An overview into the historical evolution of the foreign exchange market
This article will follow the historical roots of the international
currency trading from the days of the gold exchange, through the
Bretton Woods Agreement, to its current setting.
The Gold exchange period and the Bretton Woods Agreement.
Prior to Bretton Woods, the gold exchange standard -- paramount
between 1876 and World War I -- ruled over the international economic
system. Under the gold exchange, currencies exper...
Although Forex trading can lead to very profitable results, there are
risks involved: exchange rate risks, interest rate risks, credit risks,
and country risks. Approximately 80% of all currency transactions last
a period of seven days or less, while more than 40% last fewer than two
days. Given the extremely short lifespan of the typical trade,
technical indicators heavily influence entry, exit and order placement
decisions.
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
A currency option is similar to a futures contract in that it involves
a fixed currency transaction at some future date in time. However the
buyer of the option is only purchasing the right but not the obligation
to purchase a fixed amount of currency at a fixed price by a certain
date in future. The price is known as the premium and is lost if the
buyer does not exercise the option.
Continue reading ...
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
Forwards make up about 46% of currency trading. A forward transaction
is an agreement between two parties whereby one party buys a currency
at a particular price by a certain date that is greater than two
business days (a spot transaction).
A future contract is a forward contract with fixed currency amounts
and maturity dates. They are traded on future exchanges and not through
the interbank foreign exchange market.
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
A spot transaction is a straightforward exchange of one currency for
another. The spot rate is the current market price, also called the
benchmark price. Spot transactions do not require immediate settlement,
or payment "on the spot." The settlement date, or "value date," is the
second business day after the "deal date" (or "trade date") on which
the transaction is agreed to by the two traders. The two-day period
provides time to confirm the agreement and arrange the clearing and
necessary de... Continue reading ...
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
Leveraged financing, i.e., the use of credit, such as a trade purchased
on a margin, is very common in Forex. The loan/leveraged in the
margined account is collateralized by your initial deposit. This may
result in being able to control USD 100,000 for as little as USD 1,000.
There are three ways private investors can trade in Forex directly or indirectly:
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
Banks and/or online trading providers need collateral to ensure that
the investor can pay in case of a loss. The collateral is called the
margin and is also known as minimum security in Forex markets. In
practice, it is a deposit to the trader's account that is intended to
cover any currency trading losses in the future.
Margin enables private investors to trade in markets that have high
minimum units of trading by allowing traders to hold a much larger
position than their account value. Marg...
Posted by emogurl on Thursday, October 1, 2009,
In :
Exchange Rates
Because currencies are traded in pairs and exchanged one against the
other when traded, the rate at which they are exchanged is called the
exchange rate. The majority of the currencies are traded against the US
dollar (USD). The four next-most traded currencies are the Euro (EUR),
the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss
franc (CHF). These five currencies make up the majority of the market
and are called the major currencies or "the Majors". Some sources also
i...
Posted by emogurl on Thursday, October 1, 2009,
In :
Forex Exchange
The Forex market is a non-stop cash market where currencies of nations
are traded, typically via brokers. Foreign currencies are constantly
and simultaneously bought and sold across local and global markets and
traders' investments increase or decrease in value based upon currency
movements. Foreign exchange market conditions can change at any time in
response to real-time events.
The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:...
Posted by emogurl on Thursday, October 1, 2009,
In :
Forex Exchange
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 E... Continue reading ...
