Momentum day trading can be extremely profitable when done correctly...
Day trading momentum stocks can be a very risky adventure. You can lose a lot of money when you pick the wrong opportunities.
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+ $ The "little details" you should look for before you consider a momentum daytrade.
+ $ Things to consider when trading low float momentum stocks
+ $ Buying micro cap and small cap stocks with momentum.
+ $ Trading NASDAQ stocks or OTCBB - OTC stocks ?
+ $ Getting ready for the trading breakout. Position your self for success.
+ $ Will my market rally last more than 5 minutes or less? What to do
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Saturday, September 26, 2009
The Seven Most Traded Currencies in FOREX
Currencies are traded in dollar amounts called "lots". One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called "High Leverage".
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Here are some of the common symbols used in the Forex:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Some of the common PAIRS are:
EUR/USD Euro / US Dollar
"Euro"
USD/JPY US Dollar / Japanese Yen
"Dollar Yen"
GBP/USD British Pound / US Dollar
"Cable"
USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"
AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"
USD/CHF US Dollar / Swiss Franc
"Swissy"
EUR/JPY Euro / Japanese Yen
"Euro Yen"
The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.
If this seems confusing then you're in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.
So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.
You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Here are some of the common symbols used in the Forex:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Some of the common PAIRS are:
EUR/USD Euro / US Dollar
"Euro"
USD/JPY US Dollar / Japanese Yen
"Dollar Yen"
GBP/USD British Pound / US Dollar
"Cable"
USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"
AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"
USD/CHF US Dollar / Swiss Franc
"Swissy"
EUR/JPY Euro / Japanese Yen
"Euro Yen"
The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.
If this seems confusing then you're in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.
So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.
You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Financial Crises, Global Capital Flows and the International Financial Architecture
The recent upheavals in the world financial markets were quelled by the immediate intervention of both international financial institutions such as the IMF and of domestic ones in the developed countries, such as the Federal Reserve in the USA. The danger seems to have passed, though recent tremors in South Korea, Brazil and Taiwan do not augur well. We may face yet another crisis of the same or a larger magnitude momentarily.
What are the lessons that we can derive from the last crisis to avoid the next?
The first lesson, it would seem, is that short term and long term capital flows are two disparate phenomena with very little in common. The former is speculative and technical in nature and has very little to do with fundamental realities. The latter is investment oriented and committed to the increasing of the welfare and wealth of its new domicile. It is, therefore, wrong to talk about "global capital flows". There are investments (including even long term portfolio investments and venture capital) ? and there is speculative, "hot" money. While "hot money" is very useful as a lubricant on the wheels of liquid capital markets in rich countries ? it can be destructive in less liquid, immature economies or in economies in transition.
The two phenomena should be accorded a different treatment. While long term capital flows should be completely liberalized, encouraged and welcomed ? the short term, "hot money" type should be controlled and even discouraged. The introduction of fiscally-oriented capital controls (as Chile has implemented) is one possibility. The less attractive Malaysian model springs to mind. It is less attractive because it penalizes both the short term and the long term financial players. But it is clear that an important and integral part of the new International Financial Architecture MUST be the control of speculative money in pursuit of ever higher yields. There is nothing inherently wrong with high yields ? but the capital markets provide yields connected to economic depression and to price collapses through the mechanism of short selling and through the usage of certain derivatives. This aspect of things must be neutered or at least countered.
The second lesson is the important role that central banks and other financial authorities play in the precipitation of financial crises ? or in their prolongation. Financial bubbles and asset price inflation are the result of euphoric and irrational exuberance ? said the Chairman of the Federal Reserve Bank of the United States, the legendary Mr. Greenspun and who can dispute this? But the question that was delicately side-stepped was: WHO is responsible for financial bubbles? Expansive monetary policies, well timed signals in the interest rates markets, liquidity injections, currency interventions, international salvage operations ? are all co-ordinated by central banks and by other central or international institutions. Official INACTION is as conducive to the inflation of financial bubbles as is official ACTION. By refusing to restructure the banking system, to introduce appropriate bankruptcy procedures, corporate transparency and good corporate governance, by engaging in protectionism and isolationism, by avoiding the implementation of anti competition legislation ? many countries have fostered the vacuum within which financial crises breed.
The third lesson is that international financial institutions can be of some help ? when not driven by political or geopolitical considerations and when not married to a dogma. Unfortunately, these are the rare cases. Most IFIs ? notably the IMF and, to a lesser extent, the World Bank ? are both politicized and doctrinaire. It is only lately and following the recent mega-crisis in Asia, that IFIs began to "reinvent" themselves, their doctrines and their recipes. This added conceptual and theoretical flexibility led to better results. It is always better to tailor a solution to the needs of the client. Perhaps this should be the biggest evolutionary step:
That IFIs will cease to regard the countries and governments within their remit as inefficient and corrupt beggars, in constant need of financial infusions. Rather they should regard these countries as CLIENTS, customers in need of service. After all, this, exactly, is the essence of the free market ? and it is from IFIs that such countries should learn the ways of the free market.
In broad outline, there are two types of emerging solutions. One type is market oriented ? and the other, interventionist. The first type calls for free markets, specially designed financial instruments (see the example of the Brady bonds) and a global "laissez faire" environment to solve the issue of financial crises. The second approach regards the free markets as the SOURCE of the problem, rather than its solution. It calls for domestic and where necessary international intervention and assistance in resolving financial crises.
Both approaches have their merits and both should be applied in varying combinations on a case by case basis.
Indeed, this is the greatest lesson of all:
There are NO magic bullets, final solutions, right ways and only recipes. This is a a trial and error process and in war one should not limit one's arsenal. Let us employ all the weapons at our disposal to achieve the best results for everyone involved.
About The Author
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia
What are the lessons that we can derive from the last crisis to avoid the next?
The first lesson, it would seem, is that short term and long term capital flows are two disparate phenomena with very little in common. The former is speculative and technical in nature and has very little to do with fundamental realities. The latter is investment oriented and committed to the increasing of the welfare and wealth of its new domicile. It is, therefore, wrong to talk about "global capital flows". There are investments (including even long term portfolio investments and venture capital) ? and there is speculative, "hot" money. While "hot money" is very useful as a lubricant on the wheels of liquid capital markets in rich countries ? it can be destructive in less liquid, immature economies or in economies in transition.
The two phenomena should be accorded a different treatment. While long term capital flows should be completely liberalized, encouraged and welcomed ? the short term, "hot money" type should be controlled and even discouraged. The introduction of fiscally-oriented capital controls (as Chile has implemented) is one possibility. The less attractive Malaysian model springs to mind. It is less attractive because it penalizes both the short term and the long term financial players. But it is clear that an important and integral part of the new International Financial Architecture MUST be the control of speculative money in pursuit of ever higher yields. There is nothing inherently wrong with high yields ? but the capital markets provide yields connected to economic depression and to price collapses through the mechanism of short selling and through the usage of certain derivatives. This aspect of things must be neutered or at least countered.
The second lesson is the important role that central banks and other financial authorities play in the precipitation of financial crises ? or in their prolongation. Financial bubbles and asset price inflation are the result of euphoric and irrational exuberance ? said the Chairman of the Federal Reserve Bank of the United States, the legendary Mr. Greenspun and who can dispute this? But the question that was delicately side-stepped was: WHO is responsible for financial bubbles? Expansive monetary policies, well timed signals in the interest rates markets, liquidity injections, currency interventions, international salvage operations ? are all co-ordinated by central banks and by other central or international institutions. Official INACTION is as conducive to the inflation of financial bubbles as is official ACTION. By refusing to restructure the banking system, to introduce appropriate bankruptcy procedures, corporate transparency and good corporate governance, by engaging in protectionism and isolationism, by avoiding the implementation of anti competition legislation ? many countries have fostered the vacuum within which financial crises breed.
The third lesson is that international financial institutions can be of some help ? when not driven by political or geopolitical considerations and when not married to a dogma. Unfortunately, these are the rare cases. Most IFIs ? notably the IMF and, to a lesser extent, the World Bank ? are both politicized and doctrinaire. It is only lately and following the recent mega-crisis in Asia, that IFIs began to "reinvent" themselves, their doctrines and their recipes. This added conceptual and theoretical flexibility led to better results. It is always better to tailor a solution to the needs of the client. Perhaps this should be the biggest evolutionary step:
That IFIs will cease to regard the countries and governments within their remit as inefficient and corrupt beggars, in constant need of financial infusions. Rather they should regard these countries as CLIENTS, customers in need of service. After all, this, exactly, is the essence of the free market ? and it is from IFIs that such countries should learn the ways of the free market.
In broad outline, there are two types of emerging solutions. One type is market oriented ? and the other, interventionist. The first type calls for free markets, specially designed financial instruments (see the example of the Brady bonds) and a global "laissez faire" environment to solve the issue of financial crises. The second approach regards the free markets as the SOURCE of the problem, rather than its solution. It calls for domestic and where necessary international intervention and assistance in resolving financial crises.
Both approaches have their merits and both should be applied in varying combinations on a case by case basis.
Indeed, this is the greatest lesson of all:
There are NO magic bullets, final solutions, right ways and only recipes. This is a a trial and error process and in war one should not limit one's arsenal. Let us employ all the weapons at our disposal to achieve the best results for everyone involved.
About The Author
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia
Forex Made Easy for Everyone
by: Brian Kolewe
Forex made easy is as simple as you would want it to be. The foreign exchange market is a worldwide market and according to some estimates is almost as big as thirty times the turnover of the US Equity markets. That is some figure to chew on. Forex is the commonly used term for foreign exchange. As a person who wants to invest in the forex market, one should understand the basics of how this currency market operates. Forex can be made easier for beginners to understand it and here's how.
Foreign exchange is the buying and the selling of foreign exchange in pairs of currencies. For example you buy US dollars and sell UK Sterling pounds or you sell German Marks and buy Japanese Yen. Why are currencies bought or sold? The answer is simple; Governments and Companies need foreign exchange for their purchase and payments for various commodities and services. This trade constitutes about 5% of all currency transactions, however the other 95% currency transactions are done for speculation and trade. In fact many companies will buy foreign currency when it is being traded at a lower rate to protect their financial investments. Another thing about foreign exchange market is that the rates are varying continuously and on daily basis. Therefore investors and financial managers track the forex rates and the forex market it on a daily basis.
Those who are involved in the forex trade know that almost 85% of the trading is done in only US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. This is because they are the most liquid of foreign currencies (can be easily bought and sold. In fact the US Dollar is most recognizable foreign currency even in countries like Afghanistan, Iraq, Vietnam etc).
Being a truly 24/7 market, the currency trading markets opens in the financial centers of Sydney, Tokyo, London and New York in that sequence. Investors and speculators alike respond to the ever-changing situations and can buy and sell simultaneously the currencies. In fact many operate in two or more currency market using arbitrage to gain profits (buying in one market and selling in another market or vice versa to take advantage of the prices and book profits).
While dealing in forex, one should have a margin account. Quite simply put if you have US$ 1,000 and have a forex margin account which leverages 100:1 then you can buy US$ 100,000 since you only need 1% of the US$100,000 or US$1,000. Therefore it means that with margin account you have US$ 100,000 worth of real purchasing power in your hand.
Since the foreign currency market is fluctuating on a continuous basis, one should be able to understand the factors that affect this currency market. This is done through Technical Analysis and Fundamental Analysis. These two tools of trade are used in a variety of other markets such as equity markets, stock markets, mutual funds markets etc. Technical Analysis refers to reading, summarizing and analyzing data based on the data that is generated by the market. While fundamental Analysis refers to the factors, which influence the market economy, and in turn how it would affect the currency trading. Of course there are other economic and non economic factors which can suddenly affect the trading of the forex markets such as the 9/11 tragedy etc. One needs to have a shrewd acumen and a few number crunching abilities to strike gold in the forex market.
About The Author
Brian Kolewe
Forex made easy is as simple as you would want it to be. The foreign exchange market is a worldwide market and according to some estimates is almost as big as thirty times the turnover of the US Equity markets. That is some figure to chew on. Forex is the commonly used term for foreign exchange. As a person who wants to invest in the forex market, one should understand the basics of how this currency market operates. Forex can be made easier for beginners to understand it and here's how.
Foreign exchange is the buying and the selling of foreign exchange in pairs of currencies. For example you buy US dollars and sell UK Sterling pounds or you sell German Marks and buy Japanese Yen. Why are currencies bought or sold? The answer is simple; Governments and Companies need foreign exchange for their purchase and payments for various commodities and services. This trade constitutes about 5% of all currency transactions, however the other 95% currency transactions are done for speculation and trade. In fact many companies will buy foreign currency when it is being traded at a lower rate to protect their financial investments. Another thing about foreign exchange market is that the rates are varying continuously and on daily basis. Therefore investors and financial managers track the forex rates and the forex market it on a daily basis.
Those who are involved in the forex trade know that almost 85% of the trading is done in only US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. This is because they are the most liquid of foreign currencies (can be easily bought and sold. In fact the US Dollar is most recognizable foreign currency even in countries like Afghanistan, Iraq, Vietnam etc).
Being a truly 24/7 market, the currency trading markets opens in the financial centers of Sydney, Tokyo, London and New York in that sequence. Investors and speculators alike respond to the ever-changing situations and can buy and sell simultaneously the currencies. In fact many operate in two or more currency market using arbitrage to gain profits (buying in one market and selling in another market or vice versa to take advantage of the prices and book profits).
While dealing in forex, one should have a margin account. Quite simply put if you have US$ 1,000 and have a forex margin account which leverages 100:1 then you can buy US$ 100,000 since you only need 1% of the US$100,000 or US$1,000. Therefore it means that with margin account you have US$ 100,000 worth of real purchasing power in your hand.
Since the foreign currency market is fluctuating on a continuous basis, one should be able to understand the factors that affect this currency market. This is done through Technical Analysis and Fundamental Analysis. These two tools of trade are used in a variety of other markets such as equity markets, stock markets, mutual funds markets etc. Technical Analysis refers to reading, summarizing and analyzing data based on the data that is generated by the market. While fundamental Analysis refers to the factors, which influence the market economy, and in turn how it would affect the currency trading. Of course there are other economic and non economic factors which can suddenly affect the trading of the forex markets such as the 9/11 tragedy etc. One needs to have a shrewd acumen and a few number crunching abilities to strike gold in the forex market.
About The Author
Brian Kolewe
The History of FOREX Trading
by: Divyansh Sharma
The origin of FOREX trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.
In those days, the value of goods were expressed in terms of other goods(also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.
Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies.
Before the First World war, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little.
In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.
Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.
The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.
The last few decades have seen foreign exchange trading develop into the world’s largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.
The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance.
In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.
While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the world wide web. The size of the FOREX market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor.
About The Author
Divyansh Sharma
The origin of FOREX trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.
In those days, the value of goods were expressed in terms of other goods(also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.
Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today’s modern currencies.
Before the First World war, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.. However, for this type of gold exchange, there was not necessarily a Centrals bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mindset fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. The Great Depression and the removal of the gold standard in 1931 created a serious lull in FOREX market activity. From 1931 until 1973, the FOREX market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the FOREX markets during these times was little.
In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.
Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.
The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960’s. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970’s following president Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.
The last few decades have seen foreign exchange trading develop into the world’s largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.
The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance.
In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.
While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The FOREX exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the world wide web. The size of the FOREX market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that FOREX market is a lucrative opportunity for the modern day savvy investor.
About The Author
Divyansh Sharma
FOREX
In order to be the most informed Forex trader, you need to have a basic understanding of different concepts there are in Forex trading. The following ideas will help you understand more of the trading industry and where you fit into the bigger picture.
The first concept of trading is known as “Fundamental Analysis”. Traders who use this concept usually watch international news while staying keenly aware of what is happening in the Forex trading market. Watching the news with an eye on politics, international relations and other events in the world helps forecast what might be happening in the Forex trade industry.
Another concept that is widely used is “Quantitative Analysis”, which applies a financial or business approach to understand the actions of a currency through math and statistics, in addition to measuring and researching market values. This is usually accomplished through a method of assigning numerical values to specific aspects so that quantitative analysts can attempt to mimic reality through math so as to forecast changes and movements within the Forex trading market.
The third concept of trading that is used is known as “Money Management”. This is probably the most understated concept of all but could very well be the most important. It is vital to your success that you have the concept of money management well under your belt. You, as the trader, must realize how powerful every single penny is that you risk in Forex trading. Knowing this will enable you to trade wisely and without hesitation.
Another commonly used concept of trading is called “Sentiment Analysis”. Basically, people who follow this concept follow their own reasoning and not the majority. This concept focuses on recognizing the patterns that investors take and it does so subjectively. If sentiment analysts see that the majority is leaning toward one decision, they take that as a general sign that change is coming. They would, therefore, decide on the other option from the majority.
“Technical Analysis” is another concept used in strategizing trading options. In essence, technical analysts study the data of currency exchange rates to discern if the rates will remain steady in the future. Charts are generally used to discover patterns in the Forex market. This concept is, as its name suggests, very technical and does not allow the trader to use his or her intuition in their strategy of trading.
The final concept that is used in Forex trading arenas is “Psychology”. In Forex trading, psychology is just about as important as the money that is invested! It is vital to the trader to force their emotions away and to control them so they can be successful in trading. If you do not possess the correct state of mind in trading, this field will be overwhelming and confusing to you.
Understanding these basic ideas behind Forex trading can help you discover what your methodology is. This will enable you to make decisions on a level that is comfortable for and profitable for your investment.
The first concept of trading is known as “Fundamental Analysis”. Traders who use this concept usually watch international news while staying keenly aware of what is happening in the Forex trading market. Watching the news with an eye on politics, international relations and other events in the world helps forecast what might be happening in the Forex trade industry.
Another concept that is widely used is “Quantitative Analysis”, which applies a financial or business approach to understand the actions of a currency through math and statistics, in addition to measuring and researching market values. This is usually accomplished through a method of assigning numerical values to specific aspects so that quantitative analysts can attempt to mimic reality through math so as to forecast changes and movements within the Forex trading market.
The third concept of trading that is used is known as “Money Management”. This is probably the most understated concept of all but could very well be the most important. It is vital to your success that you have the concept of money management well under your belt. You, as the trader, must realize how powerful every single penny is that you risk in Forex trading. Knowing this will enable you to trade wisely and without hesitation.
Another commonly used concept of trading is called “Sentiment Analysis”. Basically, people who follow this concept follow their own reasoning and not the majority. This concept focuses on recognizing the patterns that investors take and it does so subjectively. If sentiment analysts see that the majority is leaning toward one decision, they take that as a general sign that change is coming. They would, therefore, decide on the other option from the majority.
“Technical Analysis” is another concept used in strategizing trading options. In essence, technical analysts study the data of currency exchange rates to discern if the rates will remain steady in the future. Charts are generally used to discover patterns in the Forex market. This concept is, as its name suggests, very technical and does not allow the trader to use his or her intuition in their strategy of trading.
The final concept that is used in Forex trading arenas is “Psychology”. In Forex trading, psychology is just about as important as the money that is invested! It is vital to the trader to force their emotions away and to control them so they can be successful in trading. If you do not possess the correct state of mind in trading, this field will be overwhelming and confusing to you.
Understanding these basic ideas behind Forex trading can help you discover what your methodology is. This will enable you to make decisions on a level that is comfortable for and profitable for your investment.
Economic Indicators
Economic indicators are those signals that are all around that will show you which direction the market is currently heading. It is vital to your success as a Forex trader that you keep one ear on the ground to know what is happening in a wide range of economic areas so as to stay aware of what is happening, locally and internationally. This will enable you to make the best decisions possible regarding the investments you have already made and helping you know which ones you should be making.
Some of the indicators to watch out for are:
•Retail Sales: By way of definition, retail sales, as indicated by their name, is simply a projected estimate of what sales will be by retail shops in the US. These are usually released monthly in advance and are usually not adjust for inflation. In order for this report to be generated, a sampling of receipts from participating retailers is compiled. The importance of this in relation to Forex trading is that it is a valuable indicator of which industries and more specifically, which companies are worth investing your money into.
•Existing Home Sales: Existing homes are homes that have been standing for a while, while the rest are newly constructed. The rate at which homes are being sold can provide you, the trader, with important clues into the economic situation. For example, some sellers might sell one home to make a profit and use that profit to buy new furniture for their new homes. That could be an indication that the furniture industry will be booming very soon. Interest rates are also influential to the Forex trading industry and also affect existing home sales. These are all things to look out for when you get into Forex trading.
•Leading Indicators: Traders use these types of indicators to forecast upcoming changes in the market. Because leading indicators might change before the market actually changes, these are important principles to pay attention to in order to invest wisely. It is important to realize and understand that leading indicators are only indicators and cannot precisely foretell where the market is heading: they are only predictors.
•Trade Balance: Trade balance compares a country’s economical imports to its exports. If the country is experiencing a trade surplus, then the exports going out are more than the imports coming in. Opposite of this is when a country is experiencing trade deficit – the trade balance is in the negative with more goods being imported the exported. This aspect is foundational to successful Forex trading because the trade balance relies on the exchange rates between two particular countries. Trade balance will also be a source of important information regarding the exchange of those two countries’ currencies.
While these are just a few of the economic indicators that you, the Forex trader, should be aware of, it is important to recognize that there are many, many more indicators to watch out for. Forex Justice can help you in knowing what is happening economically around the world. It’s just that simple to sign up and have the very best help and expertise available!
Some of the indicators to watch out for are:
•Retail Sales: By way of definition, retail sales, as indicated by their name, is simply a projected estimate of what sales will be by retail shops in the US. These are usually released monthly in advance and are usually not adjust for inflation. In order for this report to be generated, a sampling of receipts from participating retailers is compiled. The importance of this in relation to Forex trading is that it is a valuable indicator of which industries and more specifically, which companies are worth investing your money into.
•Existing Home Sales: Existing homes are homes that have been standing for a while, while the rest are newly constructed. The rate at which homes are being sold can provide you, the trader, with important clues into the economic situation. For example, some sellers might sell one home to make a profit and use that profit to buy new furniture for their new homes. That could be an indication that the furniture industry will be booming very soon. Interest rates are also influential to the Forex trading industry and also affect existing home sales. These are all things to look out for when you get into Forex trading.
•Leading Indicators: Traders use these types of indicators to forecast upcoming changes in the market. Because leading indicators might change before the market actually changes, these are important principles to pay attention to in order to invest wisely. It is important to realize and understand that leading indicators are only indicators and cannot precisely foretell where the market is heading: they are only predictors.
•Trade Balance: Trade balance compares a country’s economical imports to its exports. If the country is experiencing a trade surplus, then the exports going out are more than the imports coming in. Opposite of this is when a country is experiencing trade deficit – the trade balance is in the negative with more goods being imported the exported. This aspect is foundational to successful Forex trading because the trade balance relies on the exchange rates between two particular countries. Trade balance will also be a source of important information regarding the exchange of those two countries’ currencies.
While these are just a few of the economic indicators that you, the Forex trader, should be aware of, it is important to recognize that there are many, many more indicators to watch out for. Forex Justice can help you in knowing what is happening economically around the world. It’s just that simple to sign up and have the very best help and expertise available!
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