Forex, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another.
The way it works is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor. This can happen either from market news, or events that happen across the globe. For example, If you bought currency and the price appreciates in value, then you will earn a profit by closing your position. When you do this and sell the currency back in order to lock in the profit, you are in actuality buying the counter currency in the pair. By trading currency pairs, one currency valued against another, a rate of worth has been established. The reason is because a country’s currency has value only relative to the currency of another country.
There are many different tools that can help a Forex trader out. Advanced charting programs are a major tool, as well as the FOREX traders guide. Along with these tools, global interactive training rooms with live video feeds, and the daily world bank FOREX report help investors get the most out of FOREX trading.
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Monday, August 31, 2009
Sunday, August 30, 2009
How To Improve Your Knowledge Of Forex
You have determined that it is in your best interest to learn Forex trading.
Understanding the intricacies of how the world currency market works is an excellent way to protect your assets.
If you are not sure how to go about getting into the swing of understanding and monitoring the currency exchange, here are some suggestions of how you can gain the expertise that you are looking for.
First, sit down with your banker.
Every bank in the world is plugged into the process in some form or another.
Chances are your banker can help you grasp the basics of how foreign exchange rates are calculated, what types of situations can impact the rates, and what happens when there are fluctuations in the rate of exchange between two countries.
Your bank may even have someone whose main role is to help bank customers understand finance principles in more detail.
It is not unusual for banks to offer short courses to their clientele on subjects of this nature.
Understanding the intricacies of how the world currency market works is an excellent way to protect your assets.
If you are not sure how to go about getting into the swing of understanding and monitoring the currency exchange, here are some suggestions of how you can gain the expertise that you are looking for.
First, sit down with your banker.
Every bank in the world is plugged into the process in some form or another.
Chances are your banker can help you grasp the basics of how foreign exchange rates are calculated, what types of situations can impact the rates, and what happens when there are fluctuations in the rate of exchange between two countries.
Your bank may even have someone whose main role is to help bank customers understand finance principles in more detail.
It is not unusual for banks to offer short courses to their clientele on subjects of this nature.
Friday, August 28, 2009
Forex Glossary
Here are some of the most common terms used in FOREX trading.Ask Price - sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote e.g. EUR/USD 1.1965 / 68 means that one euro can be bought for 1.1968 USD dollars.Bar Chart - a type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information, the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.Base Currency - is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 US dollars are the base currency, with 1 USD dollar being worth 112.13 Japanese yen.Bid Price - is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 means that one euro can be sold for 1.1965 USD dollars.Bid/Ask Spread - is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.Broker - the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.Candlestick Chart - a type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick. A red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.Cross Currency - a currency pair that does not include US dollars e.g. EUR/GBP.Currency Pair - two currencies involved in a FOREX transaction e.g. EUR/USD.Economic Indicator - a statistical report issued by governments or academic institutions indicating economic conditions within a country.Foreign Exchange (FOREX, FX) - simultaneously buying one currency and selling another.Fundamental Analysis - analysis of political and economic conditions that can affect currency prices.Leverage or Margin - The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 you can trade currency worth 100 times the amount of your deposit.Limit Order - an order to buy or sell when the price reaches a specified level.Lot - the size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.Major Currency - the euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.Minor Currency - the Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.Open Position - an active trade that has not been closed.Pips or Points - the smallest unit a currency can be traded in.Quote Currency - the second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.Technical Analysis - analysis of historical market data to predict future movements in the market.Tick - the minimum change in price
A Good Forex Trading System And Its Main Characteristics
Author:Adrian PabloForex trading is one of the great money making opportunities available these days. People from many walks of life, men and women, decide to join the forex trading world everyday looking for the great style of life a profitable forex trader can achieve.But once you enter the world of Forex trading the first thing you will realize is that it’s not easy to become a profitable trader. The more you learn about the currency markets the more you realize the urgent need of a good forex trading system in order to make money and not just spend your time entering trades as a hobby taking you nowhere.There are many companies and individuals out there offering you forex trading systems that promise to be the real thing and that will teach you how to earn tons of money easily. But you must be aware that not all of them are always sincere and you should be ready to look for some specific characteristics good forex trading systems must have.For example; they must be willing to let you know part or the basics of their trading system for free, so you can evaluate their claims and be sure of what you will be buying from them. Also, they should offer you a money back guarantee in case the complete system doesn’t stand to their initial claims.A very good sign of the “goodness” and utility of the system would be if the company offering you their services offers to follow up with you about any doubts and questions arising from the use of their trading system. This follow up can include a users forum, contact phone number, email direct contact, etc. Also the forex trading system you are acquiring should be recession-proof and go beyond the traditional linear models that are based mostly on past results, it is difficult to make decisions about the future moves of the currency markets based just on past performance. Ideally, the currency trading system you get should allow you to go with the market direction, either up or down, instead of hoping and believing it will go one way or another, and then find out it was all wrong.And, of course. The system should be given to you with software that performs the complex math behind it, making it simple for you to use at any time and without strange formulas.Look for these main characteristics in the forex trading system you are planning to buy, and if it full fills them; then you are quite certainly making a good decision by planning about using it in your trading career.Adrian Pablo is a Forex freelance writer with articles published in a number of places. Get a free report on Fibonacci Trading and learn more about the world of forex trading
Sunday, August 9, 2009
Indonesian Rupiah
Exchange Rates reflect the balance of supply and demand for currencies. Two key factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment and the trade balance reflect the general health of an economy and are, therefore, responsible for the underlying shifts in supply and demand for that currency.Currency Exchange Rates fluctuate throughout the day, with trading on the market continuously. CurrencySource.com will quote you a rate for your currency exchange and discuss details for your foreign currency transactionU.A.E. Dirham0.000368Argentine Peso0.000317Australian Dollar0.000122Bahrain Dinar0.000038Brunei Dollar0.000145Brazilian Real0.000190Botswana Pula0.000683Canadian Dollar0.000108Swiss Franc0.000109Chilean Peso0.054407Chinese Yuan0.000684Colombian Peso0.201877Cyprus Pound0.000040Czech Koruna0.001822Danish Krone0.000530Euro0.000071U.K. Pound Sterling0.000061Hungarian Forint0.019097Indonesian Rupiah1.000000Israeli New Sheqel0.000381Indian Rupee0.004854Iranian Rial0.997296Icelandic Krona0.012942Japanese Yen0.009510Korean Won0.124074Kuwaiti Dinar0.000029Sri Lanka Rupee0.011502Libyan Dinar0.000125Maltese Lira0.000029Mauritian Rupee0.003188Mexican Peso0.001324Malaysian Ringgit0.000354Norwegian Krone0.000623Nepalese Rupee0.007751New Zealand Dollar0.000154Omani Rial0.000038Pakistan Rupee0.006072Polish Zloty0.000298Qatar Riyal0.000364Saudi Arabian Riyal0.000375Swedish Krona0.000745Singapore Dollar0.000145Slovenian Tolar0.018234Thai Baht0.003403Trinidad and Tobago Dollar0.000630U.S. Dollar0.000100Venezuelan Bolivar0.212964South African Rand0.000783
Nepalese Rupee
Exchange Rates reflect the balance of supply and demand for currencies. Two key factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment and the trade balance reflect the general health of an economy and are, therefore, responsible for the underlying shifts in supply and demand for that currency.Currency Exchange Rates fluctuate throughout the day, with trading on the market continuously. CurrencySource.com will quote you a rate for your currency exchange and discuss details for your foreign currency transaction.Nepalese Rupee1 NPRU.A.E. Dirham0.047430Argentine Peso0.040914Australian Dollar0.015748Bahrain Dinar0.004856Brunei Dollar0.018681Brazilian Real0.024505Botswana Pula0.088156Canadian Dollar0.013967Swiss Franc0.014051Chilean Peso7.019617Chinese Yuan0.088254Colombian Peso26.046095Cyprus Pound0.005135Czech Koruna0.235089Danish Krone0.068423Euro0.009190U.K. Pound Sterling0.007832Hungarian Forint2.463892Indonesian Rupiah129.019392Israeli New Sheqel0.049187Indian Rupee0.626243Iranian Rial128.670513Icelandic Krona1.669764Japanese Yen1.226913Korean Won16.007960Kuwaiti Dinar0.003714Sri Lanka Rupee1.483926Libyan Dinar0.016090Maltese Lira0.003767Mauritian Rupee0.411350Mexican Peso0.170764Malaysian Ringgit0.045719Norwegian Krone0.080404Nepalese Rupee1.000000New Zealand Dollar0.019894Omani Rial0.004966Pakistan Rupee0.783454Polish Zloty0.038405Qatar Riyal0.047010Saudi Arabian Riyal0.048431Swedish Krona0.096119Singapore Dollar0.018681Slovenian Tolar2.352479Thai Baht0.439104Trinidad and Tobago Dollar0.081274U.S. Dollar0.012915Venezuelan Bolivar27.476513South African Rand0.100994
Forex vs. Equities
If you are interested in trading currencies online, you will find that the Forex market offers several advantages over equities trading.24-Hour TradingForex is a true 24-hour market, which offers a major advantage over equities trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls.After hours trading for U.S. equities brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread.Superior LiquidityWith a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price.Because of the lower trade volume, investors in the stock market are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction.100:1 Leverage100:1 leverage is commonly available from online FX dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. At 100:1, traders post $1000 margin for a $100,000 position, or 1%.While certainly not for everyone, the substantial leverage available from online currency trading firms is a powerful, moneymaking tool. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the Forex market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.The most effective way to manage the risk associated with margined trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a system where your controls kick in when emotion might otherwise take over.Lower Transaction CostsIt is much more cost-efficient to trade Forex in terms of both commissions and transaction fees. Commissions for stock trades range from $7.95-$29.95 per trade with online discount brokers up to $100 or more per trade with full service brokers. Another important point to consider is the width of the bid/ask spread. Regardless of deal size, forex dealing spreads are normally 5 pips or less (a pip is .0005 US cents). In general, the width of the spread in a forex transaction is less than 1/10 that of a stock transaction, which could include a .125 (1/8) wide spread.Profit Potential In Both Rising And Falling MarketsIn every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling market.The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale.Forex. Vs. FuturesThe global foreign exchange market is the largest, most active market in the world. Trading in the forex markets takes place nearly round the clock with over $3 trillion changing hands every day. It is the main event.The benefits of forex over currency futures trading are considerable. The dissimilarities between the two instruments range from philosophical realities such as the history of each, their target audience, and their relevance in the modern forex markets, to more tangible issues such as transactions fees, margin requirements, access to liquidity, ease of use and the technical and educational support offered by providers of each service. These differences are outlined below:More Volume = Better Liquidity. Daily currency futures volume on the CME is just 1% of the volume seen every day in the forex markets. Incomparable liquidity is one of many advantages that forex markets hold over currency futures. Truth be told, this is old news. Any currency professional can tell you that cash has been king since the dawn of the modern currency markets in the early 1970's. The real news is that individual traders from every risk profile now have full access to the opportunities available in the forex markets.Forex markets offer tighter bid to offer spreads than currency futures markets. By inverting the futures price to compare it to cash, you can readily see that in the USD/CHF example above, inverting the futures dealing price of .5894 - .5897 results in a cash price of 1.6958 - 1.6966, 8 pips vs. the 5-pip spread available in the cash markets.Forex markets offer higher leverage and lower margin rates than those found in currency futures trading. When trading currency futures, traders have one margin rate for "day" trades and another for "overnight" positions. These margin rates can vary depending on transaction size. Currency trading with Capitalor gives the customer one rate all the time, day and night.Forex markets utilize easily understood and universally used terms and price quotes. Currency futures quotes are inversions of the cash price. For example, if the cash price for USD/CHF is 1.7100/1.7105, the futures equivalent is .5894/ .5897; a methodology followed only in the confines of futures trading.Currency futures prices have the added complication of including a forward forex component that takes into account a time factor, interest rates and the interest differentials between various currencies. The forex markets require no such adjustments, mathematical manipulation or consideration for the interest rate component of futures contracts.Forex trades executed through Capitalor are commission free. Currency futures have the added baggage of trading commissions, exchange fees and clearing fees. These fees can add up quickly and seriously eat into a trader's profits
Tuesday, August 4, 2009
Price Action Forex Trading
Tighten your seat belt and listen very carefully, the forex education and training on price action in this in depth article is priceless and could significantly enhance your forex trading success and forex trading account profits.The real cold truth is, You have likely been brainwashed thus far in your trading career, everything you see and read on the internet about forex trading, and all the glitters of huge easy trading profits and stupendous mechanical trading robots is a complete load of rubbish and you are only kidding yourself if you truly believe that is the highway to trading success
There really is in my mind, only one genuinely profitable forex strategy and that is the study of raw price action. Everything else preached online is a complete and utter load of trash; it’s a con job, an illusion to keep you losing your money to make the brokers rich, to make the internet marketers rich and you very poor! Think about how many people lose in this industry, in fact, 95 % of all new accounts blow up in the first 6 months, go figure! Think about why brokers allow you to trade on low margins with practically no money down, they expect you lose! The truth is, it’s all set up to ensure you fail and make the select few at the top of the chain extremely rich in the process, just like a real working casino but on a much larger scale
There really is in my mind, only one genuinely profitable forex strategy and that is the study of raw price action. Everything else preached online is a complete and utter load of trash; it’s a con job, an illusion to keep you losing your money to make the brokers rich, to make the internet marketers rich and you very poor! Think about how many people lose in this industry, in fact, 95 % of all new accounts blow up in the first 6 months, go figure! Think about why brokers allow you to trade on low margins with practically no money down, they expect you lose! The truth is, it’s all set up to ensure you fail and make the select few at the top of the chain extremely rich in the process, just like a real working casino but on a much larger scale
Where to Trade Forex
Foreign exchange trading or Forex which is commonly known is where traders from all around the world trades financial instruments such as currency and stocks online.A forex market trade can be commenced as long as there are at least two or more parties involving in the deal and it takes place worldwide with millions of traders from different countries doing trades.How Big is the Forex Market?The foreign exchange market is made up of multiple parties trading in the Forex market large volumes of assets and large amounts of money which may amounts to millions at one time. The forex market as you have understand is much larger than the stock market in any one country as it involves all the forex traders in the world gathering in one centralised market to do deal.Just imagine the sheer number of traders that amounts to millions dealing with forex and you have an impression on the cash pot in forex
Forex Trading Guides
The forex trading guides help to understand the essential fundamentals and practical factors impacting key forex rates. They identify pertinent officials, institutions and economic indicators most likely to move the FOREX market. To learn about all the factors guiding the pairs listed below, please see "Foreign Exchange Markets: A Practical Guide", an innovative approach to covering FX fundamental and technical analysis.Factors Affecting the US DollarFactors Affecting USD/JPYFactors Affecting EUR/USDFactors Affecting GBP/USDFactors Affecting USD/CHFFactors Affecting AUD/USDFactors Affecting USD/CAD
Dollar near this year’s low after upbeat data
TOKYO - The dollar traded close to its lowest level this year against a basket of currencies on Tuesday after bullish global stocks and upbeat economic data from around the world lifted investor risk-appetite.
The euro, sterling and commodity-linked currencies such as the Australian and New Zealand dollars held firm near multimonth highs against the dollar, after positive manufacturing reports from the U.S., Europe and China on Monday boosted hopes about the global economy, dealers said.
“Expectations for a global economic recovery were boosted further after the series of upbeat data,” said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking.
“The market will likely keep its risk-taking stance but we may see some correction in the market as we get closer to Friday’s U.S. employment report,” he said.
The U.S. manufacturing sector continued to shrink in July but at a slower pace than in June. The Institute for Supply Management said its index of national factory activity rose to 48.9 in July from 44.8 in June, beating economists’ expectations. A reading below 50 indicates contraction.
The euro zone’s factory sector edged closer to recovery in July and a key gauge of China’s manufacturing sector hit a one-year high, data showed on Monday.
The dollar index, a gauge of the greenback’s performance against six other major currencies, stood around 77.649, little changed from late U.S. trade on Monday when the index fell as far as 77.451, its lowest since Sept. 29.
The euro edged down 0.1 percent to $1.4397, but was not far from this year’s high of $1.4445 hit on trading platform EBS on Monday.
Against the yen, the euro was down 0.1 percent at 137.12 yen after touching 137.55 on EBS the previous day, its highest since mid-June.
The dollar was down 0.1 percent at 95.17 yen.
Sterling held firm at $1.6930 after jumping as high as $1.6988, its highest in nine months, on Monday.
The Reserve Bank of Australia will announce its interest rate decision later on Tuesday. The central bank is seen as almost certain to keep interest rates steady at 3.0 percent for a fourth month and might take a step towards eventual hikes by dropping any reference to room for easing.
Australian Treasurer Wayne Swan said on Tuesday that Australian interest rates would rise along with other global interest rates.
The Australian dollar rose 0.1 percent to $0.8430 after brushing a 10-month high of $0.8441 on the Reuters dealing system on
The euro, sterling and commodity-linked currencies such as the Australian and New Zealand dollars held firm near multimonth highs against the dollar, after positive manufacturing reports from the U.S., Europe and China on Monday boosted hopes about the global economy, dealers said.
“Expectations for a global economic recovery were boosted further after the series of upbeat data,” said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking.
“The market will likely keep its risk-taking stance but we may see some correction in the market as we get closer to Friday’s U.S. employment report,” he said.
The U.S. manufacturing sector continued to shrink in July but at a slower pace than in June. The Institute for Supply Management said its index of national factory activity rose to 48.9 in July from 44.8 in June, beating economists’ expectations. A reading below 50 indicates contraction.
The euro zone’s factory sector edged closer to recovery in July and a key gauge of China’s manufacturing sector hit a one-year high, data showed on Monday.
The dollar index, a gauge of the greenback’s performance against six other major currencies, stood around 77.649, little changed from late U.S. trade on Monday when the index fell as far as 77.451, its lowest since Sept. 29.
The euro edged down 0.1 percent to $1.4397, but was not far from this year’s high of $1.4445 hit on trading platform EBS on Monday.
Against the yen, the euro was down 0.1 percent at 137.12 yen after touching 137.55 on EBS the previous day, its highest since mid-June.
The dollar was down 0.1 percent at 95.17 yen.
Sterling held firm at $1.6930 after jumping as high as $1.6988, its highest in nine months, on Monday.
The Reserve Bank of Australia will announce its interest rate decision later on Tuesday. The central bank is seen as almost certain to keep interest rates steady at 3.0 percent for a fourth month and might take a step towards eventual hikes by dropping any reference to room for easing.
Australian Treasurer Wayne Swan said on Tuesday that Australian interest rates would rise along with other global interest rates.
The Australian dollar rose 0.1 percent to $0.8430 after brushing a 10-month high of $0.8441 on the Reuters dealing system on
Forex Correlations (July): How Do Currencies Move In Relation To Each Other?
past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency.
The following is our monthly correlations update for July. As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio. Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs. Additionally, we have included the six-month trailing correlation for the majors against the EURUSD for a different view of correlation.
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. For example, having a portfolio that consists of the EURUSD and AUDUSD is different than having a portfolio comprised of EURUSD and USDCHF. Over the past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency. With the dollar taking its place as the universal counterpart once again, we have seen the USDCHF ease its correlation to general risk appetite and aversion and take up as the counterpoint to EURUSD once again (-0.91). The same would happen as much for the yield heavy pairs as the anemic. Like EURUSD, AUDUSD holds a significant interest income; yet it is clearly the dollar’s influence guiding this pair as the shifts in correlation have changed little from last month (0.76) to current levels (0.74). From a trading perspective, this means that having long exposure in both EURUSD and USDCHF would offset much of the profit or loss that could be derived by holding a single position because when EURUSD rallies, USDCHF will sell off the majority of the time. Of course, these two currencies may have different pip values and the correlation is not perfect, so the P/L will not be exactly zero. On the other end of the scale, holding long EURUSD and AUDUSD positions would be akin to nearly doubling up in one of the pairs since the correlation is positive and strong.
Furthermore, we can tell from our tables correlations rise and fall through different periods. There is clear evidence from the month to month changes of the correlation that risk influences are shifting. Comprised of two sensitive currencies, USDJPY will only track the changes in more ‘exposed’ currency pairs when the shifts in risk appetite are extreme. This is why USDJPY has seen its one-month link to AUDUSD drop so sharply (from 0.63 to -0.17) from June first to July first. Overall, having this knowledge will allow traders to effectively diversify and manage their portfolios over time.
Regardless of your trading strategy and whether you are looking to diversify your positions or find alternate pairs to leverage your view, it is very important to keep in mind the correlation between various currency pairs and their shifting trends.
FX Correlations (data as of 07/01/09)
The following is our monthly correlations update for July. As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio. Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs. Additionally, we have included the six-month trailing correlation for the majors against the EURUSD for a different view of correlation.
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. For example, having a portfolio that consists of the EURUSD and AUDUSD is different than having a portfolio comprised of EURUSD and USDCHF. Over the past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency. With the dollar taking its place as the universal counterpart once again, we have seen the USDCHF ease its correlation to general risk appetite and aversion and take up as the counterpoint to EURUSD once again (-0.91). The same would happen as much for the yield heavy pairs as the anemic. Like EURUSD, AUDUSD holds a significant interest income; yet it is clearly the dollar’s influence guiding this pair as the shifts in correlation have changed little from last month (0.76) to current levels (0.74). From a trading perspective, this means that having long exposure in both EURUSD and USDCHF would offset much of the profit or loss that could be derived by holding a single position because when EURUSD rallies, USDCHF will sell off the majority of the time. Of course, these two currencies may have different pip values and the correlation is not perfect, so the P/L will not be exactly zero. On the other end of the scale, holding long EURUSD and AUDUSD positions would be akin to nearly doubling up in one of the pairs since the correlation is positive and strong.
Furthermore, we can tell from our tables correlations rise and fall through different periods. There is clear evidence from the month to month changes of the correlation that risk influences are shifting. Comprised of two sensitive currencies, USDJPY will only track the changes in more ‘exposed’ currency pairs when the shifts in risk appetite are extreme. This is why USDJPY has seen its one-month link to AUDUSD drop so sharply (from 0.63 to -0.17) from June first to July first. Overall, having this knowledge will allow traders to effectively diversify and manage their portfolios over time.
Regardless of your trading strategy and whether you are looking to diversify your positions or find alternate pairs to leverage your view, it is very important to keep in mind the correlation between various currency pairs and their shifting trends.
FX Correlations (data as of 07/01/09)
Forex Correlations (July): How Do Currencies Move In Relation To Each Other?
past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency.
The following is our monthly correlations update for July. As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio. Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs. Additionally, we have included the six-month trailing correlation for the majors against the EURUSD for a different view of correlation.
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. For example, having a portfolio that consists of the EURUSD and AUDUSD is different than having a portfolio comprised of EURUSD and USDCHF. Over the past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency. With the dollar taking its place as the universal counterpart once again, we have seen the USDCHF ease its correlation to general risk appetite and aversion and take up as the counterpoint to EURUSD once again (-0.91). The same would happen as much for the yield heavy pairs as the anemic. Like EURUSD, AUDUSD holds a significant interest income; yet it is clearly the dollar’s influence guiding this pair as the shifts in correlation have changed little from last month (0.76) to current levels (0.74). From a trading perspective, this means that having long exposure in both EURUSD and USDCHF would offset much of the profit or loss that could be derived by holding a single position because when EURUSD rallies, USDCHF will sell off the majority of the time. Of course, these two currencies may have different pip values and the correlation is not perfect, so the P/L will not be exactly zero. On the other end of the scale, holding long EURUSD and AUDUSD positions would be akin to nearly doubling up in one of the pairs since the correlation is positive and strong.
Furthermore, we can tell from our tables correlations rise and fall through different periods. There is clear evidence from the month to month changes of the correlation that risk influences are shifting. Comprised of two sensitive currencies, USDJPY will only track the changes in more ‘exposed’ currency pairs when the shifts in risk appetite are extreme. This is why USDJPY has seen its one-month link to AUDUSD drop so sharply (from 0.63 to -0.17) from June first to July first. Overall, having this knowledge will allow traders to effectively diversify and manage their portfolios over time.
Regardless of your trading strategy and whether you are looking to diversify your positions or find alternate pairs to leverage your view, it is very important to keep in mind the correlation between various currency pairs and their shifting trends.
FX Correlations (data as of 07/01/09)
The following is our monthly correlations update for July. As we have stated time and again, correlations between different currency pairs will inevitably shift over time. Therefore, it is of utmost importance to keep abreast of these fluctuating relationships to fully understand your trades and portfolio. Below are the one-, three-, six- and twelve-month correlations for the seven major currency pairs. Additionally, we have included the six-month trailing correlation for the majors against the EURUSD for a different view of correlation.
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. For example, having a portfolio that consists of the EURUSD and AUDUSD is different than having a portfolio comprised of EURUSD and USDCHF. Over the past month, volatile risk fluctuations have settled and put the focus back on the theme of the US dollar against all its major counterparts. This is largely a reflection of the importance of growth (as the US is the largest economy in the world and is therefore expected to pace a recovery) and the greenback’s position as the world’s reserve currency. With the dollar taking its place as the universal counterpart once again, we have seen the USDCHF ease its correlation to general risk appetite and aversion and take up as the counterpoint to EURUSD once again (-0.91). The same would happen as much for the yield heavy pairs as the anemic. Like EURUSD, AUDUSD holds a significant interest income; yet it is clearly the dollar’s influence guiding this pair as the shifts in correlation have changed little from last month (0.76) to current levels (0.74). From a trading perspective, this means that having long exposure in both EURUSD and USDCHF would offset much of the profit or loss that could be derived by holding a single position because when EURUSD rallies, USDCHF will sell off the majority of the time. Of course, these two currencies may have different pip values and the correlation is not perfect, so the P/L will not be exactly zero. On the other end of the scale, holding long EURUSD and AUDUSD positions would be akin to nearly doubling up in one of the pairs since the correlation is positive and strong.
Furthermore, we can tell from our tables correlations rise and fall through different periods. There is clear evidence from the month to month changes of the correlation that risk influences are shifting. Comprised of two sensitive currencies, USDJPY will only track the changes in more ‘exposed’ currency pairs when the shifts in risk appetite are extreme. This is why USDJPY has seen its one-month link to AUDUSD drop so sharply (from 0.63 to -0.17) from June first to July first. Overall, having this knowledge will allow traders to effectively diversify and manage their portfolios over time.
Regardless of your trading strategy and whether you are looking to diversify your positions or find alternate pairs to leverage your view, it is very important to keep in mind the correlation between various currency pairs and their shifting trends.
FX Correlations (data as of 07/01/09)
An Analysis of Secular Bear Markets and Secular Bull Markets since 1900
From a historical perspective since 1900 there have been 3 Secular Bull Markets and 3 Secular Bear Markets as shown by the tables below of the Dow and S&P 500. As you can see during a Secular Bull Market the Average Annual Return (highlighted in red) is considerably higher than during a Secular Bear Market (highlighted in blue). Thus the long term Buy and Hold strategy that worked well in the 1980’s and 1990’s for investors may have not worked very well during the Secular Bear Markets of 1906-1921, 1929-1949 and 1966-1982.Secular Bear Markets vs Secular Bull Markets and Dow PerformanceThe big question is now are we in the beginning stages of a 4th Secular Bear Market which started in 2000. The average length of the previous 3 Secular Bear Markets was 18 years with a minimum of 16 years and a maximum of 21 years. Thus if you add 18 years to the year 2000 and take + or - 3 years on either side then the next Secular Bull Market may not begin until sometime in the 2015 to 2021 time period if we are now entering a 4th Secular Bear Market. However I would like to point out that even in a Secular Bear Market there can still be Bull Markets lasting a year or two as the longer term charts of the Dow show below.
FOREX Trading
Trading
By: ben@forextrading4me.com
FOREX Trading You would have surely come up with the word “FOREX”, while studying on the subject of investing. However, FOREX doesn't get large amount of an exposure in the foremost websites and publications. Thus many of the investors are not acquainted that FOREX Trading is only a short form of ‘Foreign Exchange." Trading the FOREX market simply stand for foreign currency trading. The FOREX market is the leading monetary and most liquid market. The total turnover of FOREX market is nearly US$1.2 trillion, on a daily basis. Day after day thousands of people from different regions, religion faiths, nations and races, make their mind to join FOREX trading for an excellent life. However, after joining they realize that it’s not so easy to gain tons of profits and become successful. The currency trading had huge obstacles for entry, in the last ten years. Subsequently only banks and large institutional companies had way in to the FOREX trading. But, now the technology has been enhanced to the stage that any individual can jump right in and can trade with several online FOREX platforms. In FOREX trading market, you will witness the four currency pairs that lead to the lions’ share of trade. These are the Euro versus USD, USD versus Yen, USD versus Swiss Franc, and USD versus UK’s Pound. The target in the trading is to hold a currency until its value increases in relation to the value of other currencies. For e.g., if you bought 100 Pounds for $200, hold the Pounds until its value increased in relation to USD, than you can convert those Pounds back into USD, say, for $240. That’s the profit of yours. Unlike the major stock markets, the FOREX trading is open 24 hours a day, as it's always working hours for someone around the globe. The daily turnover of FOREX market is around $1.2 trillion. One more significant feature is that FOREX is not located on an exchange such as NYSE and NASDAQ. There is no fundamental body or institute to play as middleman. Trading mingles between key banking centers around the globe. Until recent times, there were rigid fiscal necessities and huge minimum transaction sizes that stopped individual investors to enter trading. But with the boom of businesses over Internet, the individual investors found threshold to trade in currency exchange market. A FOREX broker is just like an online account for stock trading, alike e-trade. Anybody is free to open an account and trade in any quantity. Since the brokers have hundreds of investors that place orders via them, thus they are capable to meet the criteria of huge minimum transaction size by buying in substantial lumps and deals out currency with purchasing investors. Even though, now it is easy to begin trading in FOREX, it is also intricate and multifaceted market. FOREX provides incredible opportunity for earning, but at the same time you may lose everything you have in a hasty decision. It is suggested to do rigorous research prior to entering and investing your hard-earned money in FOREX trading. Forex Trading
By: ben@forextrading4me.com
FOREX Trading You would have surely come up with the word “FOREX”, while studying on the subject of investing. However, FOREX doesn't get large amount of an exposure in the foremost websites and publications. Thus many of the investors are not acquainted that FOREX Trading is only a short form of ‘Foreign Exchange." Trading the FOREX market simply stand for foreign currency trading. The FOREX market is the leading monetary and most liquid market. The total turnover of FOREX market is nearly US$1.2 trillion, on a daily basis. Day after day thousands of people from different regions, religion faiths, nations and races, make their mind to join FOREX trading for an excellent life. However, after joining they realize that it’s not so easy to gain tons of profits and become successful. The currency trading had huge obstacles for entry, in the last ten years. Subsequently only banks and large institutional companies had way in to the FOREX trading. But, now the technology has been enhanced to the stage that any individual can jump right in and can trade with several online FOREX platforms. In FOREX trading market, you will witness the four currency pairs that lead to the lions’ share of trade. These are the Euro versus USD, USD versus Yen, USD versus Swiss Franc, and USD versus UK’s Pound. The target in the trading is to hold a currency until its value increases in relation to the value of other currencies. For e.g., if you bought 100 Pounds for $200, hold the Pounds until its value increased in relation to USD, than you can convert those Pounds back into USD, say, for $240. That’s the profit of yours. Unlike the major stock markets, the FOREX trading is open 24 hours a day, as it's always working hours for someone around the globe. The daily turnover of FOREX market is around $1.2 trillion. One more significant feature is that FOREX is not located on an exchange such as NYSE and NASDAQ. There is no fundamental body or institute to play as middleman. Trading mingles between key banking centers around the globe. Until recent times, there were rigid fiscal necessities and huge minimum transaction sizes that stopped individual investors to enter trading. But with the boom of businesses over Internet, the individual investors found threshold to trade in currency exchange market. A FOREX broker is just like an online account for stock trading, alike e-trade. Anybody is free to open an account and trade in any quantity. Since the brokers have hundreds of investors that place orders via them, thus they are capable to meet the criteria of huge minimum transaction size by buying in substantial lumps and deals out currency with purchasing investors. Even though, now it is easy to begin trading in FOREX, it is also intricate and multifaceted market. FOREX provides incredible opportunity for earning, but at the same time you may lose everything you have in a hasty decision. It is suggested to do rigorous research prior to entering and investing your hard-earned money in FOREX trading. Forex Trading
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