The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007. 54 central banks and monetary authorities participated in the survey, collecting information from approximately 1280 market participants.
Excerpt from the BIS:
"The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates...Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors...A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market...Transactions between reporting dealers and non-reporting financial institutions, such as hedge funds, mutual funds, pension funds and insurance companies, more than doubled between April 2004 and April 2007 and contributed more than half of the increase in aggregate turnover." - BIS
Structure
Decentralised 'interbank' market
Main participants: Central Banks, commercial and investment banks, hedge funds, corporations & private speculators
The free-floating currency system arose from the collapse of the Bretton Woods agreement in 1971
Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2007
Trading Hours
24 hour market
Sunday 5pm EST through Friday 4pm EST.
Trading begins in the Asia-Pacific region followed by the Middle East, Europe, and America
Size
One of the largest financial markets in the world
$3.2 trillion average daily turnover, equivalent to:
More than 10 times the average daily turnover of global equity markets1
More than 35 times the average daily turnover of the NYSE2
Nearly $500 a day for every man, woman, and child on earth3
An annual turnover more than 10 times world GDP4
The spot market accounts for just under one-third of daily turnover
1. About $280 billion - World Federation of Exchanges aggregate 2006 2. About $87 billion - World Federation of Exchanges 2006 3. Based on world population of 6.6 billion - US Census Bureau 4. About $48 trillion - World Bank 2006.
Source: BIS Triennial Survey 2007
Wednesday, February 4, 2009
What are Your Options Regarding Forex Options Brokers?
Forex option brokers can generally be divided into two separate categories: forex brokers who offer online forex option trading platforms and forex brokers who only broker forex option trading via telephone trades placed through a dealing/brokerage desk. A few forex option brokers offer both online forex option trading as well a dealing/brokerage desk for investors who prefer to place orders through a live forex option broker.
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don’t want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific’s investor’s needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won’t spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO’s"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader’s needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms.
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don’t want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific’s investor’s needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won’t spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO’s"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader’s needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms.
What is forex Trading
Foreign Exchange Market, or Forex as it is commonly called, is an international exchange market to buy and sell different currencies from around the world. An investor has the ability to buy and sell these currencies in order to create gains from small movements in the value of one currency over another. The forex market is open from Monday at 0:00 GMT until Friday at 10:00 GMT. For this reason Forex traders are not limited to the general time constraints of the New York Stock Exchange or NASDAQ.
This versatility attracts many investors to become Forex traders. The liquidity of the Foreign Exchange Market is also very attractive for the Forex investor as trades range from 1 to 1.5 trillion dollars on a daily basis. These massive amounts of trades make it extremely difficult for any one trader to affect the market.
Foreign Exchange Trading is simply the purchase and sales of currency based on the strength of the currency and the fluctuation in the value of that currency. For example, if one were to invest $1,000 against the British pound at 1.7999 with a 1% margin and anticipate the exchange rate to climb. If that occurs and you close the exchange rate at 1.8050 you would earn roughly $400. Forex is giving you a 40% return on your investment.
Forex offers the possibility of huge profits in relatively short periods of time. The stock exchange is very different in that positions are generally maintained over a longer period of time. Although there are day traders, Forex traders have much shorter hold times on positions. Similar to the stock market marginal accounts can be obtained in the Foreign Exchange Market as well.
Forex marginal accounts are very engaging as they allow Forex traders to take large positions without having to make a large deposit. In many circumstances one can fund a marginal account with .05% the necessary funds. In other words, $500 would allow a $100,000 position. In order to trade Forex effectively and profitably, one must have some type of method to follow. There are two methods used in determining what Foreign Exchange trades one should make. There are two methods, fundamental Forex analysis, and technical Forex analysis.
Technical analysis is the most commonly used practice and uses the assumption that the changes that occur in the Foreign Exchange Market happened for a reason and are accurate. The belief is that if a currency has been trading towards a high then that currency will mostly continue towards that high with the adverse being true as well. The technical Forex view does not try to make long term predictions about the market but instead simply tries to take advantage of what has already been seen in the past.
The fundamental Forex method takes into account all aspects of the country in which the currency is traded. Things such as the economy, the countries prime interest rates, war, poverty level, and other factors are taken into account. If there is a sharp rise in the prime interest rate a Forex trader may take a position based on that information.
Online Forex trading has the potential of being extremely lucrative. One can learn to trade by creating an online Forex Account and begin by using a learning account without real funds. This will help you to understand the Forex trading process and how currencies are affected by different things that are happening on a global scale.
This versatility attracts many investors to become Forex traders. The liquidity of the Foreign Exchange Market is also very attractive for the Forex investor as trades range from 1 to 1.5 trillion dollars on a daily basis. These massive amounts of trades make it extremely difficult for any one trader to affect the market.
Foreign Exchange Trading is simply the purchase and sales of currency based on the strength of the currency and the fluctuation in the value of that currency. For example, if one were to invest $1,000 against the British pound at 1.7999 with a 1% margin and anticipate the exchange rate to climb. If that occurs and you close the exchange rate at 1.8050 you would earn roughly $400. Forex is giving you a 40% return on your investment.
Forex offers the possibility of huge profits in relatively short periods of time. The stock exchange is very different in that positions are generally maintained over a longer period of time. Although there are day traders, Forex traders have much shorter hold times on positions. Similar to the stock market marginal accounts can be obtained in the Foreign Exchange Market as well.
Forex marginal accounts are very engaging as they allow Forex traders to take large positions without having to make a large deposit. In many circumstances one can fund a marginal account with .05% the necessary funds. In other words, $500 would allow a $100,000 position. In order to trade Forex effectively and profitably, one must have some type of method to follow. There are two methods used in determining what Foreign Exchange trades one should make. There are two methods, fundamental Forex analysis, and technical Forex analysis.
Technical analysis is the most commonly used practice and uses the assumption that the changes that occur in the Foreign Exchange Market happened for a reason and are accurate. The belief is that if a currency has been trading towards a high then that currency will mostly continue towards that high with the adverse being true as well. The technical Forex view does not try to make long term predictions about the market but instead simply tries to take advantage of what has already been seen in the past.
The fundamental Forex method takes into account all aspects of the country in which the currency is traded. Things such as the economy, the countries prime interest rates, war, poverty level, and other factors are taken into account. If there is a sharp rise in the prime interest rate a Forex trader may take a position based on that information.
Online Forex trading has the potential of being extremely lucrative. One can learn to trade by creating an online Forex Account and begin by using a learning account without real funds. This will help you to understand the Forex trading process and how currencies are affected by different things that are happening on a global scale.
The Forex Market and Understanding Foreign Exchange Rates
Unlike the stock exchange, the Forex Market (foreign exchange market) is a relatively new player to the investment world. Today's current Forex market model started in the early 1970's, and today it represents the biggest financial market around, even surpassing the stock market. With trading surpassing $2 trillion dollars per day, the Forex market attracts more and more investors all the time. Before an investor starts trading on the Forex market, he should grasp the fundamentals of how exchange rates work.Exchange ratesBasically, the exchange rate represents the rate of exchange between two currencies. Most currencies are traded, or paired up against the dollar. The five most common currencies traded on the market are the dollar (USD), euro (EUR), the yen (JPY), the British pound (GBP), and the Swiss franc (CHF). Some other currencies that are traded are the Australian dollar, the Canadian dollar, and the Hong Kong dollar.In the exchange rate or ratio, the numerator represents the quote currency and the denominator the base currency, which always equals one.Let's say that an investor wants to exchange euros for dollars. In this case, the euro currency is the quote currency, or how much currency you have to exchange. The base currency is the dollar. The investor researches the current exchange rate (euros converted into dollars) either on the Internet, through the bank, broker, etc., and then multiplies that amount by the number of euros to exchange. Let's say that the exchange rate is 1.57959. That means that 1.57959 euros must be paid to receive one dollar. If he has 1000 euros to exchange, then he can receive $1,579.59 (1000 x 1.57959).On the flip side, the exchange rate can also tell the investor how much he'll receive if he converts dollars back into euros. If he has $1000, he can either divide that amount by the same euro to dollar exchange rate ($1000/1.57959 = 633.07 euros), or look up the conversation rate for dollars to euros on the Internet, etc. (i.e. .633072) and multiply it by the amount of dollars to exchange ($1000 x .633072 = 633.07 euros).Once the exchange rate concept is understood, the investor can feel more confident in investing in the Forex market.
Forex Market Scam
The Forex market is the biggest financial market in the world. But this doesn ' t make it easier; on the contrary. You have a lot of big advantages but Forex is also very challenging. Almost all advantages, when observed carefully, transform not is disadvantages but in challenges. It is the case of the Forex market being open 24 hours a day. When someone begins trading the Forex or reads about this particular market, this characteristic is taken as an advantage. Traders tend to think " Great! Finally I can trade whenever I want! ". Well, this is, in part, true. But, when you start trading the Forex, you ' ll see that volatility only appears during certain times and that if you are day trading, you can ' t be in front of your computer 24 hours a day. This is a challenge for most Forex traders who are looking for day trading the currency pairs. If you want to day trade, you will have to develop a decent strategy in order to concise it to a few hours a day, probably when the volatility is more likely to urge.Other big advantage that is always quoted related to the Forex market is the brim requirements. Well, smooth tuck away a pygmy invoice coextensive $300 you can advantage 100, 200 or rolled 400x your wad. You may think this is a great advantage but, in my opinion, this is more a challenge than an advantage. If you have a petite balance and pop to practice a steep side, you can avoid your entire balance in a single trade.Also, Forex is admitted as the scam market. You have trading systems, courses and common brokers that are constantly rated by traders as scams. In the case of the systems and courses in that they promise a lot of profits stash no elbow grease at all, and in the case of the brokers that donate you all the resources but inasmuch as trade lambaste you, don ' t agreement you withdraw your property or neatly disappear salt away it.When you start trading the Forex market, or if you present are, you demand to avoid the scams.Here are some tips of how to avoid Forex scams:1 - Exercise your shipshape sense. This is the primary phenomenon you compulsion to arrange. Evaluate carefully the product or the broker you are election. If you think they are offering you utterly much, be careful. It may be a scam.2 - When you are looking for a forex trading system or a course, you ' ll probably see things same " make $100, 000 in a epoch ". Forex is a challenging market and not everyone can make long green obscure it. Don ' t dispose fooled by stir gilded fast conspiracies.3 - One commendable tip when buying a trading system or course is to viewing if they have riches back guarantee or a unpaid trial spell. This journey, if you don ' t relating what you bought, you can always request for a decrease.4 - If you are looking for a forex trading system, course or broker, scan reviews untrue by others traders. Scrutinize what they think about the product, the abutment party, how they handle their clients and therefrom on. Construe all that you can.5 - Before buying a product or signing up veil a broker, always read their webpages. Feel costless to needle them your doubts. If they reckon on in their products and services, they will answer your questions.6 - If you buy a forex trading system or course, test it first on a demo account. Don ' t start with your real account because you don ' t know how it will actually work. It may need some adjustments on your part to make the strategy good for you.As I said, the Forex market is challenging. Unless you are able to spend some time with it, not only trading but also reading and learning, you won ' t make it. But, without a doubt, it ' s a very profitable market.
Forex Fundamental Analysis
The two primary approaches of analyzing Forex markets are technical analysis and fundamental analysis. Fundamental analysis comprises the examination of economic indicators, asset markets and political considerations when evaluating a nation’s currency in terms of another. The focus of fundamental analysis lies on the economic, social and political forces that drive supply and demand. There is no single set of beliefs that guide forex fundamental analysis, yet most fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.
Here we look at some of the major Forex fundamental factors that play a role in the movement of a currency:
Economic Indicators
Economic indicators are reports released by the government or a private organization that detail a country’s economic performance. These economic indicators can be released on a weekly basis, but the more common report is monthly. Indicators are based around a number of economical situations, of which the two primary factors are that of International trade and Interest. Subsidiary factors also include Consumer Price Index (CPI), Purchasing Managers Index (PMI), Durable goods orders, retail sales and Producer Price Index (PPI).
Currency’s Interest Rates
One of the major indicator factors, Interest rates, are a key economic function of any nation. Generally, when a country raises its interest rates, the country’s currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country’s stock market when there is a hike of interest rates.
International Trade
The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. A trade deficit can be an economic disaster for a government and a currency. A deficit may appear when a country is importing more than it is exporting, meaning that more money is leaving and less is coming in. In some ways, however, a trade deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.
Here we look at some of the major Forex fundamental factors that play a role in the movement of a currency:
Economic Indicators
Economic indicators are reports released by the government or a private organization that detail a country’s economic performance. These economic indicators can be released on a weekly basis, but the more common report is monthly. Indicators are based around a number of economical situations, of which the two primary factors are that of International trade and Interest. Subsidiary factors also include Consumer Price Index (CPI), Purchasing Managers Index (PMI), Durable goods orders, retail sales and Producer Price Index (PPI).
Currency’s Interest Rates
One of the major indicator factors, Interest rates, are a key economic function of any nation. Generally, when a country raises its interest rates, the country’s currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country’s stock market when there is a hike of interest rates.
International Trade
The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. A trade deficit can be an economic disaster for a government and a currency. A deficit may appear when a country is importing more than it is exporting, meaning that more money is leaving and less is coming in. In some ways, however, a trade deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.
4 Tips For Choosing a Reputable Forex Broker
Finding a Forex broker is a tough process to navigate through and for most people, the necessity of outside assistance is needed. Trying to trade in the Forex market without a broker could lead to devastating results for the normal trader. Similarly, hiring the wrong Forex broker can lead to the same result as trying to muddle through it alone. It is highly important that you be diligent in researching any prospective brokerage firms to handle your financial portfolio.A good Forex broker will supply you with clients that were successful and can attest to the specific broker's qualifications and success history. Put yourself in that position, would you testify to someone's strengths if they did a poor job for you? Client history testimony should be present in any prospective Forex broker and plentiful to indicate a solid background with trading. You can tentatively assess a lot from a Forex broker with a list of clients that will speak up for the brokerage firm or individual broker. It should be noted that all word of mouth testimony should be taken with a grain of salt and dissected to collect the pertinent information. Testimony should be used in your research to find a Forex broker but should not be the deciding factor.Another good morsel to test the reliability of any potential Forex broker is the amount of information, literature and lessons that they are willing to give to you. Most Forex brokers are of a high reputation and a solid background however, there are many out there that don't have a good history or no history and it is wise to steer clear of these brokers. You are trying to find a trusted financial advisor and settling for second best, just won't do. The more a potential Forex broker is willing to do for you in the area of helping you understand the Forex trading system, the better quality trader they will be for you.A good avenue to travel down when seeking a good Forex broker is to ask your acquaintances about Forex brokers and how they met. This can not only give you prospective referrals to great Forex brokers but will also equip you with ideas and resources that you may not have located. If you get a referral from friends, be sure to still research that specific broker and his qualifications before committing to any formal agreement.The other factor in finding a good Forex broker is the margin of return that is offered. A Forex trading margin used to influence your money and many Forex brokers offer different margins. Finding a Forex broker, who gives a margin of ten to one isn't a very good find so it's worth the time to reinvest in research. Remember that this industry is all about customer service and catering to the clients so if your prospective Forex broker doesn't return your calls within a reasonable time frame it would be advisable to keep searching.
What makes a good Trading Strategy?
Ask most NEW traders, and they will tell you about some moving average or combination of indicators or a chart pattern that they use. This is, as the more experienced trader knows, an entry point and not a strategy.
Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.
BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.
In my view: You absolutely MUST specialise.
I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".
So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.
What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
What "personality" does that share, index etc have?
What entry system is the most reliable for that share?
What stop loss system is the most effective for that share?
What average risk will a typical trade carry?
What exit system works well for that share?
What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
What timescale do you want to trade? (Using intra-day or end of day data)
How much data do you keep on past trades to help identify strategy weaknesses?
How does all this fit with your trading objectives?
Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.
It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.
THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.
Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.
BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.
In my view: You absolutely MUST specialise.
I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!
Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.
However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?
Because every share, index or commodity has it’s own "personality".
Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!
Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".
So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.
What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
What "personality" does that share, index etc have?
What entry system is the most reliable for that share?
What stop loss system is the most effective for that share?
What average risk will a typical trade carry?
What exit system works well for that share?
What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
What timescale do you want to trade? (Using intra-day or end of day data)
How much data do you keep on past trades to help identify strategy weaknesses?
How does all this fit with your trading objectives?
Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.
It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.
THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.
Sunday, February 1, 2009
World Interest Rates Table
Major Central Banks Overview
Central Bank Next Meeting Last Change Current Interest Rate
Bank of Canada Mar 03 2009 Jan 20 2009 1%
Bank of England Feb 05 2009 Jan 08 2009 1.5%
Bank of Japan Feb 19 2009 Dec 19 2008 0.1%
European Central Bank Feb 05 2009 Jan 15 2009 2%
Federal Reserve Mar 17 2009 Dec 16 2008 0.25%
Swiss National Bank Mar 12 2009 Dec 11 2008 0.5%
The Reserve Bank of Australia Feb 03 2009 Dec 02 2008 4.25%
Africa
Country Current Interest Rate Previous Last Change
Egypt 11.5% 11.0% Sep 22 2008
South Africa 11.5% 12.0% Dec 11 2008
Asia Pacific
Country Current Interest Rate Previous Last Change
Australia 4.25% 5.25% Dec 02 2008
China 5.31% 5.58% Dec 22 2008
Hong Kong SAR 0.5% 1.5% Dec 17 2008
India 5.5% 7.5% Jan 02 2009
Japan 0.1% 0.3% Dec 19 2008
Korea, Republic of 3.% 4.% Dec 11 2008
New Zealand 3.5% 5.0% Jan 28 2009
Taiwan 1.5% 2.0% Jan 07 2009
Europe
Country Current Interest Rate Previous Last Change
Czech Republic 2.25% 2.75% Dec 17 2008
European Monetary Union 2.0% 2.5% Jan 15 2009
Hungary 9.5% 10.0% Jan 19 2009
Iceland 18.% 12.% Oct 28 2008
Norway 3.00% 4.75% Dec 17 2008
Poland 5.00% 4.25% Dec 23 2008
Slovakia 2.50% 3.25% Dec 10 2008
Sweden 2.00% 3.75% Dec 04 2008
Switzerland 0.5% 1.0% Dec 11 2008
United Kingdom 1.5% 2.0% Jan 08 2009
Middle East
Country Current Interest Rate Previous Last Change
Turkey 13.% 15.% Jan 16 2009
North America
Country Current Interest Rate Previous Last Change
Canada 1.0% 1.5% Jan 20 2009
United States 0.25% 1.00% Dec 16 2008
South America
Country Current Interest Rate Previous Last Change
Brazil 12.75% 13.75% Jan 21 2009
The World Interest Rate Table covers the current interest rates of 23 different countries including previous rates and the latest dates when they were changed by Central Banks.
Central Bank Next Meeting Last Change Current Interest Rate
Bank of Canada Mar 03 2009 Jan 20 2009 1%
Bank of England Feb 05 2009 Jan 08 2009 1.5%
Bank of Japan Feb 19 2009 Dec 19 2008 0.1%
European Central Bank Feb 05 2009 Jan 15 2009 2%
Federal Reserve Mar 17 2009 Dec 16 2008 0.25%
Swiss National Bank Mar 12 2009 Dec 11 2008 0.5%
The Reserve Bank of Australia Feb 03 2009 Dec 02 2008 4.25%
Africa
Country Current Interest Rate Previous Last Change
Egypt 11.5% 11.0% Sep 22 2008
South Africa 11.5% 12.0% Dec 11 2008
Asia Pacific
Country Current Interest Rate Previous Last Change
Australia 4.25% 5.25% Dec 02 2008
China 5.31% 5.58% Dec 22 2008
Hong Kong SAR 0.5% 1.5% Dec 17 2008
India 5.5% 7.5% Jan 02 2009
Japan 0.1% 0.3% Dec 19 2008
Korea, Republic of 3.% 4.% Dec 11 2008
New Zealand 3.5% 5.0% Jan 28 2009
Taiwan 1.5% 2.0% Jan 07 2009
Europe
Country Current Interest Rate Previous Last Change
Czech Republic 2.25% 2.75% Dec 17 2008
European Monetary Union 2.0% 2.5% Jan 15 2009
Hungary 9.5% 10.0% Jan 19 2009
Iceland 18.% 12.% Oct 28 2008
Norway 3.00% 4.75% Dec 17 2008
Poland 5.00% 4.25% Dec 23 2008
Slovakia 2.50% 3.25% Dec 10 2008
Sweden 2.00% 3.75% Dec 04 2008
Switzerland 0.5% 1.0% Dec 11 2008
United Kingdom 1.5% 2.0% Jan 08 2009
Middle East
Country Current Interest Rate Previous Last Change
Turkey 13.% 15.% Jan 16 2009
North America
Country Current Interest Rate Previous Last Change
Canada 1.0% 1.5% Jan 20 2009
United States 0.25% 1.00% Dec 16 2008
South America
Country Current Interest Rate Previous Last Change
Brazil 12.75% 13.75% Jan 21 2009
The World Interest Rate Table covers the current interest rates of 23 different countries including previous rates and the latest dates when they were changed by Central Banks.
what rates of interest must be paid by different debtors for different maturities?
Overview Equity indices continue to hover nervously on key support levels and we still feel it is just a matter of time, probably within the next two weeks, before they fall through these. Interest rates have backed up a bit more, part of the price discovery mechanism in yield curves and credit spreads, as well as massive uncertainty on inflation’s outlook. Currencies mixed, the Russian rouble at its weakest ever (it trades as a basket 55% USD and 45% EUR) at 35.59 from 29.13 after Christmas and the man in the street fretting about another 1998-style collapse. The Hungarian forint under renewed attack at a record 299.25, the New Zealand dollar at $0.5065 at its weakest since December 2002, Cable up at $1.4400 and £0.8945 to the Euro. Precious metals have benefited from the continued uncertainty, spot Gold up to $926.00 and Silver doing even better at $12.57 per ounce, but the same cannot be said for other metals. Lumber at a new record low $137.90 per 1,000 random board feet.
Political and Economic Developments Even more rate cuts: 50 basis points in the Philippines to 5.00%, 75 in Poland to 4.25%, also 75 from Israel to a record low 1.00%, and an alarming 150 from New Zealand to a record low 3.00%. Meanwhile Japanese Construction Orders plunge 27.3% Y/Y, almost as much as the record low of 1993, UK Nationwide House Prices drop a record 16.6% Y/Y, and the volume of US New Home Sales hit a record low 331K annualised – presumably because they’re all too busy queuing to claim unemployment benefit which sees a record 4.776M (note: these series go back to the sixties). Japan’s Unemployment soared suddenly to 4.4% (highest since December 2005), January’s Industrial Production drops 20.6%, Vehicle Production –25.2%, so Household Spending shrinks 4.6% Y/Y. Eurozone Unemployment up at 8.00% with layoffs announced daily in all industries.
After last week’s UK Q4 GDP, -1.5% Q/Q and –1.8% Y/Y, today’s US GDP at –3.8% annualised following Q3’s –0.5% was not as awful as some had feared. IMF managing director Strauss-Kahn says countries are queuing up for help from the fund, and if they all qualified its money would run out in six to eight months.
Underlying Themes Overblown egos at Davos giving us, for what they’re worth, views on the global economy and how to fix it. President Obama has pushed through legislation, without a single Republican vote in its favour, for another $800B or so stimulus package and Germany, who’s largesse arrived begrudgingly, will have to cope with its biggest ever post-WWII budget deficit. Others are discussing the concept of a ‘bad bank’ where all the ‘nasties’ are put into storage so the tax payer can pay for them eventually. Very loud noises about increased regulation (and little said about lax oversight which got us here in the first place), and not an ounce of international cooperation in sight. The Italian finance minister storms off in a huff mid-way through a scheduled TV interview and Turkish Prime Minister Erdogan has a stand up fight with Israel’s Peres on stage. Oh dear.
What to watch for next week Monday the 2nd February holidays in Malaysia and Mexico, German December Retail Sales from this day and Manufacturing PMI’s for various European countries, Japanese January Vehicle Sales, US Manufacturing ISM plus December Construction Spending, Personal Income and Spending. Tuesday Japan December Labour Cash Earnings, January Monetary Base, UK Construction PMI, Eurozone December PPI, US Pending Home Sales, then January Car and Truck Sales. Wednesday UK January Services PMI, Official Reserves, EZ15 December Retail Sales, US January Challenger Job Cuts, ADP Employment Change, and Non-Manufacturing ISM. Thursday German December Factory Orders, the Bank of England decides on rates (almost unanimously expected to cut 50 basis points to 1.00%) as does the ECB (unanimously expected unchanged at 2.00%). Then US December Factory Orders, Q4 Non-Farm Productivity and Unit Labour Costs. Friday Japan December Leading and Coincident Indices, UK and German Industrial Production, UK January PPI, US Non-Farm Payrolls and Unemployment.
Positioning and Technical Analysis
If equities do not collapse next week, propped up on a wing and a prayer and bucket-loads of bail-out money, then interest rates should take centre-stage. With central bank target rates at or close to next-to-nothing, the question now is what rates of interest must be paid by different debtors for different maturities? While we expect yield-curves to remain positive, a certain amount of flattening is likely for longer-dated Treasuries as investors accept a lower return rather than no return on short-dates. Pressure in the interbank money markets is unlikely to ease at all, and the spread of Libor over Treasuries and over overnight money should widen, possibly very considerably. Emerging market bonds and currencies are likely to remain under pressure as they realise there is precious little money available for spending on ‘peripherals’, just like discretionary spending in cash-strapped households. Commodities should remain sidelined.
Have a nice weekend!
Political and Economic Developments Even more rate cuts: 50 basis points in the Philippines to 5.00%, 75 in Poland to 4.25%, also 75 from Israel to a record low 1.00%, and an alarming 150 from New Zealand to a record low 3.00%. Meanwhile Japanese Construction Orders plunge 27.3% Y/Y, almost as much as the record low of 1993, UK Nationwide House Prices drop a record 16.6% Y/Y, and the volume of US New Home Sales hit a record low 331K annualised – presumably because they’re all too busy queuing to claim unemployment benefit which sees a record 4.776M (note: these series go back to the sixties). Japan’s Unemployment soared suddenly to 4.4% (highest since December 2005), January’s Industrial Production drops 20.6%, Vehicle Production –25.2%, so Household Spending shrinks 4.6% Y/Y. Eurozone Unemployment up at 8.00% with layoffs announced daily in all industries.
After last week’s UK Q4 GDP, -1.5% Q/Q and –1.8% Y/Y, today’s US GDP at –3.8% annualised following Q3’s –0.5% was not as awful as some had feared. IMF managing director Strauss-Kahn says countries are queuing up for help from the fund, and if they all qualified its money would run out in six to eight months.
Underlying Themes Overblown egos at Davos giving us, for what they’re worth, views on the global economy and how to fix it. President Obama has pushed through legislation, without a single Republican vote in its favour, for another $800B or so stimulus package and Germany, who’s largesse arrived begrudgingly, will have to cope with its biggest ever post-WWII budget deficit. Others are discussing the concept of a ‘bad bank’ where all the ‘nasties’ are put into storage so the tax payer can pay for them eventually. Very loud noises about increased regulation (and little said about lax oversight which got us here in the first place), and not an ounce of international cooperation in sight. The Italian finance minister storms off in a huff mid-way through a scheduled TV interview and Turkish Prime Minister Erdogan has a stand up fight with Israel’s Peres on stage. Oh dear.
What to watch for next week Monday the 2nd February holidays in Malaysia and Mexico, German December Retail Sales from this day and Manufacturing PMI’s for various European countries, Japanese January Vehicle Sales, US Manufacturing ISM plus December Construction Spending, Personal Income and Spending. Tuesday Japan December Labour Cash Earnings, January Monetary Base, UK Construction PMI, Eurozone December PPI, US Pending Home Sales, then January Car and Truck Sales. Wednesday UK January Services PMI, Official Reserves, EZ15 December Retail Sales, US January Challenger Job Cuts, ADP Employment Change, and Non-Manufacturing ISM. Thursday German December Factory Orders, the Bank of England decides on rates (almost unanimously expected to cut 50 basis points to 1.00%) as does the ECB (unanimously expected unchanged at 2.00%). Then US December Factory Orders, Q4 Non-Farm Productivity and Unit Labour Costs. Friday Japan December Leading and Coincident Indices, UK and German Industrial Production, UK January PPI, US Non-Farm Payrolls and Unemployment.
Positioning and Technical Analysis
If equities do not collapse next week, propped up on a wing and a prayer and bucket-loads of bail-out money, then interest rates should take centre-stage. With central bank target rates at or close to next-to-nothing, the question now is what rates of interest must be paid by different debtors for different maturities? While we expect yield-curves to remain positive, a certain amount of flattening is likely for longer-dated Treasuries as investors accept a lower return rather than no return on short-dates. Pressure in the interbank money markets is unlikely to ease at all, and the spread of Libor over Treasuries and over overnight money should widen, possibly very considerably. Emerging market bonds and currencies are likely to remain under pressure as they realise there is precious little money available for spending on ‘peripherals’, just like discretionary spending in cash-strapped households. Commodities should remain sidelined.
Have a nice weekend!
The dollar and yen have strengthened against all major currencies
Yesterday, the dollar strengthened and U.S. equities fell on risk aversion and weak economic data.
Today, investors continue to be risk averse. The dollar and yen have strengthened against all major currencies. The euro has suffered as concerns about the euro-zone economy persist. One month into 2009, the euro has weakened 8 percent against the dollar as Europe's unemployment has risen, inflation has fallen, and future interest rate cuts are expected.
High-yielding currencies like the Australian dollar, New Zealand dollar, South African rand, and Mexican peso are all down significantly versus the dollar.
Key data out of the US today includes GDP, Personal Consumption, Chicago Purchasing Manager, U of Mich Confidence, and NAPM Milwaukee. Canada also releases GDP data today.
Today, investors continue to be risk averse. The dollar and yen have strengthened against all major currencies. The euro has suffered as concerns about the euro-zone economy persist. One month into 2009, the euro has weakened 8 percent against the dollar as Europe's unemployment has risen, inflation has fallen, and future interest rate cuts are expected.
High-yielding currencies like the Australian dollar, New Zealand dollar, South African rand, and Mexican peso are all down significantly versus the dollar.
Key data out of the US today includes GDP, Personal Consumption, Chicago Purchasing Manager, U of Mich Confidence, and NAPM Milwaukee. Canada also releases GDP data today.
Subscribe to:
Posts (Atom)