Saturday, April 11, 2009
Three Reasons Why Forex Trading Is Great
Forex ultimate trading 2009
Investopedia explains Money Market
Foreign Exchange Exposures
Forex Market
Honest Forex Maestro Review
Winning Tips For Online Currency Trading
Thursday, April 9, 2009
China Talks Tough with Call to Dump Dollar
Just over one week before President Barack Obama and other world leaders meet in London for a summit focusing on the , China is making clear it wants a greater say in managing economic policies worldwide. The latest blast from Beijing: a call by China's top central banker to dump the U.S. dollar as the world's most important currency. People's Bank of China Governor Zhou Xiaochuan, in a paper released on the bank's Web site on Mar. 23, called for a new "super-sovereign reserve currency" to replace the current reliance on the dollar. The goal, Zhou writes, is to "create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run."
Not surprisingly, U.S. officials aren't welcoming the idea. Speaking on Mar. 24 at a congressional hearing in Washington, Treasury Secretary and Federal Reserve Chairman both said they categorically oppose the change.
And pretty much everyone agrees it's not going to happen. In his paper, Zhou called for using the International Monetary Fund's "special drawing right" (SDR) currency, now used mainly for accounting purposes by the Washington-based organization, and pegged to the euro, pound, yen, and dollar. To succeed, the new currency would also have to be adopted worldwide by private companies for international trade transactions, a tremendous challenge. "Denominating trade and investment is almost always done in terms of one currency—and making the SDR work like that is almost impossible to imagine," Stephen Green, research chief of Shanghai-based Standard Chartered China wrote in an e-mail to BusinessWeek.
Seeking More Say
How then to read Zhou's roiling of the financial waters? It's most likely a shot across the bow signaling China's intention to have a greater voice in world financial affairs. When he attends the G-20 opening on Apr. 2, Chinese President Hu Jintao is almost certain to call for expanding China's voting rights at the IMF. Presently the members of the European Union have a combined 32% of voting rights and the U.S. has 17%, compared with only 3.7% for China and 1.9% for India. Beijing, too, may offer to purchase up to $100 billion of any IMF-issued new bonds, a People's Bank of China vice-governor suggested in a press conference in Beijing on Mar. 23.
By calling for a super-sovereign reserve currency, Zhou signals China's dissatisfaction with the global economic pecking order. As well as demonstrating Beijing's new more assertive role in the world economy, Zhou's proposal to replace the dollar may also signal China's intention to move more aggressively to diversify its foreign exchange holdings. Zhou's paper contains a "hint of a threat that the U.S. should not take the dollar's privileged status for granted," Mark Williams, international economist at Capital Economics in London, wrote in a Mar. 24 report.
The central banker's controversial proposal is the latest in a series of moves signaling Chinese irritation with the U.S. For instance, Premier Wen Jiabao on Mar. 13 told reporters he was "worried" about the value of China's massive dollar holdings. Standard Chartered Bank (STAN.L) estimates that China, the world's largest holder of U.S. debt, held $1.45 trillion in U.S. securities at the end of 2008, out of a total $1.9 trillion in foreign reserves. As the starts spending $787 billion to boost the U.S. economy and another $1 trillion on its cash-strapped banks, Beijing is worried inflation in the U.S. could erode the value of its dollar holdings. During the Mar. 13 press conference broadcast live across China, Wen called on the U.S. to take efforts to "maintain its good credit, to honor its promises, and to guarantee the safety of China's assets."
Despite Zhou's bold proposal, Beijing also knows that any rapid move toward a new reserve tender could backfire for China. That would erode the value of China's dollar holdings and likely would lift the value of the yuan, China's currency, making the country's already beleaguered export sector even less competitive. "To the extent that its concern is that dollar weakness will undermine the value of its existing reserves, it clearly has no desire to precipitate such a shift by moving out of dollar assets," wrote Williams of Capital Economics. "Zhou is well aware that the dollar's position is secure for now." Indeed, the same day Zhou called for the new reserve currency, China's State Administration of Foreign Exchange issued a statement that it supported the dollar and would continue buying U.S. Treasuries.
3rd UPDATE:Citic Pacific Hit By FX Trades; Chmn Vows Rebound
Citic Pacific Ltd.'s (0267.HK) foreign exchange scandal pushed it to a full-year loss of HK$12.66 billion (US$1.62 billion), but the conglomerate says it will return to profitability in 2009.
Daily Technical Strategist: GBPUSD
This is an excerpt from FXT Technical Strategist Plus, a 7-currency model analysis. Take A One Week Free Trial here Premium Plus
This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are those of FXTechstrategy.com own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which FXTechstrategy.com incurs any responsibility. FXTstrategy.com does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report. 3rd UPDATE:Citic Pacific Hit By FX Trades; Chmn Vows Rebound
Forex vs. Futures
The origins of today's futures market lies in the agriculture markets of the 19th century. At that time, farmers began selling contracts to deliver agricultural products at a later date. This was done to anticipate market needs and stabilize supply and demand during off seasons.
The current futures market includes much more than agricultural products. It is a worldwide market for all sorts of commodities including manufactured goods, agricultural products, and financial instruments such as currencies and treasury bonds. A futures contract states what price will be paid for a product at a specified delivery date.
When the futures market is played by speculators, the actual goods are not important and there is no expectation of delivery. Rather, it is the futures contract itself that is traded as the value of that contract changes daily according the market value of the commodity.
In every futures contract there is a buyer and a seller. The seller takes the short position and the buyer takes the long position. The futures contract specifies a buying price, a quantity and a delivery date. For example: A farmer agrees to deliver 1000 bushels of wheat to a baker at a price of $5.00 a bushel. If the daily price of wheat futures falls to $4.00 a bushel, the farmer's account is credited with $1000 ($5.00 - $4.00 X 1000 bushels) and the baker's account is debited by the same amount. Futures accounts are settled every day.
At the end of the contract period, the contract is settled. If the price of wheat futures is still at $4.00 the farmer will have made $1000 on the futures contract and the baker will have lost the same amount. However, the baker now buys wheat on the open market at $4.00 a bushel - $1000 less than the original contract, so the amount he lost on the futures contract is made up by the cheaper cost of wheat. Similarly, the farmer must sell his wheat on the open market for $4.00 a bushel, less than what he anticipated when entering the futures contract, but the profit generated by the futures contract makes up the difference.
The baker, however, is still in effect buying the wheat at $5.00 a bushel, and if he hadn't entered into a futures contract he would have been able to buy wheat at $4.00 a bushel. He protected himself against rising prices but he loses if the market price drops.
Speculators hope to profit by the daily fluctuations in the futures market by buying long (from the buyer) if they expect prices to rise or by buying short (from the seller) if they expect prices to fall.
FOREX
The foreign exchange market (FOREX) has several advantages over the futures market. FOREX is a more liquid market – as the largest financial market in the world it dwarfs the futures market in daily exchanges. This means that stop orders can be executed more easily and with less slippage in the FOREX.
The FOREX is open 24 hours a day, 5 days a week. Most futures exchanges are open 7 hours a day. This makes FOREX more liquid and allows FOREX traders to take advantage of trading opportunities as they arise rather than waiting for the market to open.
FOREX transactions are commission-free. Brokers earn money by setting a spread – the difference between what a currency can be bought at and what it can be sold at. In contrast, traders must pay a commission or brokerage fee for each futures transaction they enter into.
Because of the high volume of trading FOREX transactions are almost instantly executed. This minimizes slippage and increases price certainty. Brokers in the futures market often quote prices reflecting the last trade – not necessarily the price of your transaction.
The FOREX is less risky than the futures market because of built-in safeguards in the trading system. Debits in futures are always a possiblility because of market gap and slippage.Online Currency-Trading Sites Multiply
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Friday, April 3, 2009
Forex Market
STARTINg FOREX!
Only national banks, multi-national corporations and other large players used to have an unlimited access to foreign exchange recently. 1980's gave birth to new rules that have established margin accounts making participation possible even for small investors. Forex has gained its popularity thanks to margin accounts. Having a $1,000 investment and 100:1 margin accounts you get an access to $100,000 funds.
A reputable broker is usually required for Forex traders to carry out their transactions. CFTC (the Commodity Futures Trading Commission) registers such reputable broker as FCM (a Futures Commission Merchant). Lots of beginner traders often make 2 following mistakes: starting their trading without having a strategy and trading lead by emotions. It happens when you, having just bought and watching the rate decline, start panic and rapidly sell just to see the following market growth. Be sure to lose your money trading like this. Profitable Forex trader has an adequate strategy and doesn't let his emotions deal with trading.
Forex trader requires good education concerning movements of the market as well as different kinds of orders to carry out his trade with maximum profit and minimum risk.
Understanding the market along with the forces affecting it is the first step to becoming a successful trader. You can base trading strategies on this knowledge for successful usage in your trading.
Forex has 5 most important groups participating in the trades: Banks, Governments, Corporations, Investment Funds, and traders. Traders are the only group that doesn't have an external control having only themselves to report to. A margin agreement, conducted during establishing Forex account includes the statement that any trades which the broker considers too risky may be interfered by him. You may start your trading after establishing your Forex account.
There are various kinds of accounts offered by brokers. Standard deposit depends on the broker but is generally from $1000 to $2000 however there are mini accounts that let you in having only $200. Leverage can also be different. You get an access to higher amount of money with higher leverage possessing the same investment.
You can find out how various software tools and the system in general work by using demo accounts. They are strongly recommended to be used for every newbie Forex investor.
There are some tools that are common to all brokers despite each broker has its own software. These common tools that you can expect to see practically in any broker's software are: news feeds, real time quotes, technical analyses and charts, analyses of profit and loss.
Introducing Brokers (IB) program
Online Currency Trading is Recession-Proof
A recession hits nearly everyone and everything in the country going through it. It does not matter how large or small the recession is, the effects are widespread and often economically devastating. Your investments, no matter how small or large, lose their value. Your money loses its worth. The stock market shows this quite clearly, since it is based on companies in relation to the currency. No matter how good they do, if the currency is in trouble, the stock market will reflect that. As a result, it hits you right where it hurts: you pocketbook. Even outside a recession, common inflation can create a drop, sometimes dramatic, in the value of investments. Only one way to make money rises above all of this, not even feeling the aftershocks of the devastation wrought by a recession, and immune to the inflation of any single currency. Online currency trading, also known as forex, or foreign exchange, deals with different currencies in relation to each other. You rise above the companies entirely! Since you are dealing with currencies themselves, not different companies in a single currency, you are no longer trapped by the economy of a single country. When a currency drops in value, you can take advantage of it instead of it taking advantage of you. Make money from the recession, don't lose money! Inflation hits your home currency? It will not affect you, since your money is in several other foreign currencies. Again, instead of losing money, your cash is currently making more money for you! World-wide, all currencies are constantly fluctuating in value, creating an constantly dynamic market from which millions of dollars are being moved around every day. With a little work and a good strategy, you can make your fair share of money from this immense market. Just jumping in and moving money around, however, is not a sound investment strategy. There are hundreds of Forex trading systems out there, but again, not all of them will earn you money. If you want to turn a profit using online currency trading, you have to be careful who you choose to assist you, and what strategy you use to invest your money. Christopher Phillips Smart eCredit For Fast and Efficient Online Credit Card Application and Approval Personal Credit Guide Information And Tips For A Brighter, Healthier Financial Future This article comes with reprint rights. You are free to reprint and distribute it. You must however reprint it in its entirety, without any changes, and you must also include this text and the link above.
Turbo Scam? TRUE STORY :My Experiences and the Truth Behind This Controversial System
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Wednesday, March 18, 2009
Economic factors.
Economic factors
These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.
- Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
- Economic conditions include:
- Government budget deficits or surpluses
- The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
- Balance of trade levels and trends
- The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
- Inflation levels and trends
- Typically a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising [. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.
- Economic growth and health
- Reports such as GDP, employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
- Productivity of an economy
- Increasing productivity in an economy should positively influence the value of its currency. It affects are more prominent if the increase is in the traded sector
Financial instruments.
Financial instruments
Spot
A spot transaction is a two-day delivery transaction (except in the case of the Canadian dollar and the Mexican Nuevo Peso, which settle the next day), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot transactions has the second largest turnover by volume after Swap transactions among all FX transactions in the Global FX market.
Forward
One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a one day, a few days, months or years.
Future
Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates — for example, $1000 for next November at an agreed rate [4],[5]. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Swap
The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.
Option
A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Exchange Traded Fund
Exchange-traded funds (or ETFs) are open ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g., SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.
Foreign Exchange Market.
The foreign exchange market (currency, forex, or FX) market is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. [1]FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when worldover countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.
Now, the FX market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements.[2] Since then, the market has continued to grow. According to Euromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.[3]
The purpose of FX market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such currencies.
Types of money
Types of money
In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). Modern monetary theory distinguishes among different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money.
Commodity money
Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity.[10] Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, barley, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or Price System economies. Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money.
Representative money
Representative money is money that consists of token coins, other physical tokens such as certificates, and even non-physical "digital certificates" (authenticated digital transactions) that can be reliably exchanged for a fixed quantity of a commodity such as gold, silver or potentially water, oil or food. Representative money thus stands in direct and fixed relation to the commodity which backs it, while not itself being composed of that commodity.
Credit money
Credit money is any claim against a physical or legal person that can be used for the purchase of goods and services.[10] Credit money differs from commodity and fiat money in two ways: It is not payable on demand (although in the case of fiat money, "demand payment" is a purely symbolic act since all that can be demanded is other types of fiat currency) and there is some element of risk that the real value upon fulfillment of the claim will not be equal to real value expected at the time of purchase.[10]
This risk comes about in two ways and affects both buyer and seller.
First it is a claim and the claimant may default (not pay). High levels of default have destructive supply side effects. If manufacturers and service providers do not receive payment for the goods they produce, they will not have the resources to buy the labor and materials needed to produce new goods and services. This reduces supply, increases prices and raises unemployment, possibly triggering a period of stagflation. In extreme cases, widespread defaults can cause a lack of confidence in lending institutions and lead to economic depression. For example, abuse of credit arrangements is considered one of the significant causes of the Great Depression of the 1930s.[11]
The second source of risk is time. Credit money is a promise of future payment. If the interest rate on the claim fails to compensate for the combined impact of the inflation (or deflation) rate and the time value of money, the seller will receive less real value than anticipated. If the interest rate on the claim overcompensates, the buyer will pay more than expected.
The process of fractional-reserve banking has a cumulative effect of money creation by banks.
Fiat money
Fiat money is any money whose value is determined by legal means. The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment.[12] [13]
Fiat money is created when a type of credit money (typically notes from a central bank, such as the Federal Reserve System in the U.S.) is declared by a government act (fiat) to be acceptable and officially-recognized payment for all debts, both public and private. Fiat money may thus be symbolic of a commodity or a government promise, though not a completely specified amount of either of these. Fiat money is thus not technically fungible or tradable directly for fixed quantities of anything, except more of the same government's fiat money. Fiat moneys usually trade against each other in value in an international market, as with other goods. An exception to this is when currencies are locked to each other, as explained below. Many but not all fiat moneys are accepted on the international market as having value. Those that are trade indirectly against any internationally available goods and services [10]. Thus the number of U.S. dollars or Japanese yen which are equivalent to each other, or to a gram of gold metal, are all market decisions which change from moment to moment on a daily basis. Occasionally, a country will peg the value of its fiat money to that of the fiat money of a larger economy: for example the Belize dollar trades in fixed proportion (at 2:1) to the U.S. dollar, so there is no floating value ratio of the two currencies.
Fiat money, if physically represented in the form of currency (paper or coins) can be easily damaged or destroyed. However, here fiat money has an advantage over representative or commodity money, in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the U.S. government will replace mutilated federal reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it can be otherwise proven to have been destroyed.[14] By contrast, commodity money which has been destroyed or lost is gone.
Money supply
The money supply is the amount of money within a specific economy available for purchasing goods or services. The supply in the US is usually considered as four escalating categories M0, M1, M2 and M3. The categories grow in size with M3 representing all forms of money (including credit) and M0 being just base money (coins, bills, and central bank deposits). M0 is also money that can satisfy private banks' reserve requirements. In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England.
When gold is used as money, the money supply can grow in either of two ways. First, the money supply can increase as the amount of gold increases by new gold mining at about 2% per year, but it can also increase more during periods of gold rushes and discoveries, such as when Columbus discovered the new world and brought gold back to Spain, or when gold was discovered in California in 1848. This kind of increase helps debtors, and causes inflation, as the value of gold goes down. Second, the money supply can increase when the value of gold goes up. This kind of increase in the value of gold helps savers and creditors and is called deflation, where items for sale are less expensive in terms of gold. Deflation was the more typical situation for over a century when gold and credit money backed by gold were used as money in the US from 1792 to 1913.
Monetary policy
Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”[15]
A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union.
Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include:
- changing the interest rate at which the government loans or borrows money
- currency purchases or sales
- increasing or lowering government borrowing
- increasing or lowering government spending
- manipulation of exchange rates
- raising or lowering bank reserve requirements
- regulation or prohibition of private currencies
- taxation or tax breaks on imports or exports of capital into a country
For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz[16] supported by the work of David Laidler[17], and many others.
The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors and the influence of monetarism has since decreased.
