Trading In Forex

www.informedtrades.com — An introduction to Forex Capital Markets, a currency trading broker.

Interview with Paul Hill, CEO of GO Markets on winning the Best Forex Broker in Australia from the IB Times trading awards
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Wall Street analysts watch oil prices like hawks. During the early part of 2008, oil prices skyrocketed from near to almost 0 within a few short months. This was more than a 100% increase in oil prices in a few months. All over the world, countries started feeling huge pressures on their balance of payment accounts. Many hedge fund managers heavily speculated on the increase in oil price.

It is being studied whether the increase in the prices was due to speculation by the hedge funds. When the stock markets crashed in the middle of 2008, most of the hedge funds had to liquidate their investments in crude oil futures to cover the redemption pressure on them. Prices collapsed and are down now due to low consumer demand because of the global recession. But it is being predicted by the experts that with a recovery in the global economy, the oil demand will rise and the prices will go up again.

Oil demand in China and India plays a major role now.

As oil prices go up, consumers have to spend more on oil. The more they spend on oil, the less they spend on other products. The less they spend on other products, the less profit companies making these products make. Declining profits means declining stock prices.

The opposite case is also true. The less the prices become, the more Wall Street becomes exuberant about the profit potential of companies. This increased exuberance translates into increase in stock prices. Two large futures exchanges are used to determine the prices of crude oil. One is the New York Mercantile Exchange (NYME) and the other is the International Petroleum Exchange (IPE).

Historically, rising prices of crude oil have been associated with falling stock markets.

NYME is where most of the crude oil futures are traded. By monitoring the movement of the crude oil futures in NYME, you can develop a feel of the future economic situation of the United States. Since oil is heavily traded in US Dollar, this affects the US Dollar. The net effect is however a bit complicated.

Let’s take a look at it more closely to understand the two effects that pull USD with oil. When oil prices increase, the demand for US Dollar also increases. Most of the countries need US Dollar to pay for their oil imports. High demand for US Dollar means that it should appreciate.

But this is not the whole picture. We have to take another aspect into account. Increased oil prices also hurt the US economy. Now, which effect is more important for the currency markets?

The effect varies for different currency pairs. Suppose you are watching a currency pair that involves the USD and a currency representing a country that does well during the times of high prices of crude oil. Take Canada that has huge oil reserves after Saudi Arabia. The effect would be depreciation in the value of USD/CAD pair. US imports more oil from Canada than any other country. And if you are watching a currency pair that involves USD and a currency whose economy is harmed by the rising prices of oil, the demand for USD will rise.

So what we can say is that some currencies have positive correlation with oil prices and other currencies have negative correlation. The currency pair CAD/JPY shows the strongest reaction to rising oil prices. Japan imports almost 100% oil.

When oil prices are going to rise again, watch for CAD/JPY currency pair. CAD is positively correlated and JPY is negatively correlated. So CAD/JPY has the strongest reaction to rise in oil prices. It can be a very good currency pair to trade during times of rising oil prices.

The speculators play a very active role in the foreign exchange markets and in fact the major chunk of the foreign exchange dealings in foreign exchange markets is on account of speculators and speculative activities.

The following are the major speculators in the foreign exchange markets:

The banks dealing in foreign exchange markets with a view to make profit on account of favorable movement in exchange rates take positions; i.e. if they feel that rate of a particular currency is likely to go up in the short term, they buy that currency and sell it as soon as they are able to make quick profits;
Operations, particularly multinational corporations and transnational corporations having business operations beyond their national frontiers and on account of their cash flows being large and in multi currencies get into foreign exchange exposures. With a view to take advantage of the exchange rate movements in their favor, they either delay covering the exchange rate movements in their favor; they either delay covering exposures or do not cover until they get the cash flows. Sometimes, they take positions so as to take advantage of the exchange rate movement in their favor and for undertaking this activity; they have the state of the art dealing rooms.
Governments borrow or invest in foreign securities and then arrange cover for the exposure on account of such deals;
Individuals, like share dealings, also undertake the activity of buying and selling of foreign exchange for booking short-term profits. They also buy foreign currency stocks, bonds and other assets without covering the foreign exchange exposure risk. This also results in speculation;
Corporate entities take positions in commodities whose prices are expressed in foreign currency. This also adds to speculative activity.

It would be observed from the above that these participants in foreign exchange markets parties gain or lose on account of exchange rate movements. However, the dividing line between speculation and prudent business decision is very thin. The uncovered positions sometimes are explained away as diversification of risk. The conscious decision not to cover foreign exchange exposure can hardly be called speculation but taking positions for the purpose of trading in currency markets is definitely speculation.

The speculators or traders in the foreign exchange markets cause significant swings in foreign exchange rates. These swings, particularly sudden swings, do not do any good either to the national or international trade, and can be detrimental not only to national economy but global business also. However, to be fair to the speculators, they provide much needed liquidity and depth to foreign exchange markets. This is necessary to keep bid offer spreads to the minimum.

Similarly, liquidity also helps in executing large or unique orders without causing any ripples in foreign exchange markets. One of the views held is that speculative activity provides much needed efficiency to foreign exchange markets. Therefore, it can be said that speculations are necessary evil in the foreign exchange markets.

Fundamental analysis is the study of how the global events and news affect the currency markets.

In this edition of my Forex strategy trading Hints I will be teaching you how I you can utilize fundamental indicators to help you take better trading conclusions.

The implement of fundamental analysis in the foreign currency market is done by utilizing economic indicators. These fundamental indicators provide you with economical elements of a country that can help you to measure the strength of a country’s currency.

Economic indicators are available through a number of divisions of a country’s government and private companies. This information is analyzed by foreign currency exchange traders to foresee the direction of the currency markets. Foreign currency economic indicators are offered at determined times and dates, and are followed by most succesful Forex traders.

Because so many investors are looking at them, currency exchange economic indicators have a massive impact on the exchange rates of the currencies that are traded in the Forex market.

A large portion of Forex traders do not use fundamental analysis because economic indicators seem hard to them. 

On the other hand, utilizing fundamental analysis and following economic indicators can be a whole lot easier when you follow easy guides that will keep you updated with the Forex economic indicators with no trouble.

How to Start Using Forex Economic Indicators

It is beneficial to keep a log of all the important Forex economic indicators’ release dates.

Keep a log or register to one of the economic journal services that are available via the internet.

Aside from that, you should employ and follow economic indicators that are related to the currencies you trade. Each currency belongs to a different country and therefore the economic indicators will be different for each currency.

You will moreover need to learn what each indicator means and how it will impact a currency’s health.

The main theory behind Forex fundamental analysis is that if a country’s economy is doing well its currency will go up in value and if the economy is doing bad then their currency will devalue and its price will go down.

The Most Significant Fundamental Forex Indicators

As I mentioned before each currency will have unique economic indicators and the date and time when they are published are different. It is now time to talk about the most popular fundamental indicators that each FX trader should pay attention to.

The Treasury International Capital: The treasury international capital or TIC records the flow of treasury and agency securities. The basic principle behind this indicator is that a high reading is positive (or bullish) for the USD, while a a lower reading is negative (or bearish).

Durable goods: This is released monthly by the Bureau of Census and reflects new orders placed with domestic manufacturers for delivery in a near future.  The basic principle behind this indicator is that a increased reading is positive (or bullish) for the USD, while a decreased reading is negative or bearish.

Consumer Price Index (CPI) Ex Food & Energy: This indicator measures and analysis the weighted average of prices of consumer goods and services such as transportation, food, and medical care. This indicator is used to measure the level of inflation of a country. The basic principle behind this indicator is that a increased reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).

There are many other Economic indicators that can be used to analyze the FX Market and you should spend some time analyzing the ones that impact the currency pairs you trade. I hope I was able to supply you with useful information in this part of my Forex strategy trading hints.

Best regards,

Jay Molina

Pro foreign exchange trader & trainer

(www.abndigital.com) ABN’s Alishia Seckam speaks with Shireen Darmalingam, Macroeconomic Strategist at Standard Bank, looking at: Little reaction in the currency market to SA trade data; China PMI data beating expectations; Markets awaiting SA PMI numbers.
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What if I was to tell you that day trading forex could potentially be the most dangerous and unprofitable activity for you and your portfolio

Article Source: http://business.ezinemark.com/can-you-really-make-money-day-trading-forex-markets-17266fa5357.html

Fundamental analysis is the study of how the global events and news affect the currency markets.

In this edition of my Forex strategy trading Hints I will be teaching you how I you can utilize fundamental indicators to help you take better trading conclusions.

The implement of fundamental analysis in the foreign currency market is done by utilizing economic indicators. These fundamental indicators provide you with economical elements of a country that can help you to measure the strength of a country’s currency.

Economic indicators are available through a number of divisions of a country’s government and private companies. This information is analyzed by foreign currency exchange traders to foresee the direction of the currency markets. Foreign currency economic indicators are offered at determined times and dates, and are followed by most succesful Forex traders.

Because so many investors are looking at them, currency exchange economic indicators have a massive impact on the exchange rates of the currencies that are traded in the Forex market.

A large portion of Forex traders do not use fundamental analysis because economic indicators seem hard to them. 

On the other hand, utilizing fundamental analysis and following economic indicators can be a whole lot easier when you follow easy guides that will keep you updated with the Forex economic indicators with no trouble.

How to Start Using Forex Economic Indicators

It is beneficial to keep a log of all the important Forex economic indicators’ release dates.

Keep a log or register to one of the economic journal services that are available via the internet.

Aside from that, you should employ and follow economic indicators that are related to the currencies you trade. Each currency belongs to a different country and therefore the economic indicators will be different for each currency.

You will moreover need to learn what each indicator means and how it will impact a currency’s health.

The main theory behind Forex fundamental analysis is that if a country’s economy is doing well its currency will go up in value and if the economy is doing bad then their currency will devalue and its price will go down.

The Most Significant Fundamental Forex Indicators

As I mentioned before each currency will have unique economic indicators and the date and time when they are published are different. It is now time to talk about the most popular fundamental indicators that each FX trader should pay attention to.

The Treasury International Capital: The treasury international capital or TIC records the flow of treasury and agency securities. The basic principle behind this indicator is that a high reading is positive (or bullish) for the USD, while a a lower reading is negative (or bearish).

Durable goods: This is released monthly by the Bureau of Census and reflects new orders placed with domestic manufacturers for delivery in a near future.  The basic principle behind this indicator is that a increased reading is positive (or bullish) for the USD, while a decreased reading is negative or bearish.

Consumer Price Index (CPI) Ex Food & Energy: This indicator measures and analysis the weighted average of prices of consumer goods and services such as transportation, food, and medical care. This indicator is used to measure the level of inflation of a country. The basic principle behind this indicator is that a increased reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).

There are many other Economic indicators that can be used to analyze the FX Market and you should spend some time analyzing the ones that impact the currency pairs you trade. I hope I was able to supply you with useful information in this part of my Forex strategy trading hints.

Best regards,

Jay Molina

Pro foreign exchange trader & trainer

Watch how my day trading system for tradestation and ninja trader automatically pops an indicator up that tips the day trader off a big move in the markets is about ready to occur. This works in all futures and forex markets. When you use my indicator with my live day trading room institutional levels makes it even more powerful. You can use the indicator as a stand alone and use it with your own support/resistance levels or sign up to my live day trading room and use my institutional support and resistance levels with the indicator.
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Watch the latest market news from the London floor of spread betting provider City Index (www.cityindex.co.uk with Edward Dewhirst. Headlines include: After the FTSE closed down 28 points yesterday, a stronger showing in the US, spurred on by the Federal Reserve’s promise to keep interest rates low, has led to a positive start here in Europe. Currently we have the FTSE up 21 points at 5744 and in Germany the DAX is up 0.5% and in France the CAC is up 0.65%. With trading updates from Anglo American and figures from Kazakhmys, the miners are very much in focus this morning, leading the rally in early trading Kazakhmys is the biggest gainer, up 2.9%, while Rio Tinto, Randgold Resources and Vedanta are all up over 2%. Lloyds is also stronger, up 2.5%, with RBS and Barclays close behind, up 2.3% to 2% respectively. Some cracking figures have sent EasyJet flying this morning, up 8.5% after revenue surges 16.7%. However, it’s not all good news as Tate & Lyle is the biggest faller, off 0.8% after a broker downgrade. It’s also been a tough start for BP and Next, both down around 0.5%. BskyB is also suffering after a downgrade from Barclays. With no major UK data to be aware of, we have US durable goods and US jobless claims at 1.30pm (UK time), while we also have US home sales for December out at 3pm (GMT).
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