FOREX 2 YOU

Introduction for beginners

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1. Purpose of trading
The purpose of trading on any market is to buy low and sell high. The foreign currency market is no exception. The goods traded on this market are rates of currencies of different countries. As any other goods the currencies have their prices.
To settle transactions between businesses located in different countries, governments, speculative transactions and so forth, banks around the world execute currency trades on market. Depending on various trade, economical and other parameters, interest rates, central bank policies, time of the day, preferences and anticipations of the market players, and many other causes, the rates, that is prices, of currencies stay in ceaseless motion.
Your task as a trader is to determine the trend of the rate and buy an appreciating currency or sell a depreciating one, and then take your profits through execution of a reverse transaction.
Our dealing center gives you the opportunity to use (Akmos FOREX Master) software suite to obtain real time currency quotations from different banks and largest world exchanges participating in market. At the same time, the rate charts for every currency are displayed for you, and hottest economical News that may affect currency rates now or in the future directly or indirectly are fed to your screen. You may familiarize yourself with AFM by reading .
And, at last, you will have a special trading account allowing you to buy and sell desired currencies. Despite of having US dollars in your account, you may start your trading from selling deutchemarks or japanese yens not concerning yourself with not having bought them in advance.

2. Some codes, numbers and definitions.
Each currency is assigned a three-letter code. For example, US dollar is coded - USD (United States Dollar), euro is coded EUR (EURo), Swiss frank is coded CHF (Confederation Helvetica Franc), Japanese yen is coded JPY (JaPanese Yen), British pound is coded GBP (Great British Pound). The currency codes are defined by

standard. Usually they are formed as a two-letter ISO-3166 country code and the first letter of currency name. There are a few exceptions most notable being the euro (EUR).
Currency rates are equal to ratios of currency units of different countries relative to each other. The rates are represented by 6-letter words composed of two three-letter currency codes. The first position is occupied, as a rule, by the code of a more expensive currency. The rates are expressed in units of the second currency per unit of the first one. For example, rates USDCHF (USD-CHF) show the number of Swiss franks in one US dollar, but rates GBPUSD (GBP-USD) show the number of US dollars having to be paid for one British pound. More detailed information on the codes of financial instruments may be found in .

3. How to read quotes.
The rates are usually expressed as five-digit numbers. For example, USDJPY = 121.44 means that 1 US dollar is valued at 121.44 Japanese yens (i.e. they are willing to pay you that many yens for one US dollar while you are buying or selling). At the same time, GBPUSD = 1.6262 means that 1 British pound is valued at 1.6262 US dollars. Generally, if the rate XXXYYY = Z, it means that one unit of XXX is worth Z units of YYY.
When the rate has changed, for example USDJPY = 121.44 to USDJPY = 121.45 or GBPUSD = 1.6262 to 1.6263, they say that the rate has moved 1 point. As it follows from the information above, yen in this example has DEPRECIATED by 1 point, but the pound has APPRECIATED, also by 1 point.
While watching the charts, you should keep in mind that only euro (EURUSD), British pound (GBPUSD) and Australian dollar (AUDUSD) charts reflect real movements of the rates of these currencies (that is, chart going up, means increasing price), as growth (that is, charts moving up) mean decreasing rates (prices) for the other currencies.
Sometimes quotes are given as a pair, for example 121.44/49. It is a

pair: the first number is BID, then the two last figures of ASK. Knowing that ASK is always higher than BID and that the spread is under 100 points, the full ASK real prices can always be defined. In this example ASK = 121.49.

4. BID and ASK prices.
It is known, that every transaction is executed at a rather well defined and concrete price, while the table Quote Spread Sheet lists three prices for each currency, for example:

Each of the participants of market enters each trade as either a SELLER or a BUYER of a particular currency. In so doing, the seller offers the currency at a higher price, for example GBPUSD at 1.6325, while the buyer bids for it at a lower price, for example, GBPUSD at 1.6322. The seller's price is called ASK and the buyers price is called BID accordingly. This is why, if you anticipate GBPUSD to appreciate (your GBPUSD chart to go up), then you should decide to buy the pound when it is low to sell it high later. You can BUY only from a seller offering it at the price equal to ASK. Should you be selling the pound (this operation is called SELL), the buyer will bid at a price equal to BID for it (this holds true for all currencies). The obvious conclusion is that if you have OPENED a position (the operation is called OPEN), that is you have executed BUY GBPUSD, and want to CLOSE it immediately (the operation is called CLOSE), that is to sell the pounds you have just bought, then you could do it only at a loss, similar to what would happen at any currency exchange booth. Consequently, to make a profit you should let the rate move in the anticipated direction more than the difference between BID and ASK. The third number is called LAST, which is an average of last BID and ASK on Forex.
As described in the section 3 above, currencies with a direct quote only appreciate when the chart goes up. Currencies with inverse quote depreciate when the chart goes up. Considering an upward movement on the chart, BUY operation would be confusing if it's profitable for some currencies but not for the others. To clear the confusion, the BUY operation for currencies with inverse quote, like USDJPY, was altered. BUY for USDJPY and the like buy not the currency itself, like JPY but it buys the US dollars instead, selling the other currency. For example, BUY USDCHF at 1.4500 buys 100,000 US dollars for 145,000 swiss franks. Thus, the BUY operation is always profitable when the chart goes up, SELL is always profitable when the chart goes down.
OPEN BUY (up) is executed at the ASK, CLOSE - at the bid BID; OPEN SELL (down) – at the BID, CLOSE - at the ASK.

5. STOP and LIMIT orders.
Let us get aquainted with some useful trading tools allowing us to protect ourselves from unforeseen losses to certain degree and take the expected profits.
These are STOP and LIMIT. For a previously opened position an instruction may be entered at any moment (during the working days) to close it, if the rate reaches a preset level. For example, you have opened a position expecting the rate to go up (on the chart). To protect yourself from significant losses if the rate moves down, especially in such a situation when you don't have or are about to lose control of the market, you should enter a STOP, that is set a price at below its current value at which your position should be closed with no further instructions. Similarly, if you have opened a down position, then you should specify a price above its current value. In this case you should bear in mind that if the STOP is set too closely to the current rate value, then a random rate fluctuation may close a correctly open position at a loss, but if it is set too far, then the losses could become unreasonably high. LIMIT is a rate value that you set at which the position should be closed with a profit, that is the value of the LIMIT should always be above the current level, if you play long, and below it, if you play short.

Forex trading

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The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.
When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.
However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

History of Foreign Exchange

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Ancient Times :
Money has been around in one form or another since the time of Pharaohs. Middle Eastern moneychangers were the first currency traders who exchanged coins from one culture to another. However, during the middle ages, the need for another form of currency besides coins emerged as the method of choice. The Babylonians are credited with the first use of paper bills and receipts. These paper bills represented transferable third-party payments of funds, making foreign currency exchange trading (also referred to as or FX) much easier for merchants and traders.
From the infantile stages of during the Middle Ages to WWI, the Forex markets were relatively stable and without much speculative activity. After WWI, the Forex markets became very volatile and speculative activity increased tenfold.
From 1931 until 1973, the Forex market went through a series of changes – many of which have paved the way for the road ahead. The Forex market, as we know it today, originated in 1973.

A Transitional Era :
The first major transformation, the Bretton Woods Accord, took place toward the end of World War II. The United States, Great Britain and France met at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire to design a new global economic order. The location was chosen because, at the time, the U.S. was the only country unscathed by war; most of the major European countries were in shambles.
The Bretton Woods Accord was established to create a stable environment by which global economies could restore themselves. The Bretton Woods Accord established the pegging of currencies and the International Monetary Fund (IMF) in hopes of stabilizing the global economic situation.
Up until WWII, Great Britain 's currency, the Great British Pound, was the major currency by which most currencies were compared. This changed when the Nazi campaign against Britain included a major counterfeiting effort against its currency. In fact, WWII vaulted the U.S. dollar from a failed currency after the stock market crash of 1929 to a benchmark currency by which most other international currencies were compared.
Now, major currencies were pegged to the U.S. dollar. These currencies were allowed to fluctuate by one percent on either side of the set standard. When a currency's exchange rate would approach the limit on either side of this standard, the respective central bank would intervene to bring the exchange rate back into the accepted range. At the same time, the US dollar was pegged to gold at a price of $35 per ounce further bringing stability to other currencies and the world Forex situation.
The Bretton Woods Accord lasted until 1971. Ultimately, it failed, but did accomplish what its charter set out to do, which was to re-establish economic stability in Europe and Japan.

After the Bretton Woods Accord came the Smithsonian Agreement in December of 1971. This agreement was similar to the Bretton Woods Accord, but allowed for a greater fluctuation band for the currencies.
In 1972, the European community tried to move away from its dependency on the dollar. The European Joint Float was established by West Germany, France, Italy, the Netherlands, Belgium and Luxemburg. The agreement was similar to the Bretton Woods Accord, but allowed a greater range of fluctuation in the currency values.
Both agreements made mistakes similar to the Bretton Woods Accord and in 1973 collapsed. The collapse of the Smithsonian agreement and the European Joint Float in 1973 signified the official switch to the free-floating system. This occurred by default, as there were no new agreements to take their place. Governments were now free to peg their currencies, semi-peg or allow them to freely float. In 1978, the free-floating system was officially mandated.
In a final effort to gain independence from the dollar, Europe created the European Monetary System in July of 1978. Like all of the previous agreements, it failed in 1993.

The Foreign Exchange Market Today :
The major currencies today move independently from other currencies. The currencies are traded by anyone who wishes. This has caused a recent influx of speculation by banks, hedge funds, brokerage houses and individuals. Central banks intervene on occasion to move or attempt to move currencies to their desired levels. The underlying factor that drives today's Forex markets, however, is supply and demand. The free-floating system is ideal for today's Forex markets.

The Basics of Currency Trading

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Quoting Conventions :
In the Foreign Exchange market, currencies are traded in pairs. For instance, a speculator may trade the Euro versus the US Dollar, EUR/USD, or the US Dollar versus the Japanese Yen, USD/JPY. The base currency is the term for the first currency in the pair. The counter currency is the term for the second currency in the pair. The exchange rate represents the number of units of the counter currency that one unit of the base currency can purchase.
Traders in the market are speculating on the exchange rate between two currencies. Exchange rates measure the relative strength of one currency to another. Speculators make buy and sell decisions on currency pairs based on fundamental and technical analysis, with the intention of the exchange rate moving in their favor.

EUR/USD :

In this example euro is the base currency and thus the “basis” for the buy/sell.If you believe that the US economy will continue to weaken and this will hurt the US dollar, you would execute USD order. By doing so you have bought euros in the expectation that they will appreciate versus the US dollar. If you believe that the US economy is strong and the euro will weaken against the US dollar you would execute a USD order. By doing so you have sold euros in the expectation that they will depreciate versus the US dollar.

USD/JPY :

In this example the US dollar is the base currency and thus the “basis” for the buy/sell.If you think that the Japanese government is going to weaken the yen in order to help its export industry, you would execute a BUY USD/JPY order. By doing so you have bought U.S dollars in the expectation that they will appreciate versus the Japanese yen. If you believe that Japanese investors are pulling money out of U.S. financial markets and repatriating funds back to Japan, and this will hurt the US dollar, you would execute a SELL USD/JPY order. By doing so you have sold U.S dollars in the expectation that they will depreciate against the Japanese yen.

GBP/USD :

In this example the GBP is the base currency and thus the “basis” for the buy/sell.
If you think the British economy will continue to be the leading economy among the G7 nations in terms of growth, thus buying the pound, you would execute a BUY GBP/USD order. By doing so you have bought pounds in the expectation that they will appreciate versus the US dollar. If you believe the British are going to adopt the euro and this will weaken pounds as they devalue their currency in anticipation of the merge, you would execute a SELL GBP/USD order. By doing so you have sold pounds in the expectation that they will depreciate against the US dollar.

USD/CHF :

In this example the USD is the base currency and thus the “basis” for the buy/sell.
If you think the Swiss franc is overvalued, you would execute a BUY USD/CHF order. By doing so you have bought US dollars in the expectation that they will appreciate versus the Swiss Franc. If you believe that due to instability in the Middle East and in U.S. financial markets the dollar will continue to weaken, you would execute a SELL USD/CHF order. By doing so you have sold US dollars in the expectation that they will depreciate against the Swiss franc.

Sample Trade :
A trader wishes to speculate on EUR/USD. Believing that the EUR will rise against the USD, or that the exchange rate will move upwards, the trader places an order to buy EUR/USD at a market rate of 1.3050. Let us also assume that the trader is speculating on 100,000 units of the base currency, which is the standard lot size, or trading increment, used in the Foreign Exchange market. Since the base currency is the first currency in the pair, the trader is speculating on the value of 100,000 Euros with respect to the US Dollar.
In this example, the trader is buying Euros, since he believes the Euro will rise in value with respect to the US Dollar. Accordingly, he finances the transaction of buying 100,000 Euros by borrowing an equivalent amount of US Dollars.
For the trader, the value of the amount borrowed is a function of the exchange rate. Since the exchange rate at the time of the transaction was 1.3050, the market cost for 1 Euro was 1.3050 US Dollars. Hence, 100,000 Euros cost $130,500 (1.3050 * 100,000). This borrowed amount of 130,500 USD must be paid back when the transaction is closed.
Let’s assume that the trader is correct in assuming that the Euro would rise in value with respect to the USD, and that the exchange rate moved to 1.3150, 100 pips above the rate at which the trader entered. If the trader were to close his position now, the 100,000 Euros he purchased at the onset of the transaction would be sold, and his debt of 130,500 US Dollars would be paid off.
At an exchange rate of 1.3150, the trader’s 100,000 Euros are now worth 131,500 US Dollars (100,000 * 1.3150). After repaying the borrowed amount of 130,500, this leaves him with a profit of $1,000.
Traders have equal opportunities to profit regardless of whether the exchange rate is rising or falling.

Spreads & Bid/Ask :
When viewing quotes, you will notice that there are two prices for each currency pair. Similar to all financial products, FX quotes include a "bid' and "ask". The bid is the price at which a dealer is willing to buy and clients can sell the base currency in exchange for the counter currency. The ask is the price at which a dealer is willing to sell and a client can buy.
Bid = The Price at which the Trader (You) Can Sell Ask = The Price at which the Trader (You) Can Buy
For example, say the EUR/USD is trading at 1.3050 x 1.3053. In this case, the bid is 1.3050 and the ask is 1.3053. The difference between the bid and ask constitutes the spread. In the above example, the spread is 3 pips, or points. This differential reflects the cost of the trade. Essentially, the market would have to move 3 pips in your favor for you to break even, and 4 pips for you to be in your profit zone.

Structure of the Market :
The FX market is an over-the-counter market with no centralized exchange. Traders have a choice between firms that offer trade-clearing services.
Unlike many major equities and futures markets, the structure of the

is highly decentralized. In other words, there is no central location where trades occur. The New York Stock Exchange, for example, is a totally centralized exchange. All orders pertaining to the purchase or sale of a stock listed on the NYSE are routed to the same dealer and pass through the hands of a single clearing firm. This structure requires buyers and sellers to meet at the NYSE in order to trade a stock that is listed on this exchange. It is for this reason that there is one universally quoted price for a stock at any given time.
In the FX market there are multiple dealers whose business is to unite buyers and sellers. Each dealer has the ability and the authority to execute trades independently of each other. This structure is inherently competitive as traders are faced with a choice between a variety of firms with an equal ability to execute their trades. The firm that offers the best services and execution will capitalize on this market efficiency by attracting the most traders. In the equities markets, the execution of trades is monopolized and there is no incentive for a clearing firm to offer competitive prices, to innovate, or to improve the quality of their service.

Margin :
In standard cash stock accounts, money should be deposited for the full amount of the position you are trading, or if you have a margin account, for at least half of the position. This is in contrast to the FX market, where only a small percentage of the actual position value needs to be deposited prior to taking on the trade. This small deposit, known as the margin, is not a down payment, but rather a performance bond or good faith deposit to ensure against trading losses. The margin requirement allows traders to hold positions much larger than their account value (up to 200x the size).
Margin requirements are as low as .5% meaning for every standard lot size of 100,000 units, you must commit $500. However, if you wanted to control a $100,000 in the stock market, you would have to deposit at the very least, $50,000. Even in the futures market you would have to deposit at least $5,000 to control a $100,000 position.

Bank of England Collapse :
The above illustration shows a classic example of a 5000-pip collapse of the GBP/DEM in 1992 from 2.9000 to 2.4000 in a matter of weeks. George Soros, in fact made $1 billion overnight buying GBP to convert them into DEM.

Currency Abbreviations :
Below is a list of the abbreviations for various currencies that are commonly traded in the FX market:
EUR = Euro

GBP = British Pound (Sterling, Cable)

JPY = Japanese Yen

CHF = Swiss Franc (Swissie)

USD = United States Dollar

NZD = New Zealand Dollar (Kiwi)

AUD = Australian Dollar (Aussie)

CAD = Canadian Dollar

25 Trading stategies for forex :

Currency Trading Strategy Number One:
When you are just starting out, strive to carve out 20 pips per
session, and that’s it. Then, turn it off, and study some more. When
you get really good at it, you can then “graduate” to higher returns.
So, set your goal at 20 pips and stick to it, until you are a grand
master at this wonderful “business” called forex trading. I stress the
word business. This is not a game, especially where your “hardearned
money” is involved.

Currency Trading Strategy Number Two:
Spend most of your time on the 15-min chart.

Currency Trading Strategy Number Three:
When you first start out in any particular session, look at the 1 hr
chart to get an overall perspective on trend from one session to the
next, and what it’s likely shaping up to be at the beginning of the
upcoming new session.

Currency Trading Strategy Number Four:
Only look at the 5 min chart if you absolutely have to see what’s
behind the current 15 min bar – especially where the bar is
elongated, and may have just penetrated a pivot point; in other
words, is price reversing course on the 5 min chart, which would
obviously not yet be reflected on the 15 min chart?

Currency Trading Strategy Number Five:
Don’t dwell on the 5 min chart, as it contains a lot of “noise” that will
whipsaw you to death.

Currency Trading Strategy Number Six:
MACD rules on the 15 min chart. Even if MACD is, say, trending up
on the 1 hr chart, if it is trending down on the 15 min chart, that’s
what you take your cue from. That’s not to say a shift in price
direction is not in the works. It just means it’s coming, but not yet.
In the meantime, you don’t want to miss what’s happening “in the
now,” which is what is reflected in the 15 min chart.

Currency Trading Strategy Number Seven:
If MACD is trending down on the 15 min chart, and price is wanting
to go north, price will sooner than later head south as it perhaps
bounces off a pivot point, or gets turned around at a juncture caught
by one of the other three “tools” you should be using (“reading
bars,” MACD divergence, or trendline analysis). Same thing if MACD
is trending up, and price is trying to head south.

Currency Trading Strategy Number Eight:
Only use MACD for divergence, not for buy or sell signals. It is a
lagging indicator, and as such is useless as a trigger. It is too slow
for that in the forex world.

Currency Trading Strategy Number Nine:
Again, MACD divergence on the 15 min chart is more significant than
what you see on the 1 hr chart in the near-term. For those of you
who don’t understand what divergence means, keep looking at my
own personal forex trading examples on this page on a daily basis for
examples of divergence. Basically, what it means is where you see
MACD waves “waving” in the opposite direction to price action. That’s
why I connect the top of the waves (in a downtrend) and the bottom
of the waves (in an uptrend) to illustrate that the waves are “waving”
higher in an uptrend and lower in a downtrend – in the opposite
direction to where price is going.

Currency Trading Strategy Number 10:
Always “protect” your money by using 20-30 pip stops. Mental stops
are okay, but not if you are dead serious about using a “disciplined”
approach to managing your money. You will lose three out of ten
trades. The three losses should be kept to 20-30 pips. Your wins will
by far surpass your small losses, and that’s what stop-losses are all
about. Don’t be afraid to lose. Even professional batters strike out six
out of 10 times. Lions are only successful 20% of the time in their
chase for the kill. Professional golfers lose 95% of the time.
Professional poker players lose 50% of the time. So, your chances
are better at trading the forex, using my system of course, than in
any other venue. Even businesses have “bad inventory.” And, life in
general is not always “100%” for sure.

Currency Trading Strategy Number 11:
That all said and done, if you entered a trade close to a pivot point,
or a particular significant bar pattern (like a double top, for instance,
or a trendline breakout), place your stop on the other side (but not
too close to) the event that caused you to take action. This is
because price has a tendency to snap back to that situation that
caused it to bolt away from it in the first place. If you follow the 20-
30 pip stop rule, but a 33 pip stop on the other side of that event
would safeguard you against such a reaction, then so much the
better. So, yes the stop rule is 20-30 pips, but within reason of
course.

Currency Trading Strategy Number 12:
Stops (read “stop-loss”) are for insurance purposes only – not
necessarily for taking profits. However, you can most certainly
employ “trailing stops,” whereby you keep moving your stop up (or
down, whichever the case may be) to protect your profits, as price
advances, or declines.

Currency Trading Strategy Number 13:
Only use “reading bars,” MACD divergence, pivot points, and
trendline analysis in your forex trading toolkit. That’s all you need for
this market. Be a technical bigot. Focus on pure technical analysis,
and avoid funnymentals. Even news is factored into price action, so
you don’t need to be up on it each and every nanosecond. If you
don't have my .pdf file on reading bars, please send me an e-mail,
and I'll forward it to you: prbain@tradingsmarts.com As was pointed
out to me by a client, "reading bars" includes spotting double, or
even triple, tops and bottoms.

Currency Trading Strategy Number 14:
And now for the tough part. I know my documentation says that the
forecast low and high for the next trading session can be M1/M3 or
M2/M4. However, trading is shades of gray. It is not a black and
white business. If it were, the world would be paved in gold, and
everybody would be rich. Now, we wouldn’t want that would we? The
forex would be nothing more than a Church at the end of a road
connected to a river bank at the other end with nothing in between.
The point I am trying to make is that the “actual” low and high for
the next session could very well be any combination of M1, M2, M3,
and M4. It could be M1/M4, M2/M3, or combinations of the other five
pivot points. The M1/M3 and M2/M4 calculations are just guideposts,
but are not poured in concrete. Price is the number one indicator. It
will determine what the low and high are going to be. And one other
thing, you should use these forecasts in conjunction with the other
three “tools” in your forex trading toolkit – “reading bars,” MACD
divergence, and trendline analysis. In other words, if price has been
trending down from the past session into the current one, price is
trading at, say, M3, and price is still going down, then M3 may very
well be the high for the new session, regardless of the fact that my
system may have called for M4 to be the high. So, use the pivot
points in conjunction with other three possible signals – “reading
bars,” MACD divergence, and trendline analysis. I have seen it
happen, as in the example just given, where price was trending down
from one session to the next right through M3 at the open of the
next session – simultaneous with the formation of a “double top” bar
pattern. Well, there you have three indications that price was headed
south for sure. And, I believe MACD was also trending down in that
particular case. So, that was another clue that the high for the
session had probably already been put in.

Currency Trading Strategy Number 15:
When you are first starting out, pick one currency of the four major
pairs (EUR/USD, USD/JPY, GBP/USD, and USD/CHF) to trade, and
become a specialist in it. I would personally recommend the Euro,
especially if you are going to be asking me questions, as that's what
I focus on with my clients around the world. Get to know its rhythm.
When you are doing well with it, then move on, and trade the other
three major pairs, as you see fit. When you are in learning mode,
you will have your hands full trying to figure out what to look for,
and how to manage your trades – enough so that you don't want to
be skipping back and forth between currencies.

Currency Trading Strategy Number 16:
Keep a log of all your trades – both good and bad. Analyze where
you went right and wrong, and vow not to repeat those situations
that could have been done better. This is all part of being organized
as a "professional" trader - with good habits. This is not about gunslinging
and winging it with "Hail Mary" passes.

Currency Trading Strategy Number 17:
Important point here: If price action opens in the upper end of the
projected range for the session (all the way up to R2, and beyond) –
in other words, in the sell area (that area above the central pivot
point) – and there are other suggestions that price is too high (such
as a particular bar reading, MACD divergence, or trendline breakout),
then price has probably achieved the upper end of its price range for
the session. The same holds true where price action opens in the
lower end of the projected range for the session (all the way down to
S2, and beyond) – in other words, in the buy area (that area below
the central pivot point) – and there are other suggestions that price
is too low (such as a particular bar reading, MACD divergence, or
trendline breakout), then price has probably achieved the lower end
of its price range for the session.

Currency Trading Strategy Number 18:
If there is nothing to do, then don't do it. Don't just do something
because your "gut" tells you to. That can get you in a lot of trouble in
this business. Only react to bona fide signals provided by the four
indicators talked about above – "reading bars," MACD divergence,
pivot points, and trendline analysis.

Currency Trading Strategy Number 19:
Only use an "industrial strength" market maker with the lowest pip
spread in the industry.

Currency Trading Strategy Number 20:
Occasionally, you will see a huge spike up in price, as we did 11 May
03. This just happened to be on a Sunday, shortly after recommencement
of trading, after the weekend respite. Ordinarily, I
would take the OHLC numbers from Friday, but given the nature of
the wild swing up that evening on one of the 15 min bars, I would
then use the OHLC numbers from Sunday night's session close to get
a better reading on support and resistance levels for the next
session. This is, of course, if you are using a market maker that
delineates its break between trading sessions in the late evening -
anywhere between 20:59:50 and 24:00 (midnight).

Currency Trading Strategy Number 21:
I often get asked by fellow traders why my pivot points aren't the
same as theirs. Good question. The answer is, of course, that you
may be using a different market maker, where a daily 24-hour
session is "cut off" at a different time. Some end at 20:59:50. Others
at five pm. Where you take your OHLC from will have a direct
bearing on the pivot points that you calculate using my program. The
results will obviously not be the same. But, that is okay – because
you want to use the pivot point calculations that are reflective of the
last 24 hours at the market maker you are trading with. That way,
the resulting numbers will be truly indicative of the support and
resistance levels you should be working with during the next session.
If you are trading with a firm that cuts off at 5 pm, and using OHLC
figures from another source that cuts off at a different time, your
figures will be "out-of-sync." I hope this all makes sense. If not,
please send me an e-mail: prbain@tradingsmarts.com Also, in your
message, you can ask me how to get a copy of my program, if you
don't already have one. You can also ask me where you should be
trading – i.e., which market maker you should be using. I only
recommend "select" providers, after considerable research, and
feedback from my clients.

Currency Trading Strategy Number 22:
Former stock traders take note: I say former because I don't
honestly know why you would ever want to go back to stocks after
having tasted the forex. Don't over-trade the forex. This is not a
scalping market! If you have to scalp, do it in slow motion.
Currencies trend well. Don't buy too soon in a downtrend, and don't
sell too soon in an uptrend. Watch for trendline breakouts to know
when to make your move.

Currency Trading Strategy Number 23:
You cannot succeed at trading the forex unless you are TOTALLY
committed to trading, and trading it. This is not something to be
played with. If you are not going to take it seriously, then try
something else.

Currency Trading Strategy Number 24:
Put your emotions in your hip pocket. This is a business, and should
be treated as such. If you have any bad habits, the forex will fix
them real quick.

Currency Trading Strategy Number 25:
Important point here: If you deem the major trend for the current
session, based on everything you have learned to this point, to be
down, then think DOWN. Sell rallies. Don't look to buy, or you might
get whipsawed to death. Likewise, if you deem the major trend for
the current session to be up, based on everything you have learned
to this point, then think UP. Buy the dips. Don't look to sell. Former
stock traders fall prey to wanting to have it both ways. Maybe, when
you get real good at this, you can try. But for now, think one way,
and save yourself the grief.

Advantages of Forex vs. Other Markets

2007-03-25T02:43:00.000-07:00

8000 stocks vs. 4 major currency pairs :
There are approximately 4,500 stocks listed on the New York Stock exchange. Another 3,500 are listed on the NASDAQ. Which one will you trade? Got the software? Got the time? Concentrate on the majors; find your trade. You have approximately 34 second-tier currencies to look at in your spare time (if you are so inclined).

No Middlemen :
The stock markets are comprised up of a number of centralized exchanges. One of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded presents additional costs. The cost can be either in time or in fees. Spot currency trading does away with the middlemen and allows clients to interact directly with the market maker. Forex traders get quicker access and cheaper transaction costs.
* FX Solutions is compensated through a portion of the bid / ask spread.

Trade Countries Like You Do Companies :
Equity traders rely on key fundamental and technical data when making assessments of a particular company’s future growth and performance. Just the same, similar factors are considered when gauging the overall health of a country’s economy and currency. Currency valuation is a function of supply and demand. Namely, factors such as interest rate movements, economic indicators such as GDP, foreign investment, and the trade balance all provide an indication of the general health of an economy and underlying shifts in the supply and demand for that currency. As a basic example, consider an interest rate decision by a country’s central bank. If a rate is hiked, it is expected that capital flows into that country may increase, as investors may seek to realize a greater return on their investment in that country vis-à-vis others. As more capital flows into the country, the demand for its currency increases - which generally causes an appreciation of that currency.

24-Hour Trading Liquidity :
Since the Forex market, in a sense, follows the sun around the globe, it rarely experiences periods of illiquidity. When , clients can place trades continously from Sunday 5 PM EST to Friday 4:30 PM EST. You no longer have to wait for the market to open when news has already hit the streets or have to stop trading because the CME, CBOT or other American futures pits have closed for the day. This gives the Forex trader added flexibility and continuous market opportunities that just aren't available in Futures.
There are three main economic zones that are linked throughout the world. For instance, when the Pacific Rim markets such as Japan and Singapore begin to slow, the European markets of England, Switzerland and Germany begin. These Forex markets are followed by the North American markets of the United States, Canada and Mexico. As the North American markets begin to slow down for the evening, the Pacific Rim starts their trading day again. This example shows that you are no longer limited to trading using a comparatively short, trading day offered by U.S. markets only.
* FX Solutions dealing desk is closed from Friday 4:30 PM EST until Sunday 5 PM EST. No trades may be opened or closed during this period.

Execution Speed and Quality :
As a result of the unsurpassed liquidity in the spot FX market, the execution speed and quality is far superior to that of the Futures markets, and other markets as well. Every Futures trader has experienced periods of inconsistent execution and price uncertainty – for example when even a market order was subject to a 30-minute fill delay. Despite electronic platforms and limited guarantees on execution in the Futures market, execution price and time is far from certain. In contrast, when trading on the GTS Platform, the price you see is a real-time streaming executable rate.

Highly Trending markets :
The Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market. In turn, this creates a haven for traders not having to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the lower volume markets, like Futures or Options.

Commission-Free Trading :
Though some speculators are unaware, all financial markets have a spread (the difference between the bid and ask price). In the Futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the Futures market typically signify the last traded price, not the spread. FX Solutions offers you on tradable prices. This allows you to make quick decisions on your Forex trades without having to account for fees that may affect your profit/loss or slippage between the price you have just seen on the ticker and the price upon which the order will be filled.
* FX Solutions is compensated through a portion of the bid / ask spread.

Better Leverage :
One of the main advantages for traders trading Spot currencies is the leverage capability afforded to them. With margin policies as lenient as .25%, a trader is able to leverage up to 400:1. That is, a trader can control a $100,000 position for only $25. Keep in mind however, leverage is a double-edged sword and you should try to avoid overleveraging, as it magnifies both profits and losses.
* FX Solutions asks that you consider the risks associated with increasing your leverage. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit, this may work against you as well as for you. You may sustain a total loss of initial margin and you may be required to deposit additional funds to cover a short margin position. FLEXI Leverage is available for self-traded accounts only (does not apply to managed accounts).

TRADE THE NEWS

2007-03-24T09:33:00.000-07:00

Here is a great example of how you can use the 1 minute charts to trade the
economic news releases. To find out when the world economic news releases
are, simply go to http://www.forexnews.com and scroll down to the bottom of the
website for the list of the current week news releases that impact the Forex
markets. In the above example, the economic news release was scheduled for
8:30 AM EST. At 8:33 the price jumped up 20 pips. Using our 1 minute
strategy along with the news, is an effective way of scalping profits on the FX
markets.

**Tip: Remember to wait a minute or two after the announcement. Don't open a
position before the scheduled time!
**Tip: There are news releases all throughout the week during the different time
zones and trading sessions. This technique works well during overnight trading
EST during the European and London sessions.

glossary

2007-03-24T08:53:00.000-07:00

Accrual
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.
Actualize
The underlying assets or instruments which are traded in the cash market.
Adjustable Peg
An exchange rate system where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency. The official rate may be changed from time to time.
Adjustment
Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
Agent Bank
A bank acting for a foreign bank.
In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand
Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.
Aggregate Risk
Total amount of exposure a bank has with a customer for both spot and forward contracts.
Aggregate Supply
Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio
Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.
Aggressor
A trader dealing on an existing price in the market.
Appreciation
A currency is said to 'appreciate' when it strengthens in price in response to market demand.
Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage
Profiting from differences in the price of a single currency pair that is traded on more than one market.
Arbitrage Channel
The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
Around
Used in quoting forward "premium/discount". "Five-five around" would mean five points on either side of the present spot value.
Ask Price
Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote - e.g. EUR/USD 1.1965 / 68 - means that one euro can be bought for 1.1968 US dollars.
Asset
An item having commercial or exchange value.
Asset Location
Dividing instrument funds among markets to achieve diversification or maximum return.
At Best
An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.
At or Better
An order to deal at a specific rate or better.
Authorized Dealer
A financial institution or bank authorized to deal in foreign exchange.
Average Rate Option
A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an "Asian option".
Back Office
The office location, or department, where the processing of financial transactions takes place.
Balance of Trade
The value of a country's exports minus its imports.
Bank Notes
Paper issued by the central bank, redeemable as money and considered to be full legal tender.
Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
Bar Chart
A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information - the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency
In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.
Bear Market
An extended period of general price decline in an individual security, an asset, or a market.
Bid Price
is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1923 / 68 - means that one euro can be sold for 1.1923 US dollars.
Bid/Ask Spread
is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Big Figure
The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the big figure is 108. EUR/USD price of .8325/28 the big figure is .83
Bretton Woods
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.
Bull Market
A market which is on a consistent upward trend.
Bundesbank
Central Bank of Germany.
Buy On Margin
The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed.
Buy Limit Order
An order to execute a transaction at a specified price (the limit) or lower.
Candlestick Chart
A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).
Central Bank
A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy.
Chartist
A person who attempts to predict prices by analyzing past price movements as recorded on a chart.
Closing a Position
The process of selling or buying a foreign exchange position resulting in the liquidation (squaring up) of the position.
Commission
The fee that a broker may charge clients for dealing on their behalf.
Cross Currency
A currency pair that does not include US dollars - e.g. EUR/GBP.
Currency
Money issued by a government. Coins and paper money. It is a form of money used as a unit of exchange within a country.
Currency Pair
Two currencies involved in a Forex transaction - e.g. EUR/USD.
Currency Risk
The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments.
Day Trade
A trade opened and closed on the same trading day.
Day Trading
Refers to a style or type of trading where trade positions are opened and closed during the same day.
Day Trader
A trader who buys and sells on the basis of small short-term price movements.
Dealer
An individual or firm that buys and sells assets from their portfolio, acting as a principal or counterpart to a transaction.
Depreciation
A fall in the value of a currency due to market forces.
Desk
Term referring to a group dealing with a specific currency or currencies.
Devalution
The act by a government to reduce the external value of its currency.
Direct Quotation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Discretionary Account
An account in which the customer permits a trading institution to act on the customer's behalf in buying and selling currency pairs. The institution has discretion as to the choice of currency pairs, prices, and timing-subject to any limitations specified in the agreement.
Economic Indicator
A statistical report issued by governments or academic institutions indicating economic conditions within a country.
Euro (EUR)
The single currency of the European Economic and Monetary Union (EMU) introduced in January 1999. This is the amalgamation of the following currencies, after Jan. 1, 2002 these currencies will be considered legacy currencies. Germany Deutsche Marks, Italy Lira, Austria Schillings, France Franc, Belgium Francs, Netherlands (Dutch) Guilders, Finland Markka, Portugal Escudo, Greece Drachmas, Ireland Punt, Luxembourg Francs, Spanish Pesetas.
European Central Bank (ECU)
The Central Bank for the new European Monetary Union.
Execution
The Process of completing an order or deal.
First In First Out (FIFO)
refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (Forex, FX)
Simultaneously buying one currency and selling another.
Fundamental Analysis
Analysis of political and economic conditions that can affect currency prices.
Gann Trading
W.D. Gann is considered by many to be the greatest trader of all time. There's no doubt his analysis of market cycles and price behaviour is without equal. Gann is believed to have profited by over 50 million dollars trading all the markets.
Hedging Transaction
A hedging transaction is one that protects an asset or liability against fluctuation in the foreign exchange rates.
Leverage or Margin
The ratio of the value of a transaction to the required deposit. A common margin for Forex trading is 100:1 - you can trade currency worth 100 times the amount of your deposit.
Limit Order
An order to buy or sell when the price reaches a specified level.
Liquidity
A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed. A more liquid market will provide more frequent price quotes at a smaller bid/ask spread.
Lot
The size of a Forex transaction. Standard lots are worth about 100,000 US dollars.
Major Currency
The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Margin
The minimum amount of funds required in a trader's brokerage account in order to open a position (enter a trade) or to maintain an open position. See Leverage.
Margin Call
An automatic closing of the position by the broker if the margin falls below the required minimum during a trade. The result of this is you need to place more funds in your trading account before entering further trades.
Market Order
An order to buy at the current Ask price.
Minor Currency
The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
Monetary Policy
Generally associated with the setting of interest rate levels in an economy to try and stimulate or stifle borrowing and thus control consumer demand/spending. Conventional wisdom states that if interest rates move in an upward direction in one nation (under normal economic circumstances) then the currency in that nation should move up in value against foreign currencies. The rational is that the rate of return on interest bearing deposits become more attractive and the foreign demand for that currency should increase.
Offer (Ask)
The rate at which a dealer is willing to sell a currency.
Offer Price
The rate quoted by the broker for selling the first of a particular pair of currencies.
Offsetting transaction
A trade with which serves to cancel or offset some or all of the market risk of an open position.
One Cancels the Other (OCO)
A combination of a linked limit order and a stop loss orders at predetermined market levels, where if one is executed the other order is automatically cancelled. It is used to encapsulate foreign exchange risk within known parameters i.e. to try to achieve a favourable rate whilst also giving protection against adverse market moves. It is lodged with a Bank or Broker and offers 24 hour protection and will float until either cancelled or hit. It is free of charge to use and provides an excellent vehicle for companies to transact their currencies at the best point in a range, whilst protecting themselves from negative movements.
Open Order
An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.
Open Position
An active trade that has not been closed.
An active trade with corresponding unrealized Profit and Loss, which has not been offset by an equal and opposite deal.
Option Trading
An option is defined as the right, but not an obligation, to buy or sell an asset (such as stock or currency) at a fixed price before a predetermined date.
Order
A customer's instructions to buy or sell currencies.
Over the Counter (OTC)
Used to describe any transaction that is not conducted over an exchange.
Overnight Position
Trader's long or short position in a currency at the end of a trading day.
Pips or Points
The smallest unit a currency can be traded in.
The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001.
Pip Spread
The pip difference between the Bid and Ask price. Typically 3 or more pips, varying also by currency pairs. Some brokers offer fixed spreads; others will change the spread (variable spread) depending on market activity.
Pip Value
With the USD as the base currency, pip values are $10 for standard trades and $1 for mini trades. For other base currencies such as for the GBP/USD or EUR/JPY pairs, a pip has a different US dollar value which needs to be calculated.
Political Risk
Exposure to changes in governmental policy which will have an adverse effect on an investor's position.
Price
The price at which the underlying currency can be bought or sold.
Price Transparency
The ability of all market participants to "see" or deal at the same price.
Describes quotes to which every market participant has equal access.
Principle Value
The original amount invested by the client.
Profit /Loss or "P/L" or Gain/Loss
The actual "realized" gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.
Quote Currency
The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rally
A recovery in price after a period of decline.
Range
The difference between the highest and lowest price of a future recorded during a given trading session.
Rate
Price at which a currency can be purchased or sold against another currency.
The price of one currency in terms of another, typically used for dealing purposes.
Resistance
Price level at which technical analysts note persistent selling of a currency.
A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
Revaluation
Daily calculation of potential profits or losses on open positions based on the difference between the settlement price of the previous trading day and the current trading day.
An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of "Devaluation".
Risk (Forex Risk)
The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced.
Exposure to uncertain change, most often used with a negative connotation of adverse change.
Risk Management
The employment of financial analysis and use of trading techniques to reduce and/or control exposure to financial risk.
Rollover (Roll-Over)
The process of extending the settlement value date on an open position forward to the next valid value date.
Settlement
The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
Short Position
An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
Slippage
The difference in pips between the order price approved by the client and the price at which the order is actually executed. Slippage can occur when a trade is not immediately available at the requested price, or when prices are changing rapidly. Unless a range is stipulated, the broker needs to confirm a different price for approval by the client (trader) who can accept or refuse the new entry price.
Spot Market
Market where people buy and sell actual financial instruments (currencies) for two-day delivery.
Spot Price
The current market price of a currency that normally settles in 2 business days (1 day for Dollar/Canada).
The current market price. Settlement of spot transactions usually occurs within two business days.
Spread
This point or pip difference between the bid and ask price of a currency pair.
Square
Purchase and sales are in balance and thus the dealer has no open position.
Squawk Box
A speaker connected to a phone often used in broker trading desks.
Squeeze
Action by a central bank to reduce supply in order to increase the price of money.
The difference between the bid and offer prices.
Stable Market
An active market which can absorb large sale or purchases of currency without major moves.
Standard
A term referring to certain normal amounts and maturities for dealing.
Sterilization
Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
Sterling (The Pound - GBP)
Another term for the British currency, "The Pound".
Stop
An order to buy or to sell a currency when the currency's price reaches or passes a specified level.
Stop Loss Order
Order to buy or sell when a given price is reached or passed to liquidate part or all of an existing position.
Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.
Support Levels
A price at which a currency or the currency market will receive considerable buying pressure.
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of "resistance".
Swap
A transaction which moves the maturity date of an open position to a future date.
The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
Swap Price
A price as a differential between two dates of the swap.
Swing Trading
A trade made usually in stocks (but also in forex) and held for between several days and up to a few weeks. A swing trade might be completed in less than a week, or if the stock consolidates it might take several weeks. While a swing trader will watch the market very closely, this trading style does not require constant monitoring. A swing trader will typically aim for a 10-15% average profit on trades. While the stock market is much smaller than the forex, it is more 'physical'; predictions of price movement can be more reliable, depending on the source of information.
Swiss
Market slang for Swiss Franc.
Take Profit Order
A customer's instructions to buy or sell a currency pair which, when executed, will result in the reduction in the size of the existing position and show a profit on said position.
Technical Analysis
This is the study of market action, primarily through the use of charts, for the purposes of forecasting future prices and trends, support and resistance levels. It can be used to further identify trends and indicate trend reversals. Technical analysis is widely used by the main market players (traders, mainly banks, whose large trades can influence (but not control) price levels. Technical analysis has become arguably the most popular form of analysis in tracking and forecasting currency movements.
Technical Correction
An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Thin Market
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
Thursday/Friday Dollars
A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
Tick
The smallest possible change in a price, either up or down.
Today/Tomorrow
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Tomorrow Next (Tom Next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
Top
A market top is an area where prices in an upward trend encountered heavy resistance, was unable to progress any higher, and either reversed (i.e. went into a bear trend) or traded sideways.
Trade Date
The date on which a trade occurs.
Tradeable Amount
Smallest transaction size acceptable.
Transaction
The buying or selling of currencies resulting from the execution of an order.
Transaction Cost
The cost of a Forex transaction - typically the spread between bid and ask prices.
Transaction Date
The date on which a trade occurs.
Turnover
The total volume of all executed transactions in a given time period.
Two Tier Market
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.
Two-Way Price
A quote in the foreign exchange market that indicates a bid and an offer.
Two-Way Quotation
When a dealer quotes both buying and selling rates for foreign exchange transactions.
Uncovered
Open position.
Under-Valuation
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
Unrealized Gain/Loss
The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.
Uptick
A new price quote at a price higher than the preceding quote.
A transaction executed at a price greater than the previous transaction.
Uptick Rule
In the US, a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
US Prime Rate
The interest rate at which US banks will lend to their prime corporate customers.
US Treasury
The United States Department of the Treasury is the government department responsible for issuing all Treasury bonds, notes, and bills.
Value Data
The maturity date of the currency for settlement, usually two business days (one day for Canada) after the trade has occurred.
Value Date
The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Value Date is also known as "maturity" date.
For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.
Value Spot
Normally settlement for two working days from today. See value date.
Variation Margin
Funds, which are required to bring the equity in an account back up to the initial margin level, calculated on a day-to-day basis.
Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.
Volatility (VOL)
Statistical measure of the change in price of a financial currency pair over a given time period.
A statistical measure of a market's price movements over time.
A measure of the amount by which an asset price is expected to fluctuate over a given period.
Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
Wash Trade
A matched deal which produces neither a gain nor a loss.
Whipsaw
Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Withholding Tax
Income tax withheld from employees' wages and paid directly to the government by the employer.
Working Day
A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both financial centre's are open for business (all relevant currency centers in the case of a cross are open).
Yard
A slang word used in the currency industry meaning "billion".
X
A Nasdaq stock symbol specifying that it is a mutual fund.
Z-Score
A statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. In a more financial sense, Z-score is the output from a credit-strength test that gauges the likelihood of bankruptcy.