Economic factors

These include: (a)economic policy, disseminated by government agencies and central banks, (b)economic conditions, generally revealed through economic reports, and other economic indicators.

• Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
• Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
• Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
• Inflation levels and trends: Typically a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.
• Economic growth and health: Reports such as GDP, employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.
• Productivity of an economy: Increasing productivity in an economy should positively influence the value of its currency. Its effects are more prominent if the increase is in the traded sector.

Central banks

National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high—that is, to trade for a profit based on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives. The combined resources of the market can easily overwhelm any central bank. Several scenarios of this nature were seen in the 1992–93 ERM collapse, and in more recent times in Southeast Asia.

Determinants of FX rates

The following theories explain the fluctuations in FX rates in a floating exchange rate regime (In a fixed exchange rate regime, FX rates are decided by its government):

(a) International parity conditions: Relative Purchasing Power Parity, interest rate parity, Domestic Fisher effect, International Fisher effect. Though to some extent the above theories provide logical explanation for the fluctuations in exchange rates, yet these theories falter as they are based on challengeable assumptions [e.g., free flow of goods, services and capital] which seldom hold true in the real world.

(b) Balance of payments model (see exchange rate): This model, however, focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. It failed to provide any explanation for continuous appreciation of dollar during 1980s and most part of 1990s in face of soaring US current account deficit.

(c) Asset market model (see exchange rate): views currencies as an important asset class for constructing investment portfolios. Assets prices are influenced mostly by people’s willingness to hold the existing quantities of assets, which in turn depends on their expectations on the future worth of these assets. The asset market model of exchange rate determination states that “the exchange rate between two currencies represents the price that just balances the relative supplies of, and demand for, assets denominated in those currencies.”

None of the models developed so far succeed to explain FX rates levels and volatility in the longer time frames. For shorter time frames (less than a few days) algorithm can be devised to predict prices. Large and small institutions and professional individual traders have made consistent profits from it. It is understood from above models that many macroeconomic factors affect the exchange rates and in the end currency prices are a result of dual forces of demand and supply. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.

Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.

Forex Automoney

FOREX (FOReign EXchange market) is the international foreign exchange market, where money is sold and bought freely. In its present condition FOREX was launched in the 1970s, when free floating currencies were adopted by most countries, and only the participants of the market determine the price of one currency against the other proceeding from supply and demand.
As far as the freedom from any external control and free competition are concerned, FOREX is a perfect market. It is also the financial market with the highest liquidity. According to various assessments, money turnover in the market constitute from 1 to 2 trillion US dollars a day. Transactions are conducted all over the world via internet 24 hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday.
While other traders make complicated mathematical analysis or guess what to do, you don't have to be a financial expert to trade forex and achieve success like professionals do!
All you need is a Forex Automoney - the web service which will give you a detailed information about "what" and "how" to trade.
Now, all you have to do to make a trading profit, is to click one button (for example "Buy") and a moment later the other button ("Sell"). If the price of the chosen currency pair rises in meanwhile, you can have a trading profit of earn even 400 times more then the increase in the currency pair price.

Pro Trade of the Day

Live trade with Richard Regan from the Virtual Trading Room of www.protradingcourse.com. Past performance are not necessarily indicative of future results. As with all trading, there is significant risk of loss. 

Trading in the Foreign Exchange or Futures markets involves a significant and substantial risk of loss and may not be suitable for everyone. You should carefully consider whether trading is suitable for you in light of your age, income, personal circumstances, trading knowledge, and financial resources. 

You should only trade with money you can afford to lose. There is no guarantee that you will profit from your trading activity and it is possible that you may lose all or some of your investment.

Forex Day Trading System

has attracted a large number of people. Of all the various day trading methods in current use, the Forex day trading system is one of the fastest growing. The cornerstone to this method of trading is the fact that all currency trading takes place within a twenty-four hour time span. Any buying or selling you do must take place over the course of only a day when using this system.

Seasoned traders who understand the market’s fluctuation patterns and are knowledgeable in the Forex trading field are in the best position to take advantage of the day trading system. Their experience will help these traders anticipate the highs and lows of the currency values. If you are a trading beginner or amateur, you would be advised to bypass the day trading system to start with. Once you have learned more about the market and it’s temperamental nature, you will then have the confidence to attempt the Forex day trading system.

It is often the most savvy and seasoned traders who get the most financial benefit from the Forex day trading system. One of the most crucial ingredients to your success is your amount of experience. Another important factor lies in the amount of capital you have at your disposal. Be prepared to invest a substantial sum of money into your day trading venture. For the more money you contribute, the higher your returns will be.

Forex day trading systems are known to involve a higher amount of financial risk than other investment options. Therefore, only attempt to utilize this system if you have no question of your financial stability. Your future success in Forex day trading relies on a clear, well thought out plan of action.

Additionally, you should also be prepared with an equally solid secondary back-up plan. Should you have some difficulty with the Forex day trading system, your back-up plan will be absolutely essential to rescue yourself and your investment. While you may suffer some financial losses, your back-up plan may help you avoid absolute ruin. Without careful and proper planning on your side, you are destined for failure, and might as well not even take the risk.

Forex Signals

How exactly does the rebate program work?

When you sign up for a new forex trading account through the link on our site, we act as the referrer on your account, and get a small compensation from the broker for each trade you make. We, in turn, give you 50% of this commission each and every month, based on the volume that you traded that month.

How much cash-back can I receive?

This depends on how much volume you trade and there is no limit to how much you can receive. If you traded 100 standard lots in a one month period, on average you would receive $500 cash-back. If you trade 1000 standard lots, you would receive roughly $5,000 cash-back. Your rebate is directly correlated to the size of round-turn lots traded.

Can I get paid on micro lots?

No. We currently only pay rebates on a minimum trade size of 1 mini lot (0.1 lots) up to any amount of standard lots.

How will I receive the rebates?

We pay rebates on the 1st of every month. Once your rebate amount meets the minimum $100 threshold, you will qualify for a payout. Payments are made through PayPal, therefore you must have a PayPal account to receive a rebate payment. If you don’t have a PayPal account you can get.

Retail foreign exchange brokers

Retail traders (individuals) constitute a growing segment of this market, both in size and importance. Currently, they participate indirectly through brokers or banks. Retail brokers, while largely controlled and regulated in the USA by the CFTC and NFA have in the past been subjected to periodic foreign exchange scams.^[8][9] To deal with the issue, the NFA and CFTC began (as of 2009) imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone.

There are two main types of retail FX brokers offering the opportunity for speculative currency trading: brokers and dealers or market makers. Brokers serve as an agent of the customer in the broader FX market, by seeking the best price in the market for a retail order and dealing on behalf of the retail customer. They charge a commission or mark-up in addition to the price obtained in the market. Dealers or market makers, by contrast, typically act as principal in the transaction versus the retail customer, and quote a price they are willing to deal at—the customer has the choice whether or not to trade at that price.

In assessing the suitability of a FX trading services, the customer should consider the ramifications of whether the service provider is acting as principal or agent. When the service provider acts as agent, the customer is generally assured of a known cost above the best inter-dealer FX rate. When the service provider acts as principal, no commission is paid, but the price offered may not be the best available in the market—since the service provider is taking the other side of the transaction, a conflict of interest may occur.

Market psychology

Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:

§ Flights to quality: Unsettling international events can lead to a “flight to quality,” with investors seeking a “safe haven.” There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts. The Swiss franc and gold have been traditional safe havens during times of political or economic uncertainty.

§ Long-term trends: Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends.

§ "Buy the rumor, sell the fact": This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought". To buy the rumor or sell the fact can also be an example of the congnitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.

§ Economic numbers: While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect: the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment trade balance figures and inflation numbers have all taken turns in the spotlight.

§ Technical Trading considerations: As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form apparent patterns that traders may attempt to use. Many traders study price charts in order to identify such patterns.

Foreign currency mortgage

A foreign currency mortgage is a mortgage which is repayable in a currency other than the currency of the country in which the borrower is a resident. Foreign currency mortgages can be used to finance both personal mortgages and corporate mortgages.

The interest rate charged on a Foreign currency mortgage is based on the interest rates applicable to the currency in which the mortgage is denominated and not the interest rates applicable to the borrower's own domestic currency. Therefore, a Foreign currency mortgage should only be considered when the interest rate on the foreign currency is significantly lower than the borrower can obtain on a mortgage taken out in his or her domestic currency.

Borrowers should bear in mind that ultimately they have a liability to repay the mortgage in another currency and currency exchange rates constantly change. This means that if the borrower's domestic currency was to strengthen against the currency in which the mortgage is denominated, then it would cost the borrower less in domestic currency to fully repay the mortgage. Therefore, in effect, the borrower makes a capital saving.

Conversely, if the exchange rate of borrowers domestic currency were to weaken against the currency in which the mortgage is denominated, then it would cost the borrower more in their domestic currency to repay the mortgage. Therefore, the borrower makes a capital loss.

Foreign exchange controls

Foreign exchange controls are various forms of controls imposed by a government on the purchase/sale of foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Common foreign exchange controls include:

§ Banning the use of foreign currency within the country

§ Banning locals from possessing foreign currency

§ Restricting currency exchange to government-approved exchangers

§ Fixed exchange rates

§ Restrictions on the amount of currency that may be imported or exported

Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. Such controls used to be common in most countries, particularly poorer ones, until the 1990s when free trade and globalization started a trend towards economic liberalization. Today, countries which still impose exchange controls are the exception rather than the rule.

Non bank foreign exchange companies

Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. These are also known as foreign exchange brokers but are distinct in that they do not offer speculative trading but currency exchange with payments. I.e., there is usually a physical delivery of currency to a bank account. Send Money Home offer an in-depth comparison into the services offered by all the major non-bank foreign exchange companies.

It is estimated that in the UK, 14% of currency transfers/payments are made via Foreign Exchange Companies. These companies' selling point is usually that they will offer better exchange rates or cheaper payments than the customer's bank. These companies differ from Money Transfer/Remittance Companies in that they generally offer higher-value services.

Benefits of Forex Trading

1.LEVERAGE: In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Some Foex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on. 

2.LIQUIDITY: Because the Forex Market is so large, it is also extremely liquid. This means that with a click of a mouse you can instantaneously buy and sell at will. You are never ’stuck’ in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

  

3.PROFIT IN BOTH ‘RISING’ AND ‘FALLING’ MARKETS: On the stock markets, you can only make money if shares are rising, but in economic recession and falling ‘bear’ markets, there is little chance of making big money. Forex is different. One of the most exciting advantages of Fx Trading is the ability to generate profits whether a currency pair is ‘up’ or ‘down’. A trader can profit by taking a ‘long’ position, (buying the currency pair at one price and selling it later at a higher price), or a ’short’ position, (selling the currency pair and buying it back at a lower price). For example, if you think the US dollar will increase in value vs. the Japanese Yen then you will buy Dollars and sell Yen (go long). If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy yen (go short). As long as the trader picks the right direction, a potential for profit always exists.

4. 24 HRS: From Sunday evening to Friday Afternoon EST the Forex market never sleeps. This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade–morning, noon or night. 

5. FREE ‘DEMO’ ACCOUNTS, NEWS, CHARTS AND ANALYSIS: Most Online Forex firms offer free ‘Demo’ accounts to practice trading, along with breaking Forex News and charting services. These are very valuable resources for traders who would like to hone their trading skills with ‘virtual’ money before opening a live trading account.

6.’MINI’ TRADING: One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn’t. Online Forex Firms now offer ‘mini’ trading accounts with a minimum account deposit of only $200-$500 with no commission trading. This makes Forex much more accessible to the averageindividual, without large, start-up capital. 

Advantages of Trading FOREX over Stocks and Commodities

There are many advantages to Trading FOREX as your main income generator. We can start by something that may be worrying many already. "Do I need a Diploma or Certification to trade the FOREX?" The answer is NO: When attempting to make more profit than losses on the fluctuation of exchange rates between major currencies (i.e.,Trading the FOREX), nobody is going to ask you for a diploma, a formal license or verify the amount of hours you've spent studying the Foreign exchange market and banking industry. All you need is the proper training.

But this is not the only advantage you get when trading FOREX, compared to other ways of investment and speculation; i.e. Stocks and Commodities.

Instantaneous Order Execution and Market Transparency

Market transparency is highly desired in any trading environment. The greater the market transparency, the more efficient the market becomes. Unlike other markets where transparency is compromised (like in the Enron scandal), FOREX markets are highly transparent (i.e., analyzing countries, and having access to real-time research / news, is easier than companies).
Because of this transparency, as an FX trader, you will be able to exercise risk management strategies in accordance to the proper fundamental and technical indicators.
The Forex market offers the highest level of market transparency out of all the financial markets. Because of this, order execution and fill confirmation usually occur in just 1-2 seconds. Markets that do not offer executable prices and force traders to absorb slippage obviously compromise the trader's profit potential considerably.
In the forex world, order execution is all-electronic and because you'll be trading via an Internet-based platform, instantaneous execution is routine. There are no exchanges, no traditional open-outcry pits, no floor brokers, and consequently, no delays.

Price Movements Are Highly Predictable

Although currency prices in the FX market may be volatile, they generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the "technical" methods and strategies taught at a number of sources.

Unlike stocks, currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends. Over 80% of volume is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, which provide for multiple opportunities to enter and exit positions.

Disadvantages of Forex Trading

Foreign Exchange, Forex or FX is one of the world’s largest financial markets dealing in real-time exchange of currencies of different countries. This currency exchange market has a greater volume of buyers and sellers, than in any other financial market of the world.

With major trading centers at Sydney, London, Frankfurt, Tokyo and New York, Forex is the only financial market, which is open 24 hours a day, 5.5 days a week, across the globe.

One of the most popular speculation markets, Forex is a market well known for its huge volume, superior liquidity, as well as the steady trading prospects. Also attractive is high levels of Leverage, one of the unique features offered by the Forex market.

Advantage of Forex tradings

Starting from a minimum of 100:1, Forex markets offer its traders with huge amounts of leverage which means that fat profits can be produced by investing small amounts of deposits.
No commission

If dealing with a financial market on daily basis, the regular investors or traders are the ones who are really benefited by the “free of commission” trading. The currency trading market lets its traders keep a whole 100% of their trading profits.
Superior liquidity

With most of the currency transactions comprising of 7 main currency pairs, the huge volume and the global trading aspect helps these currencies exhibit price stability, little slippage, narrow spreads and high levels of liquidity.
Profitability

Being an over the counter market, the trading done at Forex can be known as “over the counter” trading, wherein, a trader always buys one currency and sells of the other one in real time. There is no organizational prejudice in the market and every investor has the equal prospects for profit in it.
24 hours trading

Forex currency trading market offers its traders with a 24 hour trading opening, wherein, a Forex investor can trade ant any time of the day, whatever suits him/her, as the market is open for trading 24 hours a day, from Sunday 5:00 pm (ET) to Friday 4:30 pm.

Disadvantages of Forex trading

While high leverage serves as an advantage to attract traders to the market, it can at times also act as a disadvantage for them. With such high levels of leverage available to traders in the Forex market, comes an equally high level of danger.

This can be true for the high stake positions which carry along with them, too much risk, leading to margin calls. This is where efficient money management comes into play for playing safe.
24 hours market

Although it is convenient for the trader to trade whenever it is suitable to him, it can be a rather tough job too. This is because, at times, it is not possible for an individual trader to keep track of the Forex market, 24 hours a day.

This is where a broker comes into the picture. Retail or individual investors should try taking help from a professional broker rather than doing all the dealings himself straight with the huge market.

The broker will be an experienced professional who will act as an equal in your transactions, keeping you informed and updated about minute to minute details and fluctuations, and even guide you about the conditions, when to and when not to trade in the market.

MUTUAL GAINS

DOMESTIC money managers are gradually warming up to ‘wrap-like’ portfolio structures that are popular in developed markets. Wealth managers and brokers have begun offering portfolio management services (PMS) with mutual fund units as the underlying.
Known as ‘mutual fund wraps’ or ‘PMS fund of funds’, this product works on the same principles of highly-customised PMS schemes and is meant exclusively for affluent investors. In developed markets, mutual fund wraps are ‘do-it-yourself’ products and are ‘non-discretionary’ in nature. In non-discretionary portfolios, investors have the freedom to select funds of their choice. That is, they can structure their own portfolios, using third-party wrap platforms, with the help of an external investment expert.
In India, MF wrap providers offer discretionary portfolios where the wealth manager or broking firm will decide on investment strategies. The ‘wrap structure’ is managed like a ‘fund of fund’ that invests in diverse schemes and sectoral themes run by different fund houses. Edelweiss Capital, Bonanza Portfolio, Emkay Global, Motilal Oswal Financial, Ifast Financial (through online) and NJ India Invest are among the top providers of ‘MF wraps’.
“Our portfolio has mutual fund units of 5-10 asset management companies, covering various sectors, themes and investment strategies. Our investment coverage is restricted to 25 top equity funds (plus some debt exposure). Single stock exposure will not exceed 6% in our portfolios,” said Hiren Dhakan, associate fund manager, Bonanza Portfolio.
Under ‘wrap’ portfolios, the broking firm accepts a sizeable investment, generally between Rs 5 lakh and Rs 25 lakh, from the investor, to be deployed in an array of equity schemes. The broking firm also takes a power of attorney from the investor, empowering the firm’s investment manager to manage the portfolio. The broker charges anywhere between 1% and 2% of net investment as annualised management charges. Some broking firms also stake claim to a small portion of profits derived from investments. Most ‘MF wrap’ providers declare portfolio NAV at the end of the day.
Wrap fund managers expect to generate 25-30% returns over a threeyear period. Investment tenure in ‘wrap MFs’ could be 3-5 years. If an investor withdraws his funds before one year, he will have to pay an exit load.
“We’re offering non-discretionary wrap schemes to our clients through the Ifast interface. Using our portal, investors can buy multiple units of any fund house by giving just one application and cheque. A non-discretionary model helps the investor have a portfolio to his liking and risk profile,” said Rajesh Krishnamoorthy, managing director, Ifast Financial.