Forex Ims
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What is the FOREX market? Largest and most liquid market in the world
– Market never sleeps – – – –
Starting Max. intensity Min. intensity Important centers
The Foreign Exchange Market • Foreign exchange means • Foreign exchange transaction
• Every hour of every business day, Open and Close throughout the day
Measuring Foreign Exchange Market Activity: Average Electronic Conversations Per Hour 25,000
20,000
15,000
10,000
5,000
Greenwich Mean Time 0 1
2
3
4
5
6
10 AM Lunch Europe In Tokyo In Tokyo opening
7
8
9
Asia closing
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Americas London open closing
Afternoon in America
6 pm Tokyo In NY opens
Two components to Forex Forex has two components 1. Over-the-counter (OTC) 2. Organized exchanges
Example of a FOREX trade • Suppose you feel that the EUR is undervalued against the dollar. To execute this strategy, you would buy Euros (simultaneously selling Dollars) and then wait for the exchange rate to rise. • Wait for the right time • Earn profit
Functions of the Foreign Exchange Market • The foreign exchange Market is the mechanism by which participants: – Transfer purchasing power – Obtain or provides credit – Minimize exposure to the risks
Market Participants • The foreign exchange market consists of two tiers: – The Inter bank or wholesale market – The client or retail market
Five broad categories 1. Bank and Non bank foreign exchange dealers 2. Speculators and Arbitragers 3. Individuals and firms, 4. Central banks Treasuries, 5. Foreign exchange brokers.
Transactions in the Interbank Market • A Spot transaction in the Inter bank market is the purchase of foreign exchange, with delivery and payment between banks to take place, normally, on the second following business day. • Value date
To ensure success in this industry, there are basic things that a would-be trader should know to arm him with the strengths that would prevent him from failing.
• • • •
Scalping Day trading Swing trading Position trading
Advantages of currency trading • • • • •
Superior liquidity No insider information 24-hour trading Lower transaction costs Equal profit potential in both rising and falling markets
Most traded currencies • • • • • •
US dollar: USD Euro: EUR Japanese Yen: JPY British pound: GBP Swiss franc: CHF Australian dollar: AUD
Currencies are traded in pairs • The most heavily traded pairs: • EUR/USD - 28 % • USD/JPY - 18 % • GBP/USD - 14 %
Tools for determining future movements in Money Market • Fundamental Analysis • Technical Analysis .
Forex is the largest market in the world • Global Average daily volume • • • • • •
2004: $1.77 trillion 2005: $2.0 trillion 2006: $2.6 trillion 2007: $3.6 trillion 2008: $3.8 trillion 2009: $4 + trillion (projected)
Foreign Exchange Rates and Quotations Direct or indirect. In this pair of definitions, the home or base country of the currencies being discussed is critical. • Direct • Indirect
Foreign Exchange Rates and Quotations • Most foreign exchange transactions involve the US dollar. • Professional dealers and brokers may state foreign exchange quotations in one of two ways: – The foreign currency price of one dollar – The dollar price of a unit of foreign currency
• Most foreign currencies in the world are stated in terms of the number of units of foreign currency needed to buy one dollar.
How to Read a Currency Quote • • • • •
Currency pair Base currency Quote currency Bid price Ask Price
SIMPLE !!
Dealing with a Forex Provider
• Terms you may encounter: – Broker: no dealing desk – Broker: dealing desk – Bank
Let’s take the mystery out of these terms and look at what they really mean
What does “no dealing desk” mean Bank Liquidity Provider
Forex Broker
Trader
Price from Bank A
Price from Bank B
1. Determines best price 2. Adds Markup to Price 3. Send Price to client
Price from Bank C
Accepts the Trade
Trade Accept Message
1. Finds the best price 2. Request a Trade
Trade Accept Message
Price Display Decides to make a trade
Request a Trade
1. Trade is booked 2. Collateral account debit or credited
What does “dealing desk” mean Bank Liquidity Provider
Forex Provider
Trader
Price from Bank A
Price from Bank B
1. Determines best price 2. Adds Markup to Price 3. Send Price to client
Decides to make a trade
Price from Bank C
Dealing Desk will 2. Accepts the client trade 3. Decided to offset the trade or not with a bank 4. Offset trades with banks
Trade Accept Message
Accepts the Trade
Price Display
Request a Trade from a bank
Request a Trade
1. Trade is booked 2. Collateral account debit or credited
What does dealing with a Bank mean Bank
Price from Bank
Trader
Price Display Decides to make a trade
Bank will 2. Accepts the client trade 3. Manage the currency Risk
Request a Trade
Trade Accept Message
1. Trade is booked 2. Collateral account debit or credited
Factors affecting exchange rates • Exchange rates are driven by supply & demand Factors affecting supply & demand - Interest rate - Inflation - Trade balance - Employment - Politics
How to get started • Go to www.dbfxarabic.com • Sign up for a demo and PRACTICE • Applications are on-line • Accounts are funded with cash • Fund with as little as $5,000 USD or the equivalent in GBP, EUR or JPY.
Questions to ask yourself • How much are you investing ? • What is your trading style ? • What level of risk or leverage are you comfortable with ? • What are the different regulatory environments and how does that effect you ? • A look at the terms regarding how the Forex provider manage their currency risk
The fundamentals and the perception of the trader would be equal to the future price movement in the market. With this knowledge in hand, the trader can then be able to improve his or her odds of making the right decision.
Trading in the foreign exchange would require a lot of decision making. You cannot simply put your investment in the hands of luck and simply purchase any currency, you have to be very careful and know what exactly what you are doing. The most common mistake any trader can do is to trade wildly, without proper strategies which were carefully formulated by using technical analysis.
Conclusion Forex market volume of transactions remains high during the whole day, but peaks highest when the Asian market (including Australia & New Zealand), the European market and the U.S. market are open simultaneously. In particular, there are two times when two of the major markets overlap during trading hours - between 2am and 4am EST (Asian/European) and between 8am to 12pm EST (European/N. American). If you want to find a great number of profitable trades, focus on the hours when the markets tend to make their biggest moves, i.e., during these big markets overlaps, which therefore, are usually the Best Times to Trade.
– Market never sleeps – – – –
Starting Max. intensity Min. intensity Important centers
The Foreign Exchange Market • Foreign exchange means • Foreign exchange transaction
• Every hour of every business day, Open and Close throughout the day
Measuring Foreign Exchange Market Activity: Average Electronic Conversations Per Hour 25,000
20,000
15,000
10,000
5,000
Greenwich Mean Time 0 1
2
3
4
5
6
10 AM Lunch Europe In Tokyo In Tokyo opening
7
8
9
Asia closing
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Americas London open closing
Afternoon in America
6 pm Tokyo In NY opens
Two components to Forex Forex has two components 1. Over-the-counter (OTC) 2. Organized exchanges
Example of a FOREX trade • Suppose you feel that the EUR is undervalued against the dollar. To execute this strategy, you would buy Euros (simultaneously selling Dollars) and then wait for the exchange rate to rise. • Wait for the right time • Earn profit
Functions of the Foreign Exchange Market • The foreign exchange Market is the mechanism by which participants: – Transfer purchasing power – Obtain or provides credit – Minimize exposure to the risks
Market Participants • The foreign exchange market consists of two tiers: – The Inter bank or wholesale market – The client or retail market
Five broad categories 1. Bank and Non bank foreign exchange dealers 2. Speculators and Arbitragers 3. Individuals and firms, 4. Central banks Treasuries, 5. Foreign exchange brokers.
Transactions in the Interbank Market • A Spot transaction in the Inter bank market is the purchase of foreign exchange, with delivery and payment between banks to take place, normally, on the second following business day. • Value date
To ensure success in this industry, there are basic things that a would-be trader should know to arm him with the strengths that would prevent him from failing.
• • • •
Scalping Day trading Swing trading Position trading
Advantages of currency trading • • • • •
Superior liquidity No insider information 24-hour trading Lower transaction costs Equal profit potential in both rising and falling markets
Most traded currencies • • • • • •
US dollar: USD Euro: EUR Japanese Yen: JPY British pound: GBP Swiss franc: CHF Australian dollar: AUD
Currencies are traded in pairs • The most heavily traded pairs: • EUR/USD - 28 % • USD/JPY - 18 % • GBP/USD - 14 %
Tools for determining future movements in Money Market • Fundamental Analysis • Technical Analysis .
Forex is the largest market in the world • Global Average daily volume • • • • • •
2004: $1.77 trillion 2005: $2.0 trillion 2006: $2.6 trillion 2007: $3.6 trillion 2008: $3.8 trillion 2009: $4 + trillion (projected)
Foreign Exchange Rates and Quotations Direct or indirect. In this pair of definitions, the home or base country of the currencies being discussed is critical. • Direct • Indirect
Foreign Exchange Rates and Quotations • Most foreign exchange transactions involve the US dollar. • Professional dealers and brokers may state foreign exchange quotations in one of two ways: – The foreign currency price of one dollar – The dollar price of a unit of foreign currency
• Most foreign currencies in the world are stated in terms of the number of units of foreign currency needed to buy one dollar.
How to Read a Currency Quote • • • • •
Currency pair Base currency Quote currency Bid price Ask Price
SIMPLE !!
Dealing with a Forex Provider
• Terms you may encounter: – Broker: no dealing desk – Broker: dealing desk – Bank
Let’s take the mystery out of these terms and look at what they really mean
What does “no dealing desk” mean Bank Liquidity Provider
Forex Broker
Trader
Price from Bank A
Price from Bank B
1. Determines best price 2. Adds Markup to Price 3. Send Price to client
Price from Bank C
Accepts the Trade
Trade Accept Message
1. Finds the best price 2. Request a Trade
Trade Accept Message
Price Display Decides to make a trade
Request a Trade
1. Trade is booked 2. Collateral account debit or credited
What does “dealing desk” mean Bank Liquidity Provider
Forex Provider
Trader
Price from Bank A
Price from Bank B
1. Determines best price 2. Adds Markup to Price 3. Send Price to client
Decides to make a trade
Price from Bank C
Dealing Desk will 2. Accepts the client trade 3. Decided to offset the trade or not with a bank 4. Offset trades with banks
Trade Accept Message
Accepts the Trade
Price Display
Request a Trade from a bank
Request a Trade
1. Trade is booked 2. Collateral account debit or credited
What does dealing with a Bank mean Bank
Price from Bank
Trader
Price Display Decides to make a trade
Bank will 2. Accepts the client trade 3. Manage the currency Risk
Request a Trade
Trade Accept Message
1. Trade is booked 2. Collateral account debit or credited
Factors affecting exchange rates • Exchange rates are driven by supply & demand Factors affecting supply & demand - Interest rate - Inflation - Trade balance - Employment - Politics
How to get started • Go to www.dbfxarabic.com • Sign up for a demo and PRACTICE • Applications are on-line • Accounts are funded with cash • Fund with as little as $5,000 USD or the equivalent in GBP, EUR or JPY.
Questions to ask yourself • How much are you investing ? • What is your trading style ? • What level of risk or leverage are you comfortable with ? • What are the different regulatory environments and how does that effect you ? • A look at the terms regarding how the Forex provider manage their currency risk
The fundamentals and the perception of the trader would be equal to the future price movement in the market. With this knowledge in hand, the trader can then be able to improve his or her odds of making the right decision.
Trading in the foreign exchange would require a lot of decision making. You cannot simply put your investment in the hands of luck and simply purchase any currency, you have to be very careful and know what exactly what you are doing. The most common mistake any trader can do is to trade wildly, without proper strategies which were carefully formulated by using technical analysis.
Conclusion Forex market volume of transactions remains high during the whole day, but peaks highest when the Asian market (including Australia & New Zealand), the European market and the U.S. market are open simultaneously. In particular, there are two times when two of the major markets overlap during trading hours - between 2am and 4am EST (Asian/European) and between 8am to 12pm EST (European/N. American). If you want to find a great number of profitable trades, focus on the hours when the markets tend to make their biggest moves, i.e., during these big markets overlaps, which therefore, are usually the Best Times to Trade.
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