BROWSING THE CURRENCIES MARKET
The June Dollar closed sharply lower on Monday and below the 20-day moving average crossing at 82.10. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near-term. Closes below the reaction low crossing at 81.97 would confirm that a short-term top has been posted. If June extends this spring's rally, the 50% retracement level of this year's decline crossing at 83.01 is the next upside target. The June Euro gapped up and closed higher on Monday as it consolidates above the 38% retracement level of this year's rally crossing at 134.279. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing at135.081 are needed to confirm that a short-term low has been posted. If June extends this spring's decline, the 50% retracement level of this year's rally crossing at 133.405 is the next downside target. The June British Pound gapped up and closed above the reaction high crossing at 1.9892 on Monday thereby renewing the rally off May's low. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If June extends this week's rally, the reaction high crossing at 1.9992 is the next upside target. Closes below the 10-day moving average crossing at 1.9809 would confirm that a short-term top has been posted.The June Swiss Franc gapped up and closed above the 10-day moving average crossing at .8165 on Monday. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are neutral hinting that sideways to higher prices are possible near-term. Closes above the reaction high crossing at .8210 are needed to confirm that a short-term low has been posted. If June renews this spring's decline, the reaction low crossing at .8064 is the next downside target. The June Canadian Dollar closed higher on Monday as it extended this year's rally above monthly resistance crossing at 94.15. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends this spring's rally, monthly resistance crossing at 95.30 is the next upside target. Closes below the 20-day moving average crossing at .9189 are needed to confirm that a top has been posted. The June Japanese Yen closed higher due to short covering on Monday as it consolidated some of last week's decline. The mid- range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If June extends this spring's decline, weekly support crossing at.8024 is the next downside target. Closes above the 20-day moving average crossing at .8293 are needed to confirm that a short- term low has been posted.
Thursday, November 8, 2007
The Exchange Rate
The Exchange Rate
Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or "the Majors". Some sources also include the Australian dollar (AUD) within the group of major currencies.
The first currency in the exchange pair is referred to as the base currency and the second currency as the counter or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1. Therefore, the exchange rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchange rate also tells a seller how much is received in the counter or quote currency when selling one unit of the base currency. For example, an exchange rate for EUR/USD of 1.2083 specifies to the buyer of euros that 1.2083 USD must be paid to obtain 1 euro.
At any given point, time and place, if an investor buys any currency and immediately sells it - and no change in the exchange rate has occurred - the investor will lose money. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency. For instance, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (also called points, one pip = 0.0001), which is very high in comparison to the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since even they require a smaller movement in exchange rates in order to profit from a trade.
Margin
Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future. Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but has the tendency to inflate rates of loss, on top of systemic risk.
Leveraged Financing
The ratio of investment to actual value is called "leverage". Leveraged financing, i.e., the use of credit, such as a trade purchased on a margin, is very common in Forex. Using a $1000 to buy a Forex contract with a $100,000 value is "leveraging" at a 1:100 ratio. The invested amount of $1000 is all that is under risk in order to achieve the gain of $100,000. The loan/leveraged in the margined account is collateralized by an investor's initial deposit. As a result, this may result in being able to control $100,000 for as little as $1,000.
Because currencies are traded in pairs and exchanged one against the other when traded, the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or "the Majors". Some sources also include the Australian dollar (AUD) within the group of major currencies.
The first currency in the exchange pair is referred to as the base currency and the second currency as the counter or quote currency. The counter or quote currency is thus the numerator in the ratio, and the base currency is the denominator. The value of the base currency (denominator) is always 1. Therefore, the exchange rate tells a buyer how much of the counter or quote currency must be paid to obtain one unit of the base currency. The exchange rate also tells a seller how much is received in the counter or quote currency when selling one unit of the base currency. For example, an exchange rate for EUR/USD of 1.2083 specifies to the buyer of euros that 1.2083 USD must be paid to obtain 1 euro.
At any given point, time and place, if an investor buys any currency and immediately sells it - and no change in the exchange rate has occurred - the investor will lose money. The reason for this is that the bid price, which represents how much will be received in the counter or quote currency when selling one unit of the base currency, is always lower than the ask price, which represents how much must be paid in the counter or quote currency when buying one unit of the base currency. For instance, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (also called points, one pip = 0.0001), which is very high in comparison to the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In general, smaller spreads are better for Forex investors since even they require a smaller movement in exchange rates in order to profit from a trade.
Margin
Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in Forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future. Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value. Margin trading also enhances the rate of profit, but has the tendency to inflate rates of loss, on top of systemic risk.
Leveraged Financing
The ratio of investment to actual value is called "leverage". Leveraged financing, i.e., the use of credit, such as a trade purchased on a margin, is very common in Forex. Using a $1000 to buy a Forex contract with a $100,000 value is "leveraging" at a 1:100 ratio. The invested amount of $1000 is all that is under risk in order to achieve the gain of $100,000. The loan/leveraged in the margined account is collateralized by an investor's initial deposit. As a result, this may result in being able to control $100,000 for as little as $1,000.
Spreads
Spreads
Spreads are the difference between Buy and Sell ( or BID and ASK). In other words, this is the difference between the market maker's selling price (to its clients) and the price the market maker buys it from its clients. If an investor buys a currency and immediately sells it ( and thus there is no change in the rate of exchange), the investor will lose money. The reason for this is the spread. At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which is required to purchase a unit of base currency. for example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (percentage in points; one pip=.0001). such a rate is much higher that the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In General, smaller spreads are better for Forex investors since they require a smaller movement in exchange rates in order to profit from a trade.
Price, Quotes and Indications
The price of a currency (in terms of the counter currency), is called "Quote". There are two kinds of quotes in the Forex market:
The Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. - Japanese Yen, Canadian dollar, etc.
The Indirect Quote: the price of 1 unit of a currency in terms of US dollars, e.g. - British pound, euro.
The market maker provides the investor with a quote. The quote is the price the market maker will honor when the deal is executed. This is unlike an "indication" by the market maker, which informs the trader about the market price level, but is not the final rate for a deal.
Cross rates - any quote which is not against the US dollar is called "cross". For instance, GBP/JPY is a cross rate, since it is calculated via the US dollar. Here is how the GBP/JPY rate is calculated:
GBP/USD = 1.7464
USD/JPY = 112.29
Therefore: GBP/JPY = 112.29 X 1.7464 = 196.10
Spreads are the difference between Buy and Sell ( or BID and ASK). In other words, this is the difference between the market maker's selling price (to its clients) and the price the market maker buys it from its clients. If an investor buys a currency and immediately sells it ( and thus there is no change in the rate of exchange), the investor will lose money. The reason for this is the spread. At any given moment, the amount that will be received in the counter currency when selling a unit of base currency will be lower than the amount of counter currency which is required to purchase a unit of base currency. for example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015, representing a spread of 1000 pips (percentage in points; one pip=.0001). such a rate is much higher that the bid/ask currency rates that online Forex investors commonly encounter, such as 1.2015/1.2020, with a spread of 5 pips. In General, smaller spreads are better for Forex investors since they require a smaller movement in exchange rates in order to profit from a trade.
Price, Quotes and Indications
The price of a currency (in terms of the counter currency), is called "Quote". There are two kinds of quotes in the Forex market:
The Direct Quote: the price for 1 US dollar in terms of the other currency, e.g. - Japanese Yen, Canadian dollar, etc.
The Indirect Quote: the price of 1 unit of a currency in terms of US dollars, e.g. - British pound, euro.
The market maker provides the investor with a quote. The quote is the price the market maker will honor when the deal is executed. This is unlike an "indication" by the market maker, which informs the trader about the market price level, but is not the final rate for a deal.
Cross rates - any quote which is not against the US dollar is called "cross". For instance, GBP/JPY is a cross rate, since it is calculated via the US dollar. Here is how the GBP/JPY rate is calculated:
GBP/USD = 1.7464
USD/JPY = 112.29
Therefore: GBP/JPY = 112.29 X 1.7464 = 196.10
Foreign Exchange (Forex) Trading Basics
Forex Trading Overview
The Foreign exchange market is a nonstop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The participants in the currency exchange markets have traditionally been the central and commercial banks, corporations, institutional investors, and hedge funds managers. In 2002, Bank of America alone made a $530 Million profit in Forex trading as stated on their annual statement under "Global Investment Income". In 1986, Caterpillar made a 100 Million profit in Forex trading and would have actually had an operating loss for the year on their normal business if it were not for that profit from Forex. In 2003, half of Daimler Chryslers 2Q operating profit was from currency trades, making more money on foreign exchange than by selling cars.
Due to its popularity and the potential for very lucrative returns on investment, many private investors have also migrated into this fast growing arena. Some of the major reasons why private investors are attracted to currency exchange market and short-term Forex trading are:
* The Forex market is open for business around the clock. Nonstop 24 hours a-day 7 days a-week access to global Forex dealers are at the disposal of the trader.
* The Forex market is the biggest market in the world. It is an enormous liquid market, with a daily turnover of more than 2.5 trillion dollars, making it easy to trade most currencies around the clock.
* The Forex markets can be very volatile due to the interdependencies of the world economy on current events. As such, the Forex market offers opportunities for huge profit potentials that are derived from volatilities of world currency prices.
* The Forex Market contains inherent standard instruments for controlling risk exposure.
* An investor has the ability to profit in both a rising or falling market.
* The investor can maintain leveraged trading with relatively low margin requirements.
* The Forex trader has many options for zero commission trading.
Just like in any other market, the goal of the investor in Forex trading is to make profits from price movements. In Forex trading, an investor makes money by trading foreign currencies and the trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Jan 15th, 2004 was 1.0757. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1075.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.90 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk- free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
The whole premise behind trading currencies is that, the investor trades only when he expects the currency that he is buying to increase in value relative to the currency he is selling. If the currency he is buying does increase in value, he must sell back the other currency in order to lock in a profit. An open position is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position. However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Most of the remaining percentage of the forex market belongs to hedging (managing business exposures to various currencies ) and other activities. Forex trades (trading onboard internet platforms) are non-delivery trades, i.e., currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Both parties to such contracts ( the trader and the trading platform ) undertake to fulfill their obligations: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 70% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (i.e., the physical delivery of the currencies). Thus, the contract ends by offsetting it against an opposite position, resulting in the profit and loss of the parties involved. An example of a trading platform is the Easy-Forex Trading Platform.
The Foreign exchange market is a nonstop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.
The participants in the currency exchange markets have traditionally been the central and commercial banks, corporations, institutional investors, and hedge funds managers. In 2002, Bank of America alone made a $530 Million profit in Forex trading as stated on their annual statement under "Global Investment Income". In 1986, Caterpillar made a 100 Million profit in Forex trading and would have actually had an operating loss for the year on their normal business if it were not for that profit from Forex. In 2003, half of Daimler Chryslers 2Q operating profit was from currency trades, making more money on foreign exchange than by selling cars.
Due to its popularity and the potential for very lucrative returns on investment, many private investors have also migrated into this fast growing arena. Some of the major reasons why private investors are attracted to currency exchange market and short-term Forex trading are:
* The Forex market is open for business around the clock. Nonstop 24 hours a-day 7 days a-week access to global Forex dealers are at the disposal of the trader.
* The Forex market is the biggest market in the world. It is an enormous liquid market, with a daily turnover of more than 2.5 trillion dollars, making it easy to trade most currencies around the clock.
* The Forex markets can be very volatile due to the interdependencies of the world economy on current events. As such, the Forex market offers opportunities for huge profit potentials that are derived from volatilities of world currency prices.
* The Forex Market contains inherent standard instruments for controlling risk exposure.
* An investor has the ability to profit in both a rising or falling market.
* The investor can maintain leveraged trading with relatively low margin requirements.
* The Forex trader has many options for zero commission trading.
Just like in any other market, the goal of the investor in Forex trading is to make profits from price movements. In Forex trading, an investor makes money by trading foreign currencies and the trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Jan 15th, 2004 was 1.0757. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1075.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.90 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk- free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
The whole premise behind trading currencies is that, the investor trades only when he expects the currency that he is buying to increase in value relative to the currency he is selling. If the currency he is buying does increase in value, he must sell back the other currency in order to lock in a profit. An open position is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position. However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Most of the remaining percentage of the forex market belongs to hedging (managing business exposures to various currencies ) and other activities. Forex trades (trading onboard internet platforms) are non-delivery trades, i.e., currencies are not physically traded, but rather there are currency contracts which are agreed upon and performed. Both parties to such contracts ( the trader and the trading platform ) undertake to fulfill their obligations: one side undertakes to sell the amount specified, and the other undertakes to buy it. As mentioned, over 70% of the market activity is for speculative purposes, so there is no intention on either side to actually perform the contract (i.e., the physical delivery of the currencies). Thus, the contract ends by offsetting it against an opposite position, resulting in the profit and loss of the parties involved. An example of a trading platform is the Easy-Forex Trading Platform.
Trading Platform
Trading Platform
Synthesis Bank, Switzerland’s most competitive online trading bank, is pleased to present you its Tradingfloor 2 platform.
Making the most of the success of our previous trading software, Tradingfloor 2 offers the same access to a full range of products as well as to new functions that will enable you to process your trading operations under the best conditions.
The Tradingfloor 2 trading platform has a new, powerful graphic interface which allows you to manipulate, analyse and compare the historical prices of multiple financial instruments, i.e. currencies (Forex), shares, CFDs and futures.
This new online trading interface, which is accessible to all, offers unprecedented means for analysing price movements of financial instruments and is completely free for Synthesis Bank’s clients.
The New Graphic Interface
Boasting all the functions of a professional graphic interface for a subscription service, the new online trading platform offers unprecedented means for analysing price movements of financial instruments.
Sideways Scroll and Zoom
Scroll the window sideways to view previous financial datas Move the axes to change the scale or compress the graph Use the Zoom button to zoom in or out Configuration and Trend Analysis to Monitor your Online TradingThe platform offers several functions that will help you analyse market configurations and trends, in particular:
Numerous curves and annotations that monitor market trends.There are various studies available, among which you will find your favourites and those that will help you compile your Trading Plan. Integration of your Trading Account : you can view the open positions directly from your accounts. Comparison of Multiple Instruments : you can view multiple instruments on the same axis for easy comparison. The reference point can be changed to compare a given point in time. A more detailed Quoting Screen
Gathering all the products into one online trading module, the new Tradingfloor 2 quoting screen allows you to monitor the stock exchange quotes and those of several other instruments from one quoting screen and to send your orders directly, based on the prices displayed.
Trader ScreenThe platform offers a new, fully-customisable screen, allowing you to choose the position of the charts, quotes, analyses and modules.
Instrument Explorer
The platform offers rapid access to thousands of instruments and the automatic launch of online trading, analysis and chart modules.The Instrument Explorer makes a certain number of trading tools available (searches and filters) to help you quickly find the instruments you are looking for and monitor your trading model:
Enter the first letters of the instrument or the name of the company. Uncheck the products that do not interest you. Classify the instruments by sectors. Launch Pad FunctionThe Instrument Explorer enables the automatic launch of online trading, analysis and chart modules.
Document FormatDocument format takes up the entire trader screen and is a display mode that has been tailor-made for the trading tools containing a considerable amount of information or text.
Panel FormatThis is a more flexible format that enables the different modules to be placed around the Document, moved with the trader screen, or even moved outside of this workspace if you are using multiple screens with your trading software.
Favourites ListAdd the financial instruments that you monitor regularly to your favourites list to gain quick access to them from your trading platform. Quick access to your recent instruments is also possible from your favourites list.
Synthesis Bank, Switzerland’s most competitive online trading bank, is pleased to present you its Tradingfloor 2 platform.
Making the most of the success of our previous trading software, Tradingfloor 2 offers the same access to a full range of products as well as to new functions that will enable you to process your trading operations under the best conditions.
The Tradingfloor 2 trading platform has a new, powerful graphic interface which allows you to manipulate, analyse and compare the historical prices of multiple financial instruments, i.e. currencies (Forex), shares, CFDs and futures.
This new online trading interface, which is accessible to all, offers unprecedented means for analysing price movements of financial instruments and is completely free for Synthesis Bank’s clients.
The New Graphic Interface
Boasting all the functions of a professional graphic interface for a subscription service, the new online trading platform offers unprecedented means for analysing price movements of financial instruments.
Sideways Scroll and Zoom
Scroll the window sideways to view previous financial datas Move the axes to change the scale or compress the graph Use the Zoom button to zoom in or out Configuration and Trend Analysis to Monitor your Online TradingThe platform offers several functions that will help you analyse market configurations and trends, in particular:
Numerous curves and annotations that monitor market trends.There are various studies available, among which you will find your favourites and those that will help you compile your Trading Plan. Integration of your Trading Account : you can view the open positions directly from your accounts. Comparison of Multiple Instruments : you can view multiple instruments on the same axis for easy comparison. The reference point can be changed to compare a given point in time. A more detailed Quoting Screen
Gathering all the products into one online trading module, the new Tradingfloor 2 quoting screen allows you to monitor the stock exchange quotes and those of several other instruments from one quoting screen and to send your orders directly, based on the prices displayed.
Trader ScreenThe platform offers a new, fully-customisable screen, allowing you to choose the position of the charts, quotes, analyses and modules.
Instrument Explorer
The platform offers rapid access to thousands of instruments and the automatic launch of online trading, analysis and chart modules.The Instrument Explorer makes a certain number of trading tools available (searches and filters) to help you quickly find the instruments you are looking for and monitor your trading model:
Enter the first letters of the instrument or the name of the company. Uncheck the products that do not interest you. Classify the instruments by sectors. Launch Pad FunctionThe Instrument Explorer enables the automatic launch of online trading, analysis and chart modules.
Document FormatDocument format takes up the entire trader screen and is a display mode that has been tailor-made for the trading tools containing a considerable amount of information or text.
Panel FormatThis is a more flexible format that enables the different modules to be placed around the Document, moved with the trader screen, or even moved outside of this workspace if you are using multiple screens with your trading software.
Favourites ListAdd the financial instruments that you monitor regularly to your favourites list to gain quick access to them from your trading platform. Quick access to your recent instruments is also possible from your favourites list.
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