As you can see from the description above, there are significant opportunities and risks in foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict stop-loss policies in positions that are moving against you.
Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out. Of course, the market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level.
But the main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events, such as G7 meetings, are normally scheduled for weekends.
For speculative trading, we always recommend the placement of protective stop-lossorders. With Saxo Bank Internet Trading you can easily place and change such orders while watching market development graphically on your computer screen
Saturday, December 1, 2007
forex trading currencies
Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.
Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 - disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar, and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!
Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.
Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 - disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar, and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!
Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.
more of forex tips
Are you old enough to remember the cost of food, clothing, and housing back in the 1930's, the years before World War II? If so, you know that prices in the late 1950s are a great deal higher. If your memory does not go back that far, you had better find out what happened to the buying power of a dollar, especially between 1940 and 1950, before you select investments.
Here are some highlights in the trend in cost of living, Bureau of Labor Statistics, a part of the U.S. Government. In the comparatively prosperous 1920s, after World War I, the cost of living was about four fifths higher than in the prewar years 1910-14, when business was rather poor. Then in the business depression starting in 1929, the cost of living dropped considerably, but in the late 1930s it was still about two fifths higher than before World War I. During and after World War II, starting in 1941, the cost of living rose rapidly, and the Korean War caused another spurt in 1951. By 1957, the cost of living was twice as high as in the late 1930s, and about three fifths above the 1920's.
Thus the cost of living has had spells of moving downward as well as upward, and sometimes for several years it changed only slightly. But the ups and downs did not balance out; the ups were considerably larger than the downs. Comparing the two low periods, the early 1910s and the late 1930s, the rise averaged a little less than 2 percent a year. And comparing the two high periods, the 1920s and 1957, the rise averaged about the same rate per year.
A saver, although well aware that a dollar now will buy considerably less than it did several years ago, is apt to forget all about this when selecting an investment. Or maybe he assumes there is nothing he can do to protect himself against a continued decline in a dollar's value. The government's talk about "security" encourages him to continue in his delusion.
What is going to be the future trend of cost of living? Of course, an estimate of future cost of living cannot be accurate. But judging by the record of the last 40 years, on the long-term average the cost of living will rise about 2 percent a year. This means that if you put a $100 bill into a safe-deposit box today, in 10 years its buying power will be $17 less than today; in 20 years it will be $29 less than today, and so on for longer periods.
Instead of just holding the cash, suppose a saver buys an E bond for $750, and redeems it in 19 years. Including appreciation, he will receive $1,347. But most of the appreciation will be offset by the estimated 2 per cent annual rise in cost of living. In buying power, the $1,347 will be worth only as much as $825 was on the day he bought the bond. Similar results are to be expected from any of the popular "safe" investments, such as life insurance and deposits in savings institutions.
Anyone limiting himself to fixed-price investments, no matter how sensible and conservative he feels, is actually gambling that the cost of living is not going to rise, and over the long term, he is likely to obtain sorry results.
Here are some highlights in the trend in cost of living, Bureau of Labor Statistics, a part of the U.S. Government. In the comparatively prosperous 1920s, after World War I, the cost of living was about four fifths higher than in the prewar years 1910-14, when business was rather poor. Then in the business depression starting in 1929, the cost of living dropped considerably, but in the late 1930s it was still about two fifths higher than before World War I. During and after World War II, starting in 1941, the cost of living rose rapidly, and the Korean War caused another spurt in 1951. By 1957, the cost of living was twice as high as in the late 1930s, and about three fifths above the 1920's.
Thus the cost of living has had spells of moving downward as well as upward, and sometimes for several years it changed only slightly. But the ups and downs did not balance out; the ups were considerably larger than the downs. Comparing the two low periods, the early 1910s and the late 1930s, the rise averaged a little less than 2 percent a year. And comparing the two high periods, the 1920s and 1957, the rise averaged about the same rate per year.
A saver, although well aware that a dollar now will buy considerably less than it did several years ago, is apt to forget all about this when selecting an investment. Or maybe he assumes there is nothing he can do to protect himself against a continued decline in a dollar's value. The government's talk about "security" encourages him to continue in his delusion.
What is going to be the future trend of cost of living? Of course, an estimate of future cost of living cannot be accurate. But judging by the record of the last 40 years, on the long-term average the cost of living will rise about 2 percent a year. This means that if you put a $100 bill into a safe-deposit box today, in 10 years its buying power will be $17 less than today; in 20 years it will be $29 less than today, and so on for longer periods.
Instead of just holding the cash, suppose a saver buys an E bond for $750, and redeems it in 19 years. Including appreciation, he will receive $1,347. But most of the appreciation will be offset by the estimated 2 per cent annual rise in cost of living. In buying power, the $1,347 will be worth only as much as $825 was on the day he bought the bond. Similar results are to be expected from any of the popular "safe" investments, such as life insurance and deposits in savings institutions.
Anyone limiting himself to fixed-price investments, no matter how sensible and conservative he feels, is actually gambling that the cost of living is not going to rise, and over the long term, he is likely to obtain sorry results.
forex trading - comission
One of the simplest, most effective, and most popular methods of buying stock is to start a Monthly Investment Plan, or MIP. Started in 1954, the MIP now has more than 93,000 accounts in force, and new ones are being written at the rate of about 180 a day.
Another 111,734 MIPs begun in the same period have been completed or terminated. Altogether, MIP investors have bought some 3,674,000 shares of various stocks, with a market value at time of purchase of over $154 million.
The Plan operates on the brilliantly simple basis of reversing the conventional buying procedure. Instead of having the price of the stock desired determine the amount of money that must be invested, MIP permits the amount of money available for investment to determine the amount of stock bought. This is a feature highly attractive to new or inexperienced investors, without large sums at their disposal.
Since the MIP encourages regular, periodic investment, it also permits the application of dollar cost averaging, one of the more successful formulas for acquiring stock.
Step by step, here is how it works. The would-be investor, first of all, may go to a New York Stock Exchange member broker, any of whom may service an MIP account. He tells the broker which stock he would like and how much, on a monthly or quarterly basis, he expects to invest. He may stocks listed on the Exchange, but no securities handled over the counter, or exclusively on other exchanges.
The broker notes this information on a form, together with the name (or names) in which the stock is to be registered, and upon receipt of a first payment, the MIP is in motion.
The form, let it be said, is not a contract, but a routine purchase order. It does not obligate the investor to a series select any of the more than 1,500 common and preferred of installment payments; it is simply a record of his intention to invest a certain amount at regular intervals, if possible. Its small print merely specifies the normal conditions under which securities are bought and sold, which apply to any stock-exchange transaction. No fees, charges, or interest payments are involved. MIP investors pay only the usual brokerage fees, which, for the sake of convenience, are deducted from his payments.
Permissible payments range from as little as $40 every three months to a maximum of $1,000 a month. The usual rate is $40 a month.
Over the years, General Motors has emerged as the favorite MIP stock. It is being bought by some 4,500 MIP investors.
If you should happen to want it, too, what would your monthly $40 buy? As this was being written, GM sold at 48V4. With a commission of approximately six percent deducted, you have $37.74 for investment. This will buy .7781 percent, or about 3/4 of a share.
Right here is the unique element of MIP. It is possible in ordinary stock-exchange dealings to buy an odd lot of as little as one share. It is possible to spend no more than $40 and acquire 10 shares of a stock selling at three. But in no way except through the MIP can an investor buy fractional shares and accumulate stock costing more per share than he has to invest.
The prime benefit to the investor is that it brings the entire range of big board stocks within reach.
Another 111,734 MIPs begun in the same period have been completed or terminated. Altogether, MIP investors have bought some 3,674,000 shares of various stocks, with a market value at time of purchase of over $154 million.
The Plan operates on the brilliantly simple basis of reversing the conventional buying procedure. Instead of having the price of the stock desired determine the amount of money that must be invested, MIP permits the amount of money available for investment to determine the amount of stock bought. This is a feature highly attractive to new or inexperienced investors, without large sums at their disposal.
Since the MIP encourages regular, periodic investment, it also permits the application of dollar cost averaging, one of the more successful formulas for acquiring stock.
Step by step, here is how it works. The would-be investor, first of all, may go to a New York Stock Exchange member broker, any of whom may service an MIP account. He tells the broker which stock he would like and how much, on a monthly or quarterly basis, he expects to invest. He may stocks listed on the Exchange, but no securities handled over the counter, or exclusively on other exchanges.
The broker notes this information on a form, together with the name (or names) in which the stock is to be registered, and upon receipt of a first payment, the MIP is in motion.
The form, let it be said, is not a contract, but a routine purchase order. It does not obligate the investor to a series select any of the more than 1,500 common and preferred of installment payments; it is simply a record of his intention to invest a certain amount at regular intervals, if possible. Its small print merely specifies the normal conditions under which securities are bought and sold, which apply to any stock-exchange transaction. No fees, charges, or interest payments are involved. MIP investors pay only the usual brokerage fees, which, for the sake of convenience, are deducted from his payments.
Permissible payments range from as little as $40 every three months to a maximum of $1,000 a month. The usual rate is $40 a month.
Over the years, General Motors has emerged as the favorite MIP stock. It is being bought by some 4,500 MIP investors.
If you should happen to want it, too, what would your monthly $40 buy? As this was being written, GM sold at 48V4. With a commission of approximately six percent deducted, you have $37.74 for investment. This will buy .7781 percent, or about 3/4 of a share.
Right here is the unique element of MIP. It is possible in ordinary stock-exchange dealings to buy an odd lot of as little as one share. It is possible to spend no more than $40 and acquire 10 shares of a stock selling at three. But in no way except through the MIP can an investor buy fractional shares and accumulate stock costing more per share than he has to invest.
The prime benefit to the investor is that it brings the entire range of big board stocks within reach.
forex trading tips
EUR/USD
EUR/USD Current spot rate: 1.2778, Pivot: 1.2804
Today trading range: 1.2700 - 1.2845
Resistance: 1.2795 , 1.2845 , 1.2900
Support: 1.2760 , 1.2735 , 1.2700
Advice: There are news from EU and US today, but we expect bearish movements to continue this week, so maybe we'll see break of 1.2760. We sell at current price 1.2778 with 1.2700 target and stop above 1.2815. Good luck.
EUR/USD Current spot rate: 1.2778, Pivot: 1.2804
Today trading range: 1.2700 - 1.2845
Resistance: 1.2795 , 1.2845 , 1.2900
Support: 1.2760 , 1.2735 , 1.2700
Advice: There are news from EU and US today, but we expect bearish movements to continue this week, so maybe we'll see break of 1.2760. We sell at current price 1.2778 with 1.2700 target and stop above 1.2815. Good luck.
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