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Uncategorized - December 11, 2018

Currency Trading – Make a Money in a simple way

Introduction

The foreign exchange market (currency, currency or currency market) is a decentralized or non-resident global currency market. This market determines the exchange rate. It covers all aspects of the purchase, sale, and exchange of existing or fixed prices. When it comes to trade, it is the largest market in the world, and then the credit market.

Content

1. Introduction
2. The Language of Currency
3. Commission in Forex Trading
4. Market size and liquidity
5. Market participants
5.1 Commercial companies
5.2 Central banks
5.3 Foreign exchange fixing
5.4 Investment management firms
5.5 Retail foreign exchange traders
5.6 Non-bank foreign exchange companies
5.7 Money transfer/remittance companies and bureaux de change
6. Currency Carry Trade
7. Pip in Forex Trading
8. Exchange rate
8.1 The retail exchange market
8.2 Exchange rate regime
9. Economic factors
10. Political conditions
11. Final Verdict

2. The Language of Currency

Currencies

In order to collect currency pairs, the market is used in the following format: EUR / USD = 1.23700, not its expression: 1 USD = 1.23700 USD. In the desired format, the base currency is shown on the left, in this case in Euros, and on the right side is the exchange rate, the US dollar. When investors sell, the exchange rate shows how many units the base currency unit receives. Traders decide to buy if they think that the value of the main currency may increase. In this example, investors would buy the US dollar against the euro if they expect the dollar to rise to USD 1.31. The changes that take place are the way an investor makes a profit.

3. Commission in Forex Trading

Commision Forex Trading

Investors trading on shares, futures or options usually uses an intermediary who acts as a representative of the transaction. The broker accepts the transfer order and tries to perform it according to the customer’s instructions. The broker receives a commission if the client buys and sells a negotiating instrument to provide this service. The foreign exchange market has no commissions. Unlike stock markets, FX is the only important market. Tax offices are business entities, not realtors. This is a fundamental difference that all investors need to understand. Unlike brokers, traders are exposed to market risk, acting as a contractor in the investor’s turnover. You do not pay commissions; Instead, they earn their money on offer and on demand. Investors in foreign currencies may not try to buy or sell with the offer, as on stock exchanges. However, if the price eliminates the distribution price, there are no additional costs or commissions. Each benchmark is the net profit of the investor. However, the fact that traders always have to overcome the distribution offer/distribution complicates FX flush

4. Market size and liquidity

Most developed countries allow trade in derivative instruments (such as futures and futures). All these developed countries already have completely convertible capital accounts. Some emerging market governments do not allow derivative products on stock exchanges because of their capital controls. In emerging countries, the use of financial derivatives is growing [60]. Countries like South Korea, South Africa and India have introduced currency controls despite some capital controls. From 2007 in April to 2010 In April, foreign trade turnover increased by 20%, and since 2004, it has more than doubled in value [61]. The increase in sales is associated with many factors: the growing importance of foreign currency as asset classes, the growing number of large business entities and the emergence of private investors as an important market segment. The growth of electronic implementation and a diversified choice of locations reduced transaction costs, increased market liquidity and increased the commitment of many customers. In particular, e-commerce through online portals has helped retailers to trade in the currency market. By 2010, retailers will estimate around 10% of cash turnover or $ 150 billion a day (see below for foreign currency retailers).

Foreign currency on OTC market, where dealers and dealers are negotiated directly because there is no central stock exchange or clearing house. The largest center of geographic marketing is Great Britain, mainly London. According to TheCityUK, London probably increased the share of traditional income from 34.6% in 2007. In April Up to 36.7% in 2010 In April As a result of the dominant position of London, the stock price is usually a certain market price in London. For example, if the International Monetary Fund calculates the value of Special Drawing Rights on a daily basis, it will use London market prices at noon on that day.

5. Market participants

In contrast to the stock exchange, the currency market is divided into access levels. The most important of these is the interbank currency market, which consists of the largest commercial banks and stock exchange investors. On the interbank market, the difference between buying and selling prices is very high and unknown to players outside the internal circle. The difference between buying and sell prices increases (for example, from 0 to 1 in the stream to 1-2 points for currencies such as EUR) as the access levels decrease. It results from the volume. If an entrepreneur can secure large amounts of transactions in large amounts, he may require a lower margin between buying and sell prices, which is called better distribution. Access levels for currency market participants are determined by the size of the “lines” (amounts they trade). The top-level intermediate market accounts for 51% of all transactions. [63] There are smaller banks, followed by large multinational companies (which must cover the risk and pay employees in different countries), large hedge funds, and even several retailers. According to Galati and Melvin, “pension funds, insurance companies, investment funds, and other institutional investors since the beginning of 2000 played an important role on the financial markets, especially on foreign exchange markets.” (2004). He also notes that ‘hedge funds have increased significantly in terms of both number and total value in 2001-2004’ [64]. Central banks are also involved in the currency market to keep their currency in line with their economic needs.

5.1. Commercial companies

An important part of the foreign exchange market is the financial activity of companies looking for foreign currencies to pay for goods or services. Trading companies often sell relatively small amounts compared to banks or speculators, and their transactions often have little effect on short-term market prices. Nevertheless, trade flows are an important factor in the long-term trend of the exchange rate. Some multinational corporations (MNCs) can have unpredictable results when they secure very high positions for well-known positions on other market players.

5.2 Central banksCentral banks

The national central banks play an important role in the currency markets. They try to control money supply, inflation and/or interest rates, they often have official or unofficial goals for their currencies. They can often use large foreign currency reserves to stabilize the market. Nevertheless, the effectiveness of the central bank’s “speculative stabilization” is questionable when central banks went bankrupt if they have suffered significant losses like other entities. There is also no convincing evidence that they actually profit from trading.

5.3. Foreign exchange fixing

The exchange rate is a daily exchange rate determined by the National Bank of each country. The point is that central banks use a set point and exchange rate to measure their current behavior. The exchange rate setting reflects the true value of the market equilibrium. Banks, traders, and traders use indexing indicators as indicators of the market trend. Only expectations or rumors about the intervention of the central bank on the currency market may be enough to stabilize the exchange rate. However, in countries with a false currency market system, aggressive interventions can be applied several times a year. Central banks do not always achieve their goals. Combined market resources can easily go to any central bank. [65] 1992-1993 Several scenarios of this kind were noted during the collapse of the European exchange rate mechanism, and more recently in Asia.

5.4. Investment management firms

Investment

Investment companies (which usually have large customer accounts, such as pension funds and capital subsidies) use the foreign exchange market to facilitate transactions with foreign securities. For example, an investment manager with an international portfolio of shares must buy and sell several currency pairs to buy foreign securities. When asset managers also perform speculative supervisory activities in special currencies to control the currency risk for consumers in order to generate profits and reduce risk. Although the number of specialized companies of this type is relatively small, many companies have a high value of managed assets and therefore can create large transactions.

5.5.Retail foreign exchange traders

Private speculators are a growing segment of this market. Currently, they are indirectly involved through intermediaries or banks. Retail brokers who control most of the US for the Futures Trading Commission and the National Futures Association are regulated, previously they were subject to regular currency fraud. To address this problem, the NFA demanded that the 2010 members trade in foreign exchange markets as such a registry (ie CTA on the Forex market instead of CTA). Those NFA members who have traditionally been subject to minimum net capital requirements are subject to a higher minimum capital requirement for FCM and IB traded on the Forex market. Some currency brokers operate from the United Kingdom as part of the Financial Services Authority, where currency trading is part of wider private negotiations, margins are used, including margins and financial spread betting.

5.6 Non-bank foreign exchange companies

foreign exchange

Non-bank currency offers both individuals and companies, currency exchange and international payments. It is also known as the Forex Broker but differs in that it does not have to offer speculative transactions, but currency conversion payments (i.e. Usually, the physical delivery of the currency to a bank account). It is estimated that 14% of transfers/payments are made via foreign trade companies in the United Kingdom [68]. Typically, the selling point of these companies is a better exchange rate or cheaper payments than the customer’s bank. [69] These companies differ from money transfer / transferring companies because they usually offer higher value services. The size of the operations carried out by Indian currency exchange companies is around 2 billion. [70] euros per day. It does not compete with a well-developed foreign exchange market with international renown, but with the emergence of online currency transactions, the market is constantly growing. In India, approximately 25% of remittances/payments are made in a foreign currency. [71] Most of these companies use USP at higher exchange rates than banks. They are managed by FEDA, and each foreign exchange transaction depends on 1999. Foreign Exchange Management Act (FEMA).

5.7. Money transfer/remittance companies and bureaux de change

Money Transfer

Money transfer offices and/or money transfer companies usually carry large migrations of small economic migrants to their own country. 2007 The Aite Group estimates that cash transfers amounted to 369 billion. USD (by 8% more than last year). The four largest foreign markets (India, China, Mexico, and the Philippines) receive $ 95 billion. USD The largest and most well-known provider is Western Union with 345,000 agents worldwide, followed by the UAE Exchange. [Required offer] Exchange offices offer cheap currency exchange services for travelers. They are usually located at airports and railway stations or in tourist destinations and allow an exchange of physical banknotes between currencies. You have access to currency markets through banks or currency exchange companies.

6. Currency Carry Trade

Currency

Carry is the most popular currency market run by both the largest hedge funds and the smallest retailers. Laptops rely on the fact that every currency in the world is linked to interest rates. This short-term interest rate is determined by the central banks of these countries: the US Federal Reserve, the Japanese Bank of Japan and the Bank of England in the United Kingdom. The idea of “Carry” is quite simple. The investor maintains a high-interest rate for a long time and finances the purchase of a low-interest rate currency. 2005 One of the best combinations was the transition to NZD / JPY. The New Zealand economy is driving a huge demand for raw materials from China and the housing market, and interest rates have risen to 7.25% while remaining while Japan’s interest rates remained at 0%. The entrepreneur, who for a long time passed through NZD / JPY, managed only 725 basis points. We prepare indicator 10: transfer of NZD 1 / JPY turnover, annual profit per interest rate difference of 72.5% would be achieved without the result of capital growth. Now you understand why tickets are so popular!

7. Pip in Forex Trading

Pip represents “percent” and is the lowest step in currency trading. Prices on the currency market are listed in the fourth decimal place. For example, if the pharmacy soap was set at $ 1.20, the same bar of soap would be included in the currency market of 1.2000. This fourth place after the comma is replaced by 1 punt and is usually 1 100 1%. Among the major currencies, the Japanese yen is the only exception to this rule. The Japanese yen is now worth around $ 0.01. Therefore, the entry has only become two decimal places (d., H. To 1/100 1/1000 in relation to other major currencies) in the USD / JPY pair.

8. Exchange rate

exchange rates are set on the currency market [2], which is open to buyers and sellers, and some currency transactions are a continuous variety: 24 hours a day, except weekends, or 22 hours from Sunday 20:15 GMT: 00 GMT, Friday. The local interest rate refers to the current exchange rate. The rate per command is the exchange rate that is quoted and traded today, but delivery and future payment on a given day. Retailers on the currency market are characterized by different buying and selling prices for merchants. Most transactions are linked to or in local currency. The purchase price is the price at which you can buy money from currency dealers, and the sale price is the price at which they sell in that currency. The mentioned indicators include a profit margin (or profit) and a sales agent, otherwise, the margin may consist of the Commission or otherwise. You can also specify a different cash, confirmation form or electronically. A higher level of operations on documents is justified as compensation for the additional time and expense of the issued document. On the other hand, there is no money for resale, at any time, but it’s collateral, storage, and transportation costs and capital costs of the inventory aggregation banknote (change).

8.1 The retail exchange market

retail exchange market

International travel and cross-border currency currencies are mainly purchased from banks, exchange offices and various forms of exchange. These establishments come from the interbank currency market, which the International Settlement Bank allocates 5.3 trillion dollars per day.  Purchases are made in cash at the contract price. Private clients are paid in the form of commissions or otherwise incur the costs of the service provider and make a profit. One tax form is less favorable than the wholesale price. The difference between the purchase price and the selling price is known as the distribution of the offer/offer.

8.2 Exchange rate regime

A mobile system or a regulated system is a fixed exchange rate system, but it provides for currency conversion (usually devaluation). For example, from 1994 to 2005, the Chinese yuan (RMB) was tied to $ 8,2768 to $ 1. China was not the only country that did it. From the end of World War II until 1967, Western European countries maintained fixed exchange rates from Bretagne-Woods for the US dollar [8]. However, according to the president of Richard M. Nixon in 1971. August 15 In the so-called Nixon shock, this system was to be abandoned due to market pressure and speculation about changing market regimes.

9. Economic factors

Economic

The economic policy includes fiscal policy (budget practices/expenses) and monetary policy (how central banks influence government supplies and monetary expenditures reflecting interest rates).

Deficit or surplus of the state budget: the market usually reacts negatively to the growing deficit of the general government sector and positively limits the budget deficit. This impact is reflected in the value of the national currency.

A balance of levels and trends in trade: trade flows between countries indicate the demand for goods and services, which in turn reflects the demand for domestic currency in trade. Shortcomings and disadvantages of trade in goods and services reflect the competitiveness of the country’s economy. For example, the trade balance may have a negative effect on the currency of a given country.

Inflation and trends: Typically, the currency loses its value if there is high inflation in the country or inflation is perceived as growing. This is due to the fact that inflation of a given currency affects purchasing power, that is demand. However, as inflation increases, the currency may be stronger because the central bank is expected to increase short-term interest rates to counter inflation.

Economic growth and health: reports such as GDP, employment rates, retail sales, capacity utilization, etc. It describes economic growth and health in the country. In general, the healthier and more credible the country’s economy is, the better the currency and the higher demand.

Economic efficiency: higher productivity in the economy must have a positive impact on the value of its currency. This impact is more pronounced because the commercial sector is growing.

10. Political conditions

Internal, regional and international political circumstances and events can have a major impact on foreign exchange markets. All exchange rates are sensitive due to political instability and expectations of the new party. Political shocks and instability may have a negative impact on the country’s economy. For example, the destabilization of the coalition governments of Pakistan and Thailand may have a negative impact on the value of their currencies. Similarly, in a country with a difficult financial situation, the emergence of a fiscal group may have the opposite effect. Events in one region in one country can also stimulate positive/negative interests in the neighboring country, and thus affect the currency.

11. Final Verdict

New economic data from major countries and geopolitical tensions are just some of the events that may affect currency prices. As in the case of everyone in the investment market, learning stock trading is easy, but creating effective trading strategies requires many practices. In most Forex brokers, you can open a free virtual account that allows you to trade virtual money until you find strategies that will help you succeed as a Forex trader.

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