Foreign Currency Symbols

Currencies, like equities, have their own symbols that distinguish one from another. Since currencies are quoted in terms of the value of one against the value of another, a currency pair includes the "name" for both currencies, separated by a "/". The "name" is a three letter acronym. The first two letters are in most cases reserved for identification of the country. The last letter is the first letter of the unit of currency for that country.

For example,

USD = United States Dollar
GBP = Great Britain Pound
JPY = Japanese Yen
CAD = Canadian Dollar
CHF = Confederatio Helvetica (Latin for Swiss Confederation) Franc
NZD = New Zealand Dollar
AUD = Australian Dollar
NOK = Norwegian Krona
SEK = Swedish Krona

Since the European Euro has no specific country attached to it, it goes simply by the acronym EUR.

By combining one currency, EUR, with another USD, you create a currency pair EUR/USD.

The Liquid Currency Pairs

Currencies, like equities and bonds, have pairs that are very liquid and those that are not so liquid. The liquid currencies can be characterized as those that are the most stable economically and politically. They include the countries that form the G7 - the United States, Japan, Great Britain, France, Germany, Italy, and Canada.

Since the unification of the European currencies into the EURO, the currencies that are most liquid now include the US Dollar, the Japanese Yen, the British Pound, the Euro, and the Canadian Dollar. It is estimated that activities in these currencies comprise more than 80% of the daily foreign exchange volume.

What is Foreign Exchange?

For active traders and investors, foreign exchange should be no different than other investment products such as equities, commodities or fixed-income. Because of globalization in the economic world and consolidation of whole economic regions (i.e., the European Union), including currencies in a portfolio helps to diversify assets and can reduce risk.

Just like other investment alternatives, foreign exchange offers traders/investors a market where they can buy or sell an investment product. In this case it is a specific Currency Pair. The currency pair may be the Euro versus the US Dollar, the US Dollar versus the Japanese Yen, the British Pound versus the US Dollar, the Euro versus British Pound, or a number of other currency combinations.

The different currency combinations represent nothing more than the value of one currency versus the value of another. That relationship is represented by a single price. In foreign exchange, the price of a currency pair is the market’s expectations (at that time) of the value of that currency measured against another currency given the current and expected economic and political situation in the two economies. In equity terms, it is the price of the stock.
If, for example, an economy’s inflation/interest rates are low and stable, if its output is growing strongly, or if its politics are stable and expectations are for more of the same, then one can expect (in general) for that country's currency to remain strong versus a less fundamentally favorable currency.

Contrasting that with an equity, if the domestic and global economy is strong, if inflation is not rampant, if competition is not taking away market share or eating into margins, if product demand and growth are strong, of if the companies internal "politics" are such that the workers are happy and productive, and expectations are for more of the same, then you can expect that company’s stock to remain strong versus a company with less favorable fundamentals.

Similar to equities there are other factors that determine the short term value of a product including technical analysis, short term supply and demand, seasonal capital flow patterns, the current price of the instrument, etc. It is these universal dynamics that will move a currency’s value up or down.

Forward Contracts versus Futures Contracts

Forward and futures contracts share characteristics.
Both allow investors to hedge against currency risk..
Forward contracts differ to futures contracts in that they are over-the-counter (OTC) contracts traded directly between banks and financial institutions. OTC contracts are often tailored to meet the needs of each individual customer. The disadvantage, however, is that forward contracts are often reserved for larger institutions. Institutions that trade forwards are also required to have all the necessary transactional documentation and may be required to motivate why the forward contract was entered into. The buyers and sellers of OTC derivatives are also subject to the risk that the counterparty to the trade may default.

Futures contracts are exchange traded contracts and thus standardised with respect to quantity and value of the underlying, quotation method and date of expiry. Prices for each contract are negotiated between buyers and sellers via the Yield-X electronic order matching platform or automatic trading system (ATS). Currency future brokers input orders which are automatically matched on the basis of time and price priority. Currency futures therefore allow for transparent pricing. Currency futures also equalize the playing field for all investors. The product allows for individuals to access the currency market generally reserved for institutions and allows smaller corporate entities to access favourable rates generally reserved for larger corporates. Currency futures unlike forwards allow investors to take a view on the movement of the underlying exchange rates.

Performance by the counterparties to a futures contract is guaranteed on Yield-X via Safcom (the JSE’s clearing house) for all derivative contracts. Standardised contracts traded on a regulated exchange enable the risk of both parties to be reduced and also increase the liquidity in the secondary trading market. Liquidity refers to the ability of trading participants to get in and out of their positions when they choose to.

Metatrader 4 (MT4) Trading Platform

The highly accredited Metatrader 4 or MT4 trading platform as it is commonly referred to, is one of the most renowned and widely used forex trading platforms around today. It is the first choice of trading platform amongst retail investors and traders alike and the benchmark platform amongst brokers. It is one of the most versatile, user friendly trading platforms, packed with all the necessary features today’s active trader requires to succeed with their forex trading.

Benefits of MT4:

• User friendly interface with no real complexities, which makes this platform especially suitable for novice traders.

• No language barriers. MT4 enables users across the world to convert the data in the MT4 platform to their language of choice.

• MT4 possesses both charting and trading capabilities all packed in one user friendly package thus enabling today’s active trader’ s to carry out technical analysis and place trades at the same time.

• A very important and popular feature that MT4 offers its users is to automate their trading through the use of expert advisors or EA’s as it is commonly known as. Expert advisors or EA’s can either be developed by the user themselves or they can purchase EA’s developed and tested by well known vendors.

• MT4 is a equipped with advanced communication tools where TDFX post messages, publishes in house analysis, market news in real time thus eliminating the need to communicate with clients through the traditional methods of e-mail and telephone.

• MT4 is a highly reliable trading platform and is not a demanding application to run on a PC.

• MT4 provides its users with easy access to view personal information such as account balances, account history, access details, change of password etc.

• MT4 is a very secure and highly safe trading platform to carry out trading activities as the data transfer between trader and server is scripted through 129-bit key and it also conceals the server’s IP address.

• MT4 works with all kinds of currency crosses so long as they are offered by the broker and has also been designed to work with futures and equities.

• Last but not least in this comprehensive list of benefits is the fact that MT4 is fully customizable and its users can tailor MT4 to satisfy every need. Users can develop their own indicators and expert advisors through MT4’s proprietary MQL programming language.

Introducing Foreign Exchange (Forex)

Foreign Exchange Trading is the buying and selling of different currencies. Better known as FOREX, it is a fast paced but highly lucrative process. To make a decent head start in the industry, it is best to remember a few important factors.

In Foreign Exchange Trading or FX Trading, clients are able to hedge against, or speculate upon, changes in the exchange rate of two currencies. For example, a speculator can be long EUR/USD in foreign exchange market in order to profit from capturing the appreciation of Euro against the U.S. Dollar. Foreign exchange services provide an opportunity for clients to trade FX. Foreign Exchange Trading is done on the foreign exchange market.

Each currency in the FOREX trading industry is assigned a three-letter code. Because many countries use currencies with the same name (e.g. the dollar or peso), it is extremely important that traders are familiar with these codes.

Where an exact same currency is used in various countries, then the code remains the same. For example, the Euro is used across much of the European Union, so the same code (EUR) would be used for France, Germany, etc.

Other examples of three-letter codes include the US dollar, which is assigned (USD), the Australian dollar (AUD), the Chinese Yuan Renminbi (CNY), the Chilean peso (CLP), and so forth.
Just as with any trade industry, the main purpose is to make a profit, by buying low and selling high. Thus, in FOREX trading, one must always find the opportunity to buy one currency low, and sell the other high.

Traders must also be aware of trading hours and which markets across the globe are open or closed. For example, due to time differences, the market in London would be open or closed at different times to that in Tokyo. While Frankfurt, London and New York open at 2:00am, 3:00am and 4:00am respectively, Sydney and Tokyo do not open until 4:00pm and 7:00pm, on Eastern Standard Time.

10 GREAT FOREX TRADING TIPS

Below are some expert trading tips for forex traders

1. An old cliché but on which holds great truth – ALWAYS trade in the direction of the trend. In the Forex markets we see great trends in currency pairs that last for a long time (cycles). Therefore, it pays to identify the dominant trend of currency pairs. Going against the trend will only cost you a lot of money and destabilise you emotionally.

2. Plan your trade, trade your plan. Trade plans can be made well in advance in the Forex market and help eliminate emotional trading. The more mechanical you become in entering and exiting trades, the more profitable and consistent you will become in the long run.

3. Before initiating any trade, always know your risk and truly accept this risk. The risk is defined as the number of pips from your entry to your stop loss.

4. Always, use a stop loss after initiating a trade. Placing a stop loss does not essentially mean that you are expecting to experience a losing trade but will help minimize losses against unforeseen market circumstances caused by unforeseen events such as terrorist attacks, geopolitical events etc.

5. After initiating a trade, a trader must have clear trade management guidelines for that trade. Trade management means that the trader knows in advance when and where he or she will move the stop loss and when to scale out of part of the trade and eventually where to take profits.

6. Whilst trading Forex, it is imperative for a trader to know the characteristics of the currency pairs he or she likes to trade. A way of achieving this is by looking at the past behaviour of the currency pairs in order to ascertain key characteristics such as:

a) how well does the pair trend?

b) which economic events influence the pair?

c) what is the Average Daily Range of the pair?etc.

7. Always keep in mind that the Forex market presents the trader with a constant stream of opportunities, therefore, if the trader experiences more than 2-3 consecutive losses, stopping to trade for a period of time is advisable. This will give the trader time to refocus and examine mistakes and prepare psychologically to re-enter the market again.

8. Trade to profit and not just to trade. Many traders think that because they might sit in front of a trade station for a period of time it is logical that they should be trading constantly. A trader should only initiate trades once all the odds are stacked in his favour and he has an edge. Then and only then can trade be initiated. Patience and discipline is an integral part of successful and consistent trading and are traits that a trader must endeavour to possess.

9. All successful traders have a trading diary that contains all the trades good or bad they have ever initiated. This gives traders the opportunity to constantly evaluate their performance and rectify any identified mistakes.

10. All successful traders are constantly learning and evolving. Just when you think you know it all about trading, a new curveball gets thrown your way. Furthermore, as time passes by, new methods of making money are developed and need to be learned about.

Market Participants

There are four categories of participants in the currency derivatives market. Hedgers use currency futures to protect an existing portfolio (or an anticipated investment) against possible adverse currency movements. Hedgers therefore seek to reduce risk.
Hedgers have a real interest in the underlying currency and use futures as a way of preserving their performance.
Arbitrageurs profit from price differentials of similar products in different markets, e.g. price differentials between the spot exchange rate and futures price.
Investors use currency futures to enhance the long-term performance of a portfolio of assets. Speculators use currency futures in hopes of making a profit on short-term movements in prices.
Speculators therefore seek to enhance risk with the aim of making a profit.
Speculators have no interest in the underlying currency other than taking a view on the future direction of the currency’s price.

A successful and efficient market is made up of a healthy balance of the abovementioned participants.

Currency Futures Qualifying Clients

The following categories of clients are permitted to tradeand hold positions in currency futures and are referred toas “qualifying clients.”

1. A South African individual with no limits applicable

2. A South African corporate entity with no limits applicable

3. A non resident individual or corporate entity with no limits applicable

4. An Investment Manager and Collective investment Scheme subject to their foreign portfolio allowance

5. A resident pension fund organisation subject to their foreign portfolio allowance.

6. A resident long-term or short-term insurer subject to their foreign portfolio allowance

Currency Futures Dispensations

Currency futures were launched predominatelyas a retail product.
The initial dispensation granted by the Minister of Finance in 2007
allows individuals to trade over and above their two millionRand foreign allocation allowance stipulated by the SouthAfrican Reserve Bank.
Individuals, in other words, have nolimits to the value traded in the currency futures market.

The Minister of Finance in his 2008 budget speech extended the currency futures qualifying audience to include all South African corporate entities.
Corporate entities, including companies, close corporations, (Pty) Ltds, partnerships and trusts are authorized to trade currency futures with no restrictions on the value traded.
Corporate entities do not need to apply to Reserve Bank to trade nor do they have to report their trades.

Factors that Influence Exchange Rates

An exchange-rate between to countries is determined by demand and supply of the relevant two currencies, which is influenced by economic factors including, among many others, the flow of imports and exports, the flow of capital and relative inflation rates. One factor affecting an exchange-rate is the merchandise trade balance. By definition, the merchandise trade balance is the net difference between the value of merchandise being exported and imported into a particular country. For example, consider the exchange-rate for USD/ZAR. South Africa (SA) imports products from the U.S. To pay for them, South Africans need US Dollars; therefore, the SA companies trade SA Rand for US Dollars. On the other hand, because Americans desire SA goods, they purchase SA Rands.

The net effect is an increase in the supply of US Dollars and SA Rands. The SA demand for American goods and services contributes to the demand for US Dollars while American purchases of SA goods and services contribute to the demand of SA Rands. In this case, the net difference between SA purchases of American goods, and American purchases of SA goods, is the merchandise trade balance between the two countries. If the SA demand for American goods is higher than the American demand for SA goods, the demand for US Dollars is higher than the demand of SA Rands.

As a result the US Dollar would appreciate against the SA Rand. The flow of funds between countries to pay for stocks and bonds purchases also contributes to the exchange-rate movements. In the near term, these capital flows are greatly influenced by yield or interest differentials. This is known as interest rate parity, which holds that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Over the long run, the spot exchange adjusts to reflect the difference in interest rates between the two countries.

All else being equal, the higher the yield on SA securities compared to American securities, the more attractive SA securities are relative to American securities. An increase in SA yields would tend to raise the flow of U.S. dollars into SA securities as well as decrease the outflow of Rands to American securities. Combined, this increased flow of funds into SA would lower the value of the U.S. dollar and increase the value of the Rand, therefore, the SA to U.S. dollar ("ZARUSD") ratio, as it is represented in the forex market, would increase, hence you would need more Dollars to buy one SA Rand. The rate of inflation is another factor influencing currency exchange-rates. Inflation occurs when the rate of money growth in an economy is higher than the rate of growth in real GDP, hence more money is chasing fewer goods, and this in turn drives up the prices of these goods.

Since exchange rates are an expression of one unit of a currency in terms of another, inflation essentially changes the relative value of this relation. For example, if SA is experiencing higher inflation than US then the USD/ZAR ratio increases to represent the increased value of Dollars relative to SA Rand. Or seen in another way, one Rand will now buy less Dollars. This fact is rooted in the concept of a purchasing power parity, which holds that, over the long run, the exchange-rate adjusts to reflect the difference in price levels between countries, a given item will thus in theory have the same price in two countries adjusted by the prevailing exchange rate.

Introduction to the Foreign Exchange Markets

Although the foreign exchange market is the largest traded market in the world, its reach to the retail sector pales in comparison to the Equity and Fixed Income markets. This is in large part due to a general lack of awareness of FX in the investor community, along with a lack of understanding of how and why currencies move. Adding to the mystique of this market is the lack of a physical central exchange akin to the NYSE or the CME. It is this very lack of structure that enables the FX markets to operate on a 24-hour basis, beginning the trading day in New Zealand and continuing through the time zones.
Traditionally, access to the FX market was limited to the bank community that traded large blocks of currencies for commercial, hedging, or speculative purposes. The creation of firms like FXDD has opened the door of Forex trading to such institutions as funds and money managers, as well as to the individual retail trader. This sector of the market has grown exponentially over the past several years.

Forex Technical and Fundamental Analysis

GBP/USD 1.5984 Technical Analysis

GBP/USD Open 1.6036 High 1.6382 Low 1.5917 Close 1.6057

Pound/Dollar made a significant bearish movement on Thursday, with over 450 pips, closing the day at 1.6000. On the 1 hour chart after breaking down out of the wide trading range, the Cable weakened vastly, going under 1.6000 this morning. The Sterling is under intensive bearish pressure at the moment and every movement under the psychological 1.6000 may give end of the bullish scenario and set new objectives towards 1.5915, followed by 1.5790. However, rising above it may renew the upward channel and lead to recovery of the British currency. The CCI indicator has crossed up the 100 line on the 1 hour chart, suggesting upward pressure, and potential strengthening of the British currency.

Technical resistance levels: 1.6450 1.6570 1.6700Technical support levels: 1.5915 1.5790 1.5650

Trading range: 1.5970 - 1.6045

Trend: UpwardBuy at 1.5984 SL 1.5954 TP 1.6034
Already made +54 pips profit on GBP/USD today from the following signal:5:40 GMT+1

Buy GBP/USD at 1.5985 SL 1.5959 TP 1.6045

exited at 8:28 GMTToday so far +117, yesterday +115.

Forex Features

Forex Features:

24-hour market - A trader may take advantage of the market around the clock. There is no waiting for the opening bell. We're open 5:00pm on Sunday through 4:30pm EST on Friday.
High liquidity - The Forex market has an average trading volume of over $2 trillion per day, making it the most liquid market in the world.
Low transaction cost - The retail commission on a Forex trade is as low as $0.00005 (x) currency value traded with no minimum charge.
Forex Market Nature - A trade in the Forex market involves selling or buying one currency against another. A bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying that currency against other currencies. Conversely, if the outlook is pessimistic, we have a bear market for that currency and traders may profit by selling the currency against other currencies.
Inter-bank market - The backbone of the Forex market consists of a global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The Forex market is referred to as an over the counter (OTC) market.
No one can corner the market - The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. As the market has grown even central bank interventions have become increasingly ineffectual and short lived as a tool for controlling the value of a particular currrency.

Forex Basics

Off-exchange Foreign Currency Trading is the simultaneous buying of one currency and selling of another. The foreign exchange market (FOREX), also referred to as "Spot Forex", is the largest financial market in the world, with a volume of over $2 trillion daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another across the major financial centers.
Traditionally, investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971.
Forex Market Time Zone Schedule:
Time Zone New York GMT
Tokyo Open 7:00 pm 0:00
Tokyo Close 4:00 am 9:00
London Open 3:00 am 8:00
London Close 12:00 pm 17:00
New York Open 8:00 am 13:00
New York Close 5:00 pm 22:00

Forex Charts

Forex charts assist the investor by providing a visual representation of exchange rate fluctuations. Many variables affect currency exchange rates, such as interest rates, bank policies, geopolitics, and even the time of day may affect exchange rates.
In order to help the investor attempt to predict when or in what direction a rate may change, advisors provide forex charts. Quality forex websites provide subscribers with a daily newsletter that includes a forex chart, forex signals and a forex forecast.
There are a variety of forex charts available for the investor to use and study. Some are very simple using only a couple of forex signals or indicators and are ideal for beginners. Others include 30 or 40 forex signals or indicators and live on-line streaming data so that the investor may analyze trades quickly and accurately.
In order to make an accurate forex forecast, it would seem that the more indicators, the better, but some analysts prefer a simpler system.
The idea behind studying forex charts is that history repeats itself. Instead of trying to “see the future”, a forex forecast evaluates the past. That is to say that the analyst who is responsible for attempting to predict future currency moves analyzes what happened to an exchange rate yesterday, last week, last month or last year and uses this knowledge to the best degree he knows how.
Some people trade short term, some intermediate term, and some long term. All three types of traders may benefit from the use of forex charts, just adapted to their own trading time frame.
Investors also create their own forex charts to evaluate their own performance. Creating a forex strategy for oneself is the goal of many investors. Instead of looking to a professional to analyze forex signals, these investors choose to create their own forex forecast.
Others, however, create their own strategy but also follow the opinions of professional currency traders at the same time. It all depends on your personal preferences.
There are other forex charts that deal with known correlations between two currency pairs, that is, how they move in relation to each other. Some exchange rates are known to affect other exchange rates, either by moving in the same or the opposite direction depending on the correlation.
Charts are available that explain these correlations in detail and show which pairs have strong correlations or strong negative correlations, so that an investor can use the movement of the exchange rate of one currency as a signal to trade another currency. These correlations are also the basis for some forex forecasts.
It can be difficult and overwhelming to enter the world of forex trading alone. Experts recommend education, practice with a demo account and advice from a reputable broker who is backed by a quality institution. Learning to read forex charts and evaluate forex signals is a skill that comes with time, skills that are essential when an accurate forex forecast is the the goal.

Stock Trading

Investing in stock market need the serious education, we will help you to learn how to make decision before ‘in and out’ from market.
Spot trading is a trading form involving the financial market of the world including d o w j o n e s Industrial Average (d j i a), n a s d a q Composite index, hong k o n g Market (hang s e n g index), Japan(nikkei 225), South Korea (k o s p i Index) and Foreign Exchange as reference.
The stock market/stock exchange manages the time – share index counted based on the market recapitulation comprising share blue chip and second line share on the average fluctuation of 100 up to 300 points a day.
Foreign trading is a trade exploiting any change of the exchange rate of two different currencies from the fluctuation on the average of 80 up to 200 points a day, 24 hours in a day, 5 day in a week.
Being supported by sophisticated technology, everyone may keep up with the movement of foreign and index price and may become a participant in the world markets. One of the forms of index and foreign trading is margin trading where by having relatively small amount of fund, the customer may carry out any transaction in a certain contract of which amount is bigger than the investment fund.
In Index Market and foreign market the investor can determine to take any position such as buying or selling, and can liquidate such position in an anytime as well.
In Stock market Trading provides facilities of online trading where every customer can perform transaction directly by using name and personal password of the user and in addition, The customer can access the world trading, analyze graphics and get the newest account status. The internet access facilitates the investor or market doers in transaction at anytime and anywhere from office, home or even while on vacation.
Before performing any transaction, shall make a analysis to determine a type of transaction which will be committed.
There are two kinds of analysis usually used in Stock market Trading, namely :
1. Technical Analysis
It is based on the change of price which will be then clarified in the forms of statistic graphics : Hourly, Daily, Weekly, Moving Averages, R S I, M A C D and other analysis That all of them can be utilized to predict price movement Stock market Trading
2. Fundamental Analysis
It is based on social-economics and political changes form countries all over the world, especially from economic super power countries, for instance : rates of interest, Inflation rates, unemployment rates, war, strikes, the government policy that influence economic movement of the countries. The changes occurring in the superior companies Joining in a index shall become indicators.

Characteristics of Forex Market

In recent years, the foreign exchange market could favor more and more people, it becomes a favorite for the international investors, and this is strongly related to the characteristics of the Forex market. The main characteristics of the foreign exchange market are:

1st, It consists market but no trading field
The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field"
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work
Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game
In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.

Factors that Influence Exchange Rates

An exchange-rate between to countries is determined by demand and supply of the relevant two currencies, which is influenced by economic factors including, among many others, the flow of imports and exports, the flow of capital and relative inflation rates. One factor affecting an exchange-rate is the merchandise trade balance. By definition, the merchandise trade balance is the net difference between the value of merchandise being exported and imported into a particular country. For example, consider the exchange-rate for USD/ZAR. South Africa (SA) imports products from the U.S. To pay for them, South Africans need US Dollars; therefore, the SA companies trade SA Rand for US Dollars. On the other hand, because Americans desire SA goods, they purchase SA Rands. The net effect is an increase in the supply of US Dollars and SA Rands. The SA demand for American goods and services contributes to the demand for US Dollars while American purchases of SA goods and services contribute to the demand of SA Rands. In this case, the net difference between SA purchases of American goods, and American purchases of SA goods, is the merchandise trade balance between the two countries. If the SA demand for American goods is higher than the American demand for SA goods, the demand for US Dollars is higher than the demand of SA Rands. As a result the US Dollar would appreciate against the SA Rand. The flow of funds between countries to pay for stocks and bonds purchases also contributes to the exchange-rate movements. In the near term, these capital flows are greatly influenced by yield or interest differentials. This is known as interest rate parity, which holds that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Over the long run, the spot exchange adjusts to reflect the difference in interest rates between the two countries. All else being equal, the higher the yield on SA securities compared to American securities, the more attractive SA securities are relative to American securities. An increase in SA yields would tend to raise the flow of U.S. dollars into SA securities as well as decrease the outflow of Rands to American securities. Combined, this increased flow of funds into SA would lower the value of the U.S. dollar and increase the value of the Rand, therefore, the SA to U.S. dollar ("ZARUSD") ratio, as it is represented in the forex market, would increase, hence you would need more Dollars to buy one SA Rand. The rate of inflation is another factor influencing currency exchange-rates. Inflation occurs when the rate of money growth in an economy is higher than the rate of growth in real GDP, hence more money is chasing fewer goods, and this in turn drives up the prices of these goods. Since exchange rates are an expression of one unit of a currency in terms of another, inflation essentially changes the relative value of this relation. For example, if SA is experiencing higher inflation than US then the USD/ZAR ratio increases to represent the increased value of Dollars relative to SA Rand. Or seen in another way, one Rand will now buy less Dollars. This fact is rooted in the concept of a purchasing power parity, which holds that, over the long run, the exchange-rate adjusts to reflect the difference in price levels between countries, a given item will thus in theory have the same price in two countries adjusted by the prevailing exchange rate.

Currency Futures Dispensations

Currency futures were launched predominatelyas a retail product. The initial dispensation granted by the Minister of Finance in 2007 allows individuals to trade over and above their two millionRand foreign allocation allowance stipulated by the SouthAfrican Reserve Bank. Individuals, in other words, have nolimits to the value traded in the currency futures market.

The Minister of Finance in his 2008 budget speech extended the currency futures qualifying audience to include all South African corporate entities. Corporate entities, including companies, close corporations, (Pty) Ltds, partnerships and trusts are authorized to trade currency futures with no restrictions on the value traded. Corporate entities do not need to apply to Reserve Bank to trade nor do they have to report their trades.

What are Currency Futures?

A currency future contract is a contract that allows market participants to trade the underlying exchange rate for a period of time in the future. Currency futures are agreements between two counterparties where one counterparty longs the underlying exchange rate and the other shorts the underlying exchange rate on a specified future date. The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the South African Rand. Currency futures are contracts that allow participants to take a view on the movement of the exchange rate as well as hedge against currency risk. Currency futures will be used as a trading, speculating and hedging tool by all interested participants.

Currency Risk

Currency risk or foreign exchange exposure is the exposure to an unfavourable movement in a currency or exchange rate. Investors importing goods from abroad or exporting goods abroad and transacting in foreign currency or the investor’s home currency are susceptible to changes in the exchange rate and, as a result, this changes the expected income. Individuals traveling overseas are also subject to exchange rate fluctuations and the weakening of their home currency to the foreign currency in the country that they are visiting.

Theoretically, currency risk is the combination of transaction, translation, economic and political exposure.Transaction exposure refers to cash flow exposure.

This is the currency risk a firm has to face when expecting to receive or pay a fixed amount of foreign currency in the future as these cash flows will be revalued in the case of a change in exchange rates.Translation exposure, also known as accounting exposure, is the degree to which exchange rate fluctuations affect a multinational parent company's book value when financial statements of the company’s global operations are consolidated and stated in the parent company's home currency.Economic exposure, also called operating exposure, measures the change in a company’s expected operating cash flows as well as the market value of the company due to a change in exchange rates. Economic exposure can affect either the company’s profitability or market share by hampering its competitive position in a particular market.Political exposure refers to changes in an exchange rate value caused by political actions undertaken by a country’s government. Examples of political risk include government imposing changes in tax laws and exchange control regulations, both of which will have an effect on the exchange rate of that country’s currency compared to other currencies

Cashing in on Short-Term Currency Trends

Most of the time, markets don't show a clear trend - they bounce back and forth between support and resistance levels. This sideways movement is called a trading range. Below is a strategy that can help you identify entry points on short-term trends, while protecting your profits with trailing stops.+

Trade Set-up

The strategy uses two charts with different time periods (10-minute and hourly), along with two technical indicators: a 200-bar moving average and a 14-bar slow stochastic study.

Step 1: Identify a trend
Compare the moving averages on both charts. A trend may be developing when price is consistently above or below the moving averages on both charts.
Step 2: Pinpoint entry
Once you've identified a trend, look for the following two conditions at the same time on the 10-minute chart:
1= Price is no more than 20 pips above (to buy) or 20 pips below (to sell) the moving average.
2=The "fast" stochastic (%K) crosses above the "slow" stochastic (%D) below 20 (to buy), or crosses below the "slow" stochastic above 80 (to sell).

Step 3: Ride the trend
Set a trailing stop after the trade entry.
On a LONG position, the stop order should be 10 pips BELOW the 200-period moving average on the 10-minute chart. You'll RAISE the stop as the trade goes in your favor.

On a SHORT position, place the stop 10 pips ABOVE the moving average. You'll LOWER the stop as the trade goes in your favor.

An example: EUR/USD, June 2002
Step 1: compare the hourly and 10-minute EUR/USD charts.

Look for a time when price is above the 200-period moving averages on both charts.
On the hourly chart, price is almost exclusively above the 200-hour moving average, indicating a persistent uptrend.
On the 10-minute chart, price moves (and remains above) the moving average in the last third of the chart.
Step 2: pinpoint the entry zone
when the market is within 20 pips of the moving average on the 10- minute chart, and the stochastic lines cross. As indicated in the chart, conditions are right around 8pm on June 27.

Buy EUR/USD at .9883Protective trailing stop set at .9858 (10 pips below MA)
Sell EUR/USD at .9992Protective trailing stop has moved up to .9967
Profit = 109 pips, or US $1090

+ Remember that contingent orders such as trailing stops may not necessarily limit your losses.

Understanding Forex Quotes

Reading a foreign exchange quote is simple if you remember two things:

1=The first currency listed is the base currency
2=The value of the base currency is always 1.

The US dollar is usually considered the base currency for quotes. When the base currency is USD, think of the quote as telling you what a US dollar is worth in that other currency.

When USD is the base currency and the quote goes up, that means USD has strengthened in value and the other currency has weakened. In other words, a rising quote means that the US dollar can buy more of the other currency than before.

Majors not based on the US dollar

There are three exceptions when the US Dollar is not the base currency of a pair - these exceptions are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR).
For these pairs, the quote is based on the other currency, and a rising quote means that the other currency is strengthening, and the US dollar is weakening.

Cross currencies
Currency pairs that don't involve USD at all are called cross currencies.

BID, ASK and the Spread
Just like other markets, forex quotes consist of two sides, the BID and the ASK:

The BID is the price at which you can SELL base currency.
The ASK is the price at which you can BUY base currency.

The spread is the difference between the BID and the ASK, and represents the cost of trading. In forex, spreads are tighter than many other markets, making it cost effective to trade on relatively small price movements.

What's a pip?
Forex prices are generally very liquid, and are usually quoted in very small increments called pips, or "percentage in point". A pip refers to the fourth decimal point out, or 1/100th of 1%.
For Japanese yen, pips refer to the second decimal point. This is the only exception among the major currencies.

Who trades currencies, and why?

Daily turnover in the world's currencies comes from two sources:

Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.

Speculation for profit (95%).

Most traders focus on the biggest, most liquid currency pairs, known as "The Majors". These include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs.

The world's most traded market,

open 24 hours a day With average daily turnover of US$3.2 trillion, forex is the most traded market in the world.

A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.

Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night.

Leverage & Margin

Leverage trading, or trading on margin, means a trader is not required to put up the full value of the position. But there are some important distinctions between trading stocks on margin and trading Forex on margin.

When stocks trade on margin, the leverage ratios are in the range of 2:1 or 4:1 – meaning a trader would only have to deposit $10,000 to the trader’s account in order to trade stocks worth $20,000 or $40,000 respectively. However, this kind of leverage requires the stock trader to be approved for “credit” for the amount invested that is in excess of what is deposited. Moreover, if the value of the stocks falls to a certain level, a stock trader trading on margin may have to pay additional funds than originally deposited to cover the losses.

Forex trading offers more leverage than stocks or futures - up to 400 times the value of the deposited funds in the Forex trading account. Therefore, at 400:1 leverage, a trader need only put up $25 to trade $10,000 worth of a currency. However, unlike trading in stocks, Forex traders do not need credit approval to trade on margin. If the value of the Forex positions falls to a certain level, ICM will close out all positions so a trader will never owe more money than what the trader initially deposited.

What is FX trading?

FX (also known as foreign exchange, forex, or foreign currency) trading consists of trading one type of currency for another.But it is more than just this. It is a market like no other with trading volumes that exceed USD$3.5 trillion on a daily basis! it is easily the world's largest financial market. Currency trading volume vastly exceeds the turnover volume on major exchanges such as the NYSE and NASDAQ! FX trading operates "over the counter" on a 24 hour 5.5 days a week through a global network of market participants that includes banks, commercial companies and brokers. The immense size and liquidity of the markets drive down the cost of trading, a compelling advantage to you, the individual trader.Today, individuals like you, have ready access to live streaming currency prices, highly competitive spreads, news and automated trading programs all at the click of a button. Trading FX is an exciting challenge for the individual trader - but what to buy or sell and when?. Each day is different and only an informed trader can make trades. ProFXAnalytics is here to provide you with our insight and trading strategies that we have developed based on our in depth knowledge of the FX markets........

Orders and Trades

Generally speaking, there are three types of Forex orders:

1. Market order – an order to buy or sell a currency

2. Limit order – an order to capture gains from advantageous market movements

3. Stop order – an order to forego further losses from disadvantageous market movements

If a trader believes the value of a base currency will increase relative to its pair, the trader should place a Market Order to buy the currency at its “Ask” price. However, in order to protect against the risk of significant losses, a prudent trader will simultaneously place a Stop Order to sell the currency if the “Bid” price drops to a certain level. In addition, in order to capture profits, a trader will often place a Limit Order to sell the currency if the “Bid” price rises to a certain level.

In contrast, if a trader believes the value of a base currency will decrease relative to its pair, the trader should place a Market Order to sell the currency at its “Bid” price. However, in order to protect against the risk of significant losses, a prudent trader will simultaneously place a Stop Order to buy the currency if the “Ask” price rises to a certain level. In addition, in order to capture profits, a trader will often place a Limit Order to buy the currency if the “Ask” price drops to a certain level.

Therefore, prudent Forex trading would suggest that every “buy” order be coupled with two “sell” orders; and every “sell” order be coupled with two “buy” orders.

Calculating Profit and Loss

Example 1 :Imagine the current bid/ask for EUR/USD is EUR/USD: 1.2836/39, meaning a trader can buy 1 euro for 1.2839 or sell 1 euro for 1.2836. Suppose a trader decides that the Euro is undervalued against the US dollar and expects the value of the Euro to rise. To execute this strategy, a trader would buy Euros (simultaneously selling dollars), and then wait for the exchange rate to rise. Therefore, the trader places the order to buy 100,000 Euros and pays 128,390 dollars (100,000 x 1.2839) for that order. Remember, at a leverage rate of 400:1, the traders deposit would be approximately $321 for this trade. As expected, the Euro strengthens to 1.2842/44. Now, to realize the profits, the trader places an order to sell 100,000 Euros at the current rate of 1.2842, and receive 128,420 dollars for that trade. The trader bought 100k Euros at 1.2839, paying $128,390. Then the trader sold 100k Euros at 1.2842, receiving $128,420. That is a difference of 3 pips, or in dollar terms ($128,420 – 128,390 = $30). Total profit = US $30 on a deposit of $321 Example 2: Now in this example, imagine the trader once again buys EUR/USD when trading at 1.2836/39. Just as before, the trader buys 100,000 Euros and pays 128,390 dollars (100,000 x 1.2839). However, the Euro weakens to 1.2833/36. Now, to minimize loses, the trader sells 100,000 Euros at 1.2833 and receives $128,330. In this case, the trader bought 100k Euros at 1.2839, paying $128,390 and sold 100k Euros at 1.2833, receiving $128,330. That is a difference of 6 pips, or in dollar terms ($128,390 - 128,330 = $60). Total loss = US $60

Candlestick Charts

candlestick chart shows how currency pairs fluctuate in relative value over time. The x axis shows time in what ever increment a trader wants to see it. It could be minutes, hours, days or even weeks. The y axis shows the value of one base currency unit relative to the other currency in the pair. The candlestick chart below shows EUR/USD at five minute intervals over four hours.
The body of the chart shows blue and red rectangles - which are the "candlesticks". When the candlestick is blue, it means the value of the base currency has increased relative to its pair in that time interval. For blue candlesticks, the bottom edge is the opening price and the top edge is the closing price in the time interval.

When the candlestick is red, it means the value of the base currency has decreased relative to its pair in that time interval. For red candlesticks, the top edge is the opening price and the bottom edge is the closing price in the time interval.

The thin lines protruding from the top and bottom of the rectangles are called “wicks” or “tails” or “shadows”. They display the high and low prices of the base currency relative to its pair in that time interval.

Most often, we see “Bid” charts – which shows the price of selling the base currency relative to its pair. But a trader can also choose to display "Ask" charts - which show the price of buying the base currency relative to its pair.

Currency Quotes

Reading a foreign exchange quote is simple if you remember two things:

1. The first currency listed is the base currency

2. The value of the base currency is always 1

currency pair quote is comprised of a bid/ask price expressed in the following format:

EUR/USD: 1.2836 / 1.2839 or EUR/USD: 1.2836/39

The first number in the series represents the bid price, the cost of selling the Euro against the Dollar, or going ‘short' on the Euro
The second number represents the ask price, the cost of buying the Euro against the dollar, or going ‘long’ on the Euro
The difference between the ask price and the bid price is called the pip spread.

What is a pip?
A pip (or “percentage in point”) is the smallest unit of measure for any currency. In most currencies, this is the fourth digit after the decimal point and is equal to 1/100th of 1% or .0001. So, using the example above (EUR/USD: 1.2836 1.2839), the spread is 3 pips (39 – 36).

NOTE: For Japanese yen, pips refer to the second digit after the decimal point. This is the only exception among the major currencies.

FOREX Basics

"Forex" stands for foreign exchange; it's also known as FX. It is the buying and selling of currencies. Unlike stocks or futures, there's no centralized exchange for Forex. All transactions happen via phone or electronic network. Because of this, Forex is among the most liquid of trading instruments. In fact, the daily trading volume of currencies is $ 3.2 Trillion – which is more than all other world market exchange trading combined!

More than 85% of Forex trading volume occurs in the “Major” currencies: US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

In a Forex transaction, currencies trade in pairs. Therefore, a trader buys one currency while simultaneously selling its pair. That is, a trader exchanges the sold currency for the one being bought. So when a trader trades Euro-US Dollar (EUR/USD), the trader is actually exchanging the Euro for the US Dollar or vice versa. And when a trader trades US Dollar / Japanese Yen (USD/JPY), the trader is actually exchanging the US Dollars for Japanese Yen or vice versa.

What is Forex ?

Forex (also known as FX, foreign exchange) is the market where one currency is being exchanged for another one. The Forex market as a whole is not regulated by any particular entity or government body. Unlike stocks and futures, it is not conducted through a stock exchange. Instead, foreign exchange transactions are taking place on the open market (also known as over-the-counter market, OTC) because any two parties exchanging one currency into another, from local money exchanger to a large bank, are the participants of the FX market.
The volume of transactions taking place on the foreign exchange market is mind-blowing. Some estimates, based on the earlier surveys made by the Bank for International Settlements, mention an average daily figure of around US$3 trillion per day! (in early 2007).
The daily combined turnover of all major world stock exchanges is only around US$200 billion.

Because FX transactions do not need to be registered or reported to any particular exchange, there are many possibilities for its participants. A person willing to invest into FX has many options to choose from and can use different trading methods. Using a market maker allows you to choose the best conditions for trading, use the quotes available and enter large transactions with a minimal initial outlay. Usually you are able to buy/sell currency contracts equal to $100,000 with only $1000 used as a margin, another words use the 1:100 leverage. The size and volatility of the market provides excellent opportunities for making profits, however one should always remember about the risk factor when entering the foreign exchange market.

There are 5 major currencies: USD, EUR, GBP, CHF, JPY. In the currency pair the fixed unit of currency on the left is usually called “base” and the variable currency unit on the right is called “terms” or “quoted” currency. In the pair EUR/USD, EUR is the base currency and USD is the terms one.

Trading in Partnership

Trading together with a friend can have its advantages. If one of you has more experience and the other more money, you can help your friend through your experience and he can help with margins. Together, you can trade larger size and perhaps make more profits. However, unless you both agree to the same line of action and what the possible contingencies might be, it is essential that you decide which of you is to execute the trades. It is more difficult reaching trading decisions together than on your own.

If you haven’t decided on the contingency measures in advance you’ll find yourself arguing and disagreeing in the middle of a trade going against you when timely action is of the essence. It can be quite disheartening and dangerous.

If you are not absolutely sure about your partner, and you don’t agree with the way he trades, you are better off trading on your own.

Take for example an instance where the order placed was ambiguous and the broker executed it twice. The traders accepted the mistake and then the market moved against them. The partner with the greater margins but less experience was in charge of execution. He placed the order before the market opened to roll the position out. The market moved against him, he covered the position at three times the premium received and then the market corrected. He was unable to get the other side because he couldn’t watch intraday.

Trading is a business! You must be totally prepared in terms of having a business plan, knowing how to place orders, and being on top of them from beginning to end. Even then things can go wrong, but being unprepared can lead to disaster. The smallest details must be thought of and prepared in advance, but mistakes and oversights still happen.

I came across an interesting concept. The path to enlightenment involves conquering five human weaknesses: greed, fear, ignorance, pride and jealousy. We should be all familiar with the first two, which cause much grief to traders, but the last three can be a big problems, too, so it’s worth pondering on them. Human weaknesses always show up to undermine one’s trading.

Greed makes people stay in a trade too long, or trade too big a size. Fear makes one get out of winning trades too early. Ignorance makes people commit innumerable mistakes. Pride doesn’t allow one to admit one is wrong and often, small losses are allowed to turn into huge losses because one doesn’t want to accept one is wrong. Jealousy can make one trade in a subjective manner.

A detached attitude is a great asset in trading. Trading is war and it is essential that you execute a pre-planned line of action flawlessly and unemotionally. You must be flexible and let things (that are now second nature) take their course. Be like an outside passive observer.

That is why it is so important to be at your best when trading. You must have all possible things on your side. You need to feel totally on top of it, prepared, in top physical shape,

Forex V/S Stock

What is the Difference Between Forex and Stock?

The Forex market has a lot of advantages compare to stock market:

1=A Forex trader could make profit through the market no matter if it is bearish and bullish which is different from the capital market, Forex has no strict regulation in speculation, no matter whether it is a long-term or a short-term transaction there is still a hidden profit, moreover, Forex market is a double-transaction market which means Forex traders could make profit through both upward and downward trend.

2=Forex traders could obtain a much larger transaction compared to the stock market, through the Forex trading, Forex traders could obtain 100 times larger transaction compared to the stock market. According to the present US situation, if a Forex trader invests $1,000 in the stock market, the trader may obtain $2,000 of stock domination property with a proportion of 2:1, but through Forex trading, a Forex trader can do transaction with a proportion up to 100:1.

3=Forex trader may make profit from the ordinary news, like the interest rate change, Forex market is closely related to various countries' politic, economy and culture, Forex traders could also obtain profit from other kinds of news, for example interest rate level change, will influence the interest of the Forex deposit.

4=Forex traders could do 24 hours trading. The stock market can only be traded during daytime at a specific time, generally from 9:30a.m. to 4:00p.m.. If you too have your own full time job, then you will face the dilemma - either to give up your full time job or forgo the trading opportunity. But Forex market can be traded 5 days a week and 24 hours a day, Forex traders can trade during their free time which is normally at night after working hour.

5=If a trader analyze based on technical analysis, Forex trading would be much more suitable for such traders because the Forex market has a very large trading volume. Currently the Forex market has daily trading volume of 190 billion Dollar, such giant market will completely digest a fore trader's transaction cash, under such situation the accuracy of the technical analysis would be much higher then any financial market, the chances of using technical analysis to make profit would be much more higher.

6=In the stock market there are hundred and thousand kinds of stocks, then choosing stock will be a very difficult matter. But in the Forex market, the currency combination is extremely limited, this may enable Forex traders to concentrate on these currencies combination, and could follow the trend quickly.

Forex Glossary Terms

American-style option An option contract that may be exercised at any time before it expires.

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer', 'ask price', or 'ask rate'.

Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate'.

Bid/Ask Spread The point difference between the bid and ask (offer) price.

Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.

Dealer A firm in the business of acting as a counterparty to foreign currency transactions.

Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.
European-style option An option contract that can be exercised only on or near its expiration date.
Expiration This is the last day on which an option may either be exercised or offset
Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.
Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.
Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing'.
Margin See Security Deposit.
Offer See ask.
Open position Any transaction that has not been closed out by a corresponding opposite transaction.
Pip The smallest unit of trading in a foreign currency price.
Premium The price an option buyer pays for the option, not including commissions.
Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.
Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.
Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.
Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.
Security deposit The amount of money needed to open or maintain a position. Also known as 'margin'.
Settlement The actual delivery of currencies made on the maturity date of a trade.
Spot market A market of immediate delivery of and payment for the product, in this case, currency
Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.
Spread The point or pip difference between the ask and bid price of a currency pair.
Sterling Another term for British currency, the pound.
Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price'

Famous Forex Quotes

1=“If you get in on Jones’ tip; get out on Jones’ tip”. If you are riding another person’s idea, ride it all the way.

2=Run early or not at all. Don't be an eleven o'clock bull or a five o'clock bear.

3=Woodrow Wilson said, "a governments first priority is to organize the common interest against special interests". Successful traders seek out market opportunities capitalizing on the reality that government's first priority is rarely achieved.

4=People who buy headlines eventually end up selling newspapers.

5=If you do not know who you are, the market is an expensive place to find out.

6=Never give advice-the smart don't need it and the stupid don't heed it.

7=Disregard all prognostications. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word-nobody! Thus the successful trader bases no moves on what supposedly will happen but reacts instead to what does happen.

8=Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough.


9=Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does console yourself by thinking of all the times when liquidating early preserved gains you would otherwise have lost.

10=When the ship starts to sink, don't pray-jump!

11=Life never happens in a straight line. Any adult knows this. But we can too easily be hypnotized into forgetting it when contemplating a chart. Beware of the chartist's illusion.

12=Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.

13=Whatever you do, whether you bet with the herd or against, think it through independently first.

14=Repeatedly reevaluate your open positions. Keep asking yourself: would I put my money into this if it were presented to me for the first time today? Is this trade progressing toward the ending position I envisioned?

15=It is a safe bet that the money lost by (short term) speculation is small compared with the gigantic sums lost by those who let their investments "ride". Long term investors are the biggest gamblers as after they make a trade they often times stay with it and end up losing it all. The intelligent trader will . By acting promptly-hold losses to a minimum.

16=As a rule of thumb good trend lines should touch at least three previous highs or lows. The more points the line catches, the better the line.

17=Volume and open interest are as important to the technician as price.

18=The clearest and easiest way to determine a trend is from previous highs and lows. Higher highs and higher lows mark an uptrend, lower highs and lower lows mark a downtrend.

19=Don't sell a quiet market after a fall because a low volume sell-off is actually a very bullish situation.

20=Prices are made in the minds of men, not in the soybean field: fear and greed can temporarily drive prices far beyond their so called real value.

21=When the market breaks through a weekly or monthly high, it is a buy signal.When it breaks through the previous weekly or monthly low, it is a sell signal.

22=Every sunken ship has a chart.

23=Take a trading break. A break will give you a detached view of the market and a fresh look at yourself and the way you want to trade for the next several weeks.

24=Assimilate into your very bones a set of trading rules that works for you.

25=The final phase in a bull move is an accelerated runaway near the top. In this phase, the market always makes you believe that you have underestimated the potential bull market. The temptation to continue pyramiding your position is strong as profits have now swelled to the point that you believe your account can stand any setback. It is imperative at this juncture to take profits on your pyramids and reduce the position back to base levels. The base position is then liquidated when it becomes apparent that the move has ended.