Forex FAQ

What is Foreign Exchange?

The Foreign Exchange market, also referred to as the “Forex” or “FX” market, is the largest financial market in the world, with a daily average turnover of approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of one currency and selling of another. The world’s currencies are on a floating exchange rate and are always traded in pairs, for example Euro/Dollar or Dollar/Yen.

Where is the central location of the FX Market?

FX Trading is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over the Counter (OTC) or ’Interbank’ market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network.

Who are the participants in the FX Market?

The Forex market is called an ’Interbank’ market due to the fact that historically it has been dominated by banks, including central banks, commercial banks, and investment banks. However, the percentage of other market participants is rapidly growing, and now includes large multinational corporations, global money managers, registered dealers, international money brokers, futures and options traders, and private speculators.

When is the FX market open for trading?

A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, then London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

What are the most commonly traded currencies in the FX markets?

The most often traded or ’liquid’ currencies are those of countries with stable governments, respected central banks, and low inflation. Today, over 85% of all daily transactions involve trading of the major currencies, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar.

Is Forex trading capital intensive?

No. FXA requires a minimum deposit of $250. FXA allows customers to execute margin trades at up to 200:1 leverage. This means that investors can execute trades of $10,000 with an initial margin requirement of $50. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. A more pragmatic margin trade for someone new to the FX markets would be 20:1 but ultimately depends on the investor’s appetite for risk.

What is Margin?

Margin is essentially collateral for a position. If the market moves against a customer’s position, FXA will request additional funds through a “margin call.” If there are insufficient available funds, FXA will immediately close out the customer’s open positions.

What does it mean have a ’long’ or ’short’ position?

In trading parlance, a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. In this scenario, the investor benefits from a rising market. A short position is one in which the trader sells a currency in anticipation that it will depreciate. In this scenario, the investor benefits from a declining market. However, it is important to remember that every FX position requires an investor to go long in one currency and short the other.

What is the difference between an “intraday” and “overnight position”?

Intraday positions are all positions opened anytime during the 24 hour period AFTER the close of FXA’s normal trading hours at 4:30pm EST. Overnight positions are positions that are still on at the end of normal trading hours (4:30pm EST), which are automatically rolled by FXA at competitive rates (based on the currencies interest rate differentials) to the next day’s price.

How are currency prices determined?

Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price. This is known as Central Bank intervention. Any of these factors, as well as large market orders, can cause high volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to “drive” the market for any length of time.

How do I manage risk?

The most common risk management tools in FX trading are the limit order and the stop loss order. A limit order places restriction on the maximum price to be paid or the minimum price to be received. A stop loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against an investor’s position. The liquidity of the Forex market ensures that limit order and stop loss orders can be easily executed.

What kind of trading strategy should I use?

Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities, whereas fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumor. The most dramatic price movements however, occur when unexpected events happen. The event can range from a Central Bank raising domestic interest rates to the outcome of a political election or even an act of war. Nonetheless, more often it is the expectation of an event that drives the market rather than the event itself.

How often are trades made?

Market conditions dictate trading activity on any given day. As a reference, the average small to medium trader might trade as often as 10 times a day. Most importantly, by not charging commission, FXA customers can take positions as often as necessary without worrying about excessive transaction costs.

How long are positions maintained?

As a general rule, a position is kept open until one of the following occurs: 1) realization of sufficient profits from a position; 2) the specified stop-loss is triggered; 3) another position that has a better potential appears and you need these funds.

$700 billion

U.S. stocks jumped the most in six years as growing expectations that lawmakers will salvage a $700 billion bank-rescue package helped the Standard & Poor's 500 Index recover more than half of yesterday's 8.8 percent plunge.
JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. climbed more than 13 percent as Senate leaders vowed to resume work on the bailout plan this week after its rejection spurred the market's steepest decline in two decades. Hess Corp. and Schlumberger Ltd. added more than 5.8 percent as optimism about the plan helped oil rebound from a $10-a-barrel drop. All 10 industries in the S&P 500 advanced at least 1.3 percent.
``There is some renewed hope that Congress will come back and try to get the amended plan through,'' Robert Doll, who oversees $1.3 trillion as chief investment officer of global equities at BlackRock Inc. in Plainsboro, New Jersey, said in a Bloomberg Television interview. ``We have to restore confidence, we have to reduce fear, we have to get banks to lend money.''
The S&P 500 rose 58.34 points, or 5.3 percent, to 1,164.73, its biggest advance since July 2002. The Dow Jones Industrial Average jumped 485.21, or 4.7 percent, to 10,850.66 and earlier gained more than 500 points. The Nasdaq Composite Index added 5 percent to 2,082.33. More than four stocks climbed for each that fell on the New York Stock Exchange.
Worst Since 2002
Even with the advance, the S&P 500 had its worst month since 2002, with a decline of 9.2 percent, and tumbled 9 percent for the quarter. The cost of borrowing dollars overnight rose the most on record as banks hoarded cash after the defeat of the bailout plan by Congress.
European stocks rose, while Asian shares declined. Government bonds in the U.S. and Europe fell. The dollar climbed the most against the euro since the shared currency's 1999 introduction.
More than $1 trillion in market value was erased yesterday in the worst day for the S&P 500 since the ``Black Monday'' crash of 1987 after the House of Representatives rejected a plan designed to rid financial institutions of bad loans. President George W. Bush this morning urged passage of the legislation to prevent ``lasting damage'' to the economy.
The Dow average lost 6 percent in September, and the Nasdaq fell 12 percent. The S&P 500's retreat since the end of June was its fourth-straight quarterly decline, the longest stretch since 2001. The Dow slipped 4.4 percent and the Nasdaq lost 9.2 percent.
$600 Billion
The MSCI World Index of 23 developed nations dropped 12 percent this month as almost $600 billion of credit losses and writedowns at financial institutions worldwide prompted banks to hoard cash, forced Lehman Brothers Holdings Inc. into bankruptcy and spurred government seizures of American International Group Inc. and the U.K.'s Bradford & Bingley Plc.
Financial companies in the S&P 500 this month traded at 1.1 times their book value, the lowest valuation since Bloomberg began tracking the data in 1995. Commercial banks in the gauge trade at 0.8 times book value, also a 13-year low.
``The market was way overdone, and we're seeing a bounce back,'' said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. ``The stage was set for saner minds to step in and pick some things off today. We've seen some nice gains in the some of the financials.''
JPMorgan, Citigroup
JPMorgan, the biggest U.S. bank by deposits, climbed 14 percent to $46.70. Citigroup rose 16 percent to $20.51. Bank of America surged 16 percent to $35. Goldman Sachs Group Inc. increased 6.1 percent to $128 and Morgan Stanley gained 9.6 percent to $23.
Senate Majority Leader Harry Reid said approving the bank bailout legislation remains a top priority. Congress will take action on the plan this week, Senate Minority Leader Mitch McConnell said. Voters have flooded Capitol Hill offices with complaints about the bill's rejection, according to a House Republican leadership aide.
Bush said the defeat of the plan ``is not the end of the legislative process.'' Presidential candidates Barack Obama and John McCain joined him in urging Congress to return to work on the plan.
The S&P 500 Regional Banks Index of 12 stocks climbed 16 percent after plunging 24 percent yesterday, its biggest tumble since the gauge was created in 2003.

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Please review my trades and add your opinin at "opinion post".
Of course your comments can be very critical- feel free to express your thoughts... it can be very usefull

Positions- change

profit: 0 pips, total: 0 pips


buy 0,5 190.14 no sl tp:192.85
buy 0,2 189,67 no sl tp:192.85
buy 0,1 187,76 no sl tp:192.85

sell limit 1.0 193,00 no sl tp:191.20

Positions

profit: 0 pips, total: 0 pips


buy 0,5 190.14 no sl tp:189.09
buy 0,2 189,67 no sl tp:189.09
buy 0,1 187,76 no sl tp:189.09

sell limit 1.0 192,45 no sl tp:191.20

30 M chart

buy 0,5 190.14
buy 0,2 189,67
buy 0,1 187,76



margin level @ 271
profit: @ -690
waiting till 4.30 am

Today

All at New York time
First number- forcast
Secend number- previous


1:00 JPY Housing Starts y/y 49.5% 19.0%
3:55 EUR German Unemployment Change -15K -40K
4:00 CHF UBS Consumption Indicator 1.848
4:30 GBP Current Account -9.7B -8.4B
4:30 GBP Final GDP q/q 0.0% 0.0%
4:30 GBP Revised Business Investment q/q -1.9% -1.9%
5:00 EUR CPI Flash Estimate y/y 3.6% 3.8%
5:00 EUR Italian Prelim CPI m/m 0.0% 0.1%
8:30 CAD GDP m/m 0.2% 0.1%
8:30 CAD RMPI m/m -3.0% 1.4%
8:30 CAD IPPI m/m -0.4% 0.4%
9:00 USD S&P/CS Composite-20 HPI y/y -16.1% -15.9%
9:45 USD Chicago PMI 54.0 57.9
10:00 USD CB Consumer Confidence 54.0 56.9
12:00 EUR ECB President Trichet Speaks
19:30 AUD AIG Manufacturing Index 47.0
19:50 JPY Tankan Manufacturing Index -2 5
19:50 JPY Tankan Non-Manufacturing Index 5 10
21:30 JPY Average Cash Earnings y/y 0.3%