international trade
market. It was borne out of the Bretton Woods agreement
in 1944, which set forth that foreign currencies would be
fixed against the dollar, which was valued at $35 per ounce
of gold. This precedent was first put into practice in 1967,
when a bank in Chicago refused to fund a loan to a professor
in sterling pound. Of course, his intention was to sell the
currency, which he felt was priced too high against the
dollar, then buy it back later when the value had declined,
turning a quick profit.
After 1971, when the dollar was no longer convertible to
gold and the domestic market was stronger, the Bretton
Woods agreement was abandoned, and the currency
conversion process became more variable. This allowed for
a stronger backing in the foreign markets, and the United
States and Europe began a strong trade relationship. In the
1980s, the market hours and usage was extended through
the use of computers and technology to include the Asian
time zones as well. At this time, foreign exchange equaled
about $70 billion a day. Today, about twenty years later,
the trade level has skyrocketed, with trade equaling close to
$1.5 trillion daily.
Originally, trading across international lines was more
difficult, with several different currencies involved across
Europe. Though the major players in the European market
were deeply involved in and veterans of international trade
by the time other markets joined in, there were more
currencies to keep track of – the franc, the pound, the lira,
and many more – than was reasonable. With the birth of
the European Union in 1992, the wheels were set in motion
to create a single currency that would be used across most
of Europe, and the Euro was finally established and put into
circulation in 1999.
market. It was borne out of the Bretton Woods agreement
in 1944, which set forth that foreign currencies would be
fixed against the dollar, which was valued at $35 per ounce
of gold. This precedent was first put into practice in 1967,
when a bank in Chicago refused to fund a loan to a professor
in sterling pound. Of course, his intention was to sell the
currency, which he felt was priced too high against the
dollar, then buy it back later when the value had declined,
turning a quick profit.
After 1971, when the dollar was no longer convertible to
gold and the domestic market was stronger, the Bretton
Woods agreement was abandoned, and the currency
conversion process became more variable. This allowed for
a stronger backing in the foreign markets, and the United
States and Europe began a strong trade relationship. In the
1980s, the market hours and usage was extended through
the use of computers and technology to include the Asian
time zones as well. At this time, foreign exchange equaled
about $70 billion a day. Today, about twenty years later,
the trade level has skyrocketed, with trade equaling close to
$1.5 trillion daily.
Originally, trading across international lines was more
difficult, with several different currencies involved across
Europe. Though the major players in the European market
were deeply involved in and veterans of international trade
by the time other markets joined in, there were more
currencies to keep track of – the franc, the pound, the lira,
and many more – than was reasonable. With the birth of
the European Union in 1992, the wheels were set in motion
to create a single currency that would be used across most
of Europe, and the Euro was finally established and put into
circulation in 1999.
Forex Functionality
While the functionality of Forex is the same as a domestic
stock exchange, the commodities and prices are more
volatile, and there are additional factors to take into
considerations besides the typical risks associated with a
domestic market. You will have to contend with not only the
value of your stocks and your currency, but also the foreign
currencies involved in any trades or exchanges on Forex, as
well as the inconsistencies of values of particular goods and
services across international borders. It is like driving a car
with a standard transmission as opposed to an automatic.
On the domestic front, the work is mostly done for you, and
all you have to do is navigate, much like an automatic
transmission. However, shifting gears is quite similar to
having to constantly take part in the currency conversion. It
can be distracting, and it certainly complicates the act of
driving.
Because the financial situation of many countries is not as
secure as that of the United States, this can pose a
formidable problem in determining where to invest your
money and what to expect next in the international market.
Knowing what countries and currencies are involved in Forex
can assist you by allowing you to more closely monitor the
financial situation in the nations with which you will be
interacting.
stock exchange, the commodities and prices are more
volatile, and there are additional factors to take into
considerations besides the typical risks associated with a
domestic market. You will have to contend with not only the
value of your stocks and your currency, but also the foreign
currencies involved in any trades or exchanges on Forex, as
well as the inconsistencies of values of particular goods and
services across international borders. It is like driving a car
with a standard transmission as opposed to an automatic.
On the domestic front, the work is mostly done for you, and
all you have to do is navigate, much like an automatic
transmission. However, shifting gears is quite similar to
having to constantly take part in the currency conversion. It
can be distracting, and it certainly complicates the act of
driving.
Because the financial situation of many countries is not as
secure as that of the United States, this can pose a
formidable problem in determining where to invest your
money and what to expect next in the international market.
Knowing what countries and currencies are involved in Forex
can assist you by allowing you to more closely monitor the
financial situation in the nations with which you will be
interacting.
An Introduction to Forex
Forex is the nickname for the Foreign Exchange Market. In
the United States, there are several branches of the stock
market, each with their own name. For instance, some
stocks trade on the Dow Jones, others on Nasdaq. Of
course, all stock market transactions in the United States
take place on the New York Stock Exchange (NYSE). In
other countries the same is true. There may be one or more
distinct markets.
However, international trade takes place on the market
termed the Foreign Exchange Market, or Forex. Several
countries across the world in almost every time zone
participate in trade on Forex, with multiple currencies being
utilized and stocks and commodities from all participating
countries being offered for trade. Because there are so
many nations and time zones involved, Forex does not
function as a “business day” entity like most domestic stock
markets. It remains open for trade 24 hours a day, 5 days a
week.
Of course, these additional hours increase the risk factor
intensely for those of us who are human and obviously
cannot monitor our investments 24 hours a day. This means
that the value of your holdings could potentially plummet
overnight, while you sleep, because other countries are still
trading while you are in a dream world. Again, it is like a
car – there are many moving pieces under the hood, and
just because you cannot see them does not mean they are
not functioning.
This is one reason for several safety options, like limit
orders, which we will discuss later. This is also why it is
strongly recommended that your first attempts to make
money on the stock market are not transactions that take
place within the Foreign Exchange Market but on a standard
nine-to-five domestic trading market. In our car analogy,
this would be comparable to having asked someone who has
never driven or even changed the oil in a car to rebuild the
engine.
the United States, there are several branches of the stock
market, each with their own name. For instance, some
stocks trade on the Dow Jones, others on Nasdaq. Of
course, all stock market transactions in the United States
take place on the New York Stock Exchange (NYSE). In
other countries the same is true. There may be one or more
distinct markets.
However, international trade takes place on the market
termed the Foreign Exchange Market, or Forex. Several
countries across the world in almost every time zone
participate in trade on Forex, with multiple currencies being
utilized and stocks and commodities from all participating
countries being offered for trade. Because there are so
many nations and time zones involved, Forex does not
function as a “business day” entity like most domestic stock
markets. It remains open for trade 24 hours a day, 5 days a
week.
Of course, these additional hours increase the risk factor
intensely for those of us who are human and obviously
cannot monitor our investments 24 hours a day. This means
that the value of your holdings could potentially plummet
overnight, while you sleep, because other countries are still
trading while you are in a dream world. Again, it is like a
car – there are many moving pieces under the hood, and
just because you cannot see them does not mean they are
not functioning.
This is one reason for several safety options, like limit
orders, which we will discuss later. This is also why it is
strongly recommended that your first attempts to make
money on the stock market are not transactions that take
place within the Foreign Exchange Market but on a standard
nine-to-five domestic trading market. In our car analogy,
this would be comparable to having asked someone who has
never driven or even changed the oil in a car to rebuild the
engine.
Monday, February 23, 2009
Forex:Signal Strategy Trading
Day Forex Signal Strategy Trading is based on the ‘buy’ and ‘sell’ recommendations
delivered by a third party. Many forex traders can improve the profitability significantly
by using one or more such strategies while conducting the day forex trading.
Many of the online brokerage firms offering their services are backed with day forex
signal strategy trading software for generating non-linear technical signal for major
currencies. They can be obtained simply by setting the criteria on the software depending
on the present situation.
The Day Forex Signal Strategy Trading software uses non-linear advanced algorithms to
identify precise entry and exit levels with mechanical volatility-adjusted risk parameters.
These signals are updated twice per 24-hour trading day for all the major currency pairs
like EUR/USD, USD/JPY, USD/CHF, GBP/USD, and USD/CAD.
Some Day forex signal strategy trading systems use the mathematical concept of
Probability Advantage. The software based on Binary Equation System can predict the
signal for the trades investing in Forex.
The advantages of such Day forex Signal Strategy Trading Software are:
Ensures precise entry and exit signals
Offers controlled risk
Superior profit potential
Proven technical system
Commission-free Forex account setup
While you are engaged in day forex signal strategy trading you may adopt any of these
three types of trading to make your transactions fruitful. First you may watch for
Directional trade in which you keep the USD as the common currency and view the
moves of the other major currencies while performing the trade.
Second is the Strategic trade - watch carefully the movements of other majors like
EURO, GBP, JPY, CHF and AUD while trading with USD. The third is a Technical
trade, which is based on the short and long build-up in the market from time to time; so
you can do your trading for a quick return.
You should always take care to limit your losses while engaged in Day forex signal
strategy trading. One of the most useful strategies is not to retain the forex transaction
when the day ends.
As the Forex market is operational round the clock, any emergency situation arising in
some countries with a time difference can affect the market instantly. If you retain your
acquired Forex to gain more in the next day, you may face a huge loss in this sudden
development.
You should never invest all your money in day forex signal strategy trading. Keep some
money with you so that you can recover any loss you faced as quickly as possible.
You should never panic while performing the day forex signal strategy trading if the
market shows signs of unexpected moves. If your trading platform is backed by hedging
and advance hedging facilities, you can hedge the positions till the market comes to
hedging level. In this way you can hedge with 30-50 pips moves in your day forex signal
strategy trading before starting either way trades to earn back the money.
delivered by a third party. Many forex traders can improve the profitability significantly
by using one or more such strategies while conducting the day forex trading.
Many of the online brokerage firms offering their services are backed with day forex
signal strategy trading software for generating non-linear technical signal for major
currencies. They can be obtained simply by setting the criteria on the software depending
on the present situation.
The Day Forex Signal Strategy Trading software uses non-linear advanced algorithms to
identify precise entry and exit levels with mechanical volatility-adjusted risk parameters.
These signals are updated twice per 24-hour trading day for all the major currency pairs
like EUR/USD, USD/JPY, USD/CHF, GBP/USD, and USD/CAD.
Some Day forex signal strategy trading systems use the mathematical concept of
Probability Advantage. The software based on Binary Equation System can predict the
signal for the trades investing in Forex.
The advantages of such Day forex Signal Strategy Trading Software are:
Ensures precise entry and exit signals
Offers controlled risk
Superior profit potential
Proven technical system
Commission-free Forex account setup
While you are engaged in day forex signal strategy trading you may adopt any of these
three types of trading to make your transactions fruitful. First you may watch for
Directional trade in which you keep the USD as the common currency and view the
moves of the other major currencies while performing the trade.
Second is the Strategic trade - watch carefully the movements of other majors like
EURO, GBP, JPY, CHF and AUD while trading with USD. The third is a Technical
trade, which is based on the short and long build-up in the market from time to time; so
you can do your trading for a quick return.
You should always take care to limit your losses while engaged in Day forex signal
strategy trading. One of the most useful strategies is not to retain the forex transaction
when the day ends.
As the Forex market is operational round the clock, any emergency situation arising in
some countries with a time difference can affect the market instantly. If you retain your
acquired Forex to gain more in the next day, you may face a huge loss in this sudden
development.
You should never invest all your money in day forex signal strategy trading. Keep some
money with you so that you can recover any loss you faced as quickly as possible.
You should never panic while performing the day forex signal strategy trading if the
market shows signs of unexpected moves. If your trading platform is backed by hedging
and advance hedging facilities, you can hedge the positions till the market comes to
hedging level. In this way you can hedge with 30-50 pips moves in your day forex signal
strategy trading before starting either way trades to earn back the money.
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