Forex in terms of mathematics

Looking at Forex in terms of mathematics
Playing the market FOREX - is a currency speculation (ie, buy cheaper - sell more expensive and vice versa, first sell more, and then buy the cheaper). The difference between this speculation from those you encounter every day, translating rubles into dollars and vice versa, only in the special rules that I try to explain to you in terms of mathematics.
NOTE. The best way to firmly grasp the rules of the new game - this is to study these rules in practice during the game. If you have decided, however, read this section, it shows your accuracy and seriousness of approach to business. After reading the text to the end, you will pass the original test on the great promise as a player on the market FOREX.
First, as is usual in mathematics, we introduce the Basic concepts and give them DEFINITIONS.
Market rate - rate at which at any given time you can buy (sell) one currency for another. Market price set thousands on currency exchange transactions taking place every second worldwide. Hence the name - the "market". This course exists independently of our choices and you will. It is formed by millions of autonomous foreign exchange market participants, and vice versa, it changes affect the views of these participants. The unpredictability of changes in market rates - the drive mechanism of speculative games.
Arbitrage transactions (the transaction) - Purchase (sale) of foreign currency in order to eventually sell it (to buy). We consider only the transactions of U.S. dollar exchange USD to Euro (EUR), BRITISH POUND (GBP), Swiss Franc (CHF) and Japanese Yen (JPY), which are made at market prices (hereinafter referred to simply rate). It is clear that each transaction is always two sides - open positions (say buy USD for JPY) and close positions (selling USD for JPY). In the interval between the opening positions and closing positions to the USD JPY rate can vary, which in fact is a subject of interest in the transaction.
LOT - the minimum amount of currency involved in the transaction. Accordingly, the transaction volume is always a multiple of one lot.
NOTE. Traditionally the forex market is established the following rule - to quote EUR / USD and GBP / USD, USD is the quote currency, ie rate indicates how many give USD per EUR and a GBP. The opposite situation with the USD / CHF and USD / JPY - USD for them is the main currency, ie quote shows how much CHF and JPY offer for a USD. This point should be considered in determining the growth rates against the dollar. Increasing the value of quotes for USD / CHF and USD / JPY talk about reducing or weakening of these currencies against the USD (A similar situation with the ruble exchange rate). An increase in the value quotes the EUR / USD and GBP / USD reflects the growth or strengthening of these currencies against the USD.
We assume that the transactions
EUR / USD 1 lot = 100 000 EUR,
GBP / USD 1 lot = 100 000 GBP,
USD / JPY 1 lot = 100 000 USD,
USD / CHF 1 lot = 100 000 USD.
Consider the example of the transaction on EUR.
Buy 1 lot EUR at the rate of 1.0500, ie 000USD for 105 buy 100 000EUR.
Sell ​​1 lot EUR at the rate of 1.0600, ie selling 100 106 000 000EUR get USD. Profit from the transaction amounted to 1000 USD
Ah, well, when there is 105 000 USD! And if in your pocket only 1000 USD? Let's analyze the deal closely. We bought EUR 100 000 and then sold them the same and that is Our goal was not to translate dollars into euros, and profit from changes in the dollar to the euro. If we found a partner who would agree to play with us on the outcome of the transaction, carrying it out as if in his mind! Are making on each side of 1000 USD as a deposit, which provides the prize fund. Such security is the security deposit. If the result of the transaction will be beneficial for us, we'll take your winnings from the deposit a partner, otherwise parted with their money. Considered committing currency fluctuations within an average of 0.5-1%. If such changes can be insured deposit of 100-200 less than the volume of transaction and thus provide a guarantee of repayment of possible losses on the transaction. The ratio of trade to the deposit insurance called credit leverage (LEVERAGE). I should note that leverage is the lever that multiplies your winnings, not only, but, unfortunately, and losses. The higher the leverage, the riskier the game. We can now define the basic tool for the game market, FOREX.
Margin Trading (MARGIN TRADE) - the procedure of purchase and sale of currencies with leverage and security deposit, allowing to carry out transactions with large amounts of currency, not realizing the supply of money. This option is given trade a huge boost to speculative trading in FOREX, because on the one hand, reduced overhead expenses for transferring money and, on the other drew on a wide range of market traders with limited capital.
PIPS (POINT) - the minimum step change in the exchange rate. To "feel" what PIPS give consideration to the value of currencies:
1 PIPS for EUR, GBP, CHF = 0.0001 (ie, reflects the change in the fourth decimal place in the value of the course)
1 PIPS to JPY = 000.01.
In our example, with EURO change of course to 1.0600 c 1.0500 was 100 PIPS and provided a win 1000 USD. Thus, one of PIPS EUR "worth" 10 USD. The word "should" I mean the mechanism of exchange rate translation gain or loss in the transaction. Here is the "cost" PIPSa for other currencies
1 GBP = PIPS to 10 USD
1 JPY PIPS on about 9,5 USD
PIPS one of about 6,5 USD CHF
I note that the "cost" PIPSov in the game on JPY and CHF in each moment is different, because their values ​​are inversely proportional to the rate of those currencies.
Hopefully, now it is clear that in transactions on the FOREX player only cares PIPSov number, which can "bite" on the movement of a currency and how these are PIPSy.
How to play the market FOREX?
Firstly, the player selects the playing field through which he intends to play the game. On the rules of the site selection will be discussed later.
By selecting a platform, the player takes on the expense of site security deposit, say 1000 USD, it opens the ground game account and you can start.
At each time the player gets the market rate. It contains two prices - the price of buying foreign currency (ASK) and the selling price (BID) (remember how in the exchange office). The difference between these rates is called SPREAD, ranging usually from 2 to 10 PIPS. During the trading day (the time it establishes a platform for transactions), the player can come into play, opening the position to buy or sell (BUY or SELL) for the four major currencies. The player with the site specifies the position of opening rate and volume in lots.
Recall that the result of the transaction depends on the leverage, which establishes the ground. Therefore, the mechanism of the opening position is calculated so that, for any currency fluctuations, loss of its players was less than the security deposit. Consider the commonly used method of collateral. The site states that for every open lot a player makes a deposit of 500 USD. This operation divides the player's account in two parts. First - PLEDGE, is not involved in the game and returned to the player at the closing position. The second - a residue on it constantly reflects the current game result. If the player loses and the remainder set to zero, the procedure MARGIN CALL-player or add funds to your account or site Forcing close position of the player at the current rate of loss. It is sometimes, due to large fluctuations in the currency to pay off the loss and have to use part of the collateral. I want to stress again the importance of these rules to the player. Currency fluctuations during the period until the position is open then make a profit, the loss. If you open a position player does not see to it that his balance was sufficient to "survive" change of course for the worse at least 50 PIPS (about 500 USD), then such a gamble will lead to losses due to forced closures. But sad to watch after the closing, as the course unfolded and the deal could make a profit!
Thus, the player chose to play GBP, waited quotes 1.6230/1.6235 and decided to join the game in hopes of growth GBP. To do this, he asks the site the opportunity to buy 1 lot GBP price 1.6235. Site or immediately opens the player's position, or offers a new course (usually +2 PIPSa) and gives the player time (5 to 10 seconds) to decide. If confirmed, the intention to open a position on the proposed rate, site will automatically open position. We assume that the player was given the opportunity to immediately take a position on a $ 1 BUY lot at the rate of 1.6235. In addition to the collateral area immediately write off COMMISSION for the transaction - usually it's 10 USD for the lot and will reflect on the rest of the negative difference in SPREAD (remember?), Which is 50 USD (because if you close your open position on the same quotation, that the closing rate is not 1.6235, and 1.6230).
Now the player account balance
1000 USD - 500 USD (collateral)-10USD (Commission)-50USD (SPREAD) = 440USD
Obviously, the right to close the deal the player without the loss can not, because after closing the account will be 940 USD. This situation forces the player to wait for a course on SELL, at least, reach a point that allows cover the costs of opening the deal. In our case, BID must rise by 6 PIPS and reach values ​​of 1.6236.
Consider two options for this transaction.
1. Winning.
The player guessing the market and 15 minutes after opening the position rate has reached a point 1.6250/1.6255. For the price of 1.6250 the player closed the deal. Calculate the result.
The initial account of the player - 1000 USD.
Rate for GBP at 15:00 MSK (Moscow Time) 1.6230/1.6235
I bought a lot at the price of GBP 1.6235, ie 100 000 GBP 162 350 USD paid
Player's account balance - 440 USD
Rate for GBP at 15:15 MSK 1.6250/1.6255
1 lot sold at the price of GBP 1.6250, ie 100 received a 000 GBP 162 500 USD
Income from operations amounted to: 162 500 - 162 350 = 150 USD
Profit on the transaction: 150 USD - 10 USD = 140 USD.
The player's account at the end of the transaction: 1,140 USD.
Note that profit in proportion to the player lots of transactions, ie If a player has made a deal with the two lots GBP, then the profit amounted to 280 USD (proverte!).
2. Losing.
After 15 minutes of opening the course GBP dropped to a mark 1.6220/1/6225 and the player has decided to leave the game.
The initial account of the player - 1000 USD.
Rate for GBP at 15:00 MSK (Moscow Time) 1.6230/1.6235
I bought a lot at the price of GBP 1.6235, ie 100 000 GBP 162 350 USD paid
Player's account balance - 440 USD
Rate for GBP at 15:15 MSK 1.6220/1.6225
1 lot sold at the price of GBP 1.6220, ie 100 received a 000 GBP 162 200 USD
Loss from operations amounted to 162 200 - 162 350 = - 150 USD
The loss on the transaction: -150 USD - 10 USD = 160 USD.
The player's account at the end of the transaction: 840 USD.
I wonder what would happen if the rate continued to fall, and the player holding the position. With the passage of the level of work process 1.6191/1.6196 MARGIN CALL, because at this rate the current loss on the transaction amount to 162 350 - 161 910 = 440 USD and reset the balance of the player. With this course area forcibly closes the position of the player and the sad result of the transaction will be as follows - at the expense of return and only 500 USD, a loss of 500 USD!
NOTE. In this example we made a deal with the purchase of GBP and gain received as a result of the growth of the currency against the dollar by 20 PIPS (c 1.6230 1.6250 before), and loss - with the weakening of 10 PIPS (from 1.6230 to 1.6220). When playing with the sale of GBP we wanted to weaken the currency to the USD. That is, we got similar results in the following courses (opening at the rate of 1.6230 SELL):
winning - the closing rate 1.6215, falling 20 PIPS, winning 140 USD,
losing - the closing rate 1.6245, the growth of 10 PIPS, losing 160 USD.
Perform calculations and independently verify the correctness of these results.
This example - the essence of transactions in the market FOREX. An attentive reader could not help but notice the difference in winning and losing on the deal - an increase rate of 20 PIPSov yielded a profit of 140 USD, and a decrease of 10 PIPSov - loss of 160 USD. This difference - self-interest grounds, enclosed in a commission and SPREAD, the original organizer of the fee for providing the game. Incidentally, this is not all the payments, which removes the ground from the player. If we had not closed the deal within one trading day, with the area would be kept our accounts INTEREST - payment for each item carried on the next trading day. Interest - is an analogue of the interest rate of bank credit, ie, it is believed that during one trading day means a player takes to the transaction free of charge, and then should have to pay. Interest will accrue for each day of the period during which the player was holding his position open.
We assume that the interest of USD 15 per lot, and that the player in the example of the course waiting 1.6250 three trading days. In this case, its profit is: 140USD - (3 (trading days) * 15 (interest) * 1lot) = 95USD.
That is, in general, and all. As we see the rules of the game is not very complicated. I note that the rates have not completely random. They are subject to certain laws and the impact of various economic factors. This is the "highlight" of the game on the market FOREX - handling of economic news in order to predict the behavior of the course. Therefore, this game could be interesting not only for players - fans of roulette, the "blind" case, but the first "serious" intellectuals, analysts, who want to learn the laws of macroeconomics and apply them in practice.
In conclusion, a few words about choosing a playground. To do this you need to carefully examine all the information about the site, the rules that it proposes to answer the following questions:
- Whether the work site laws of your country
- What software and hardware tools platform provides you with access to the FOREX in terms of convenience, simplicity, reliability and efficiency
- The currency in which and how calculations are made
- How and by whom the taxation of income from such operations
- A minimum deposit gaming
- Installed as SPREAD, INTEREST, LEVERAGE, the procedure MARGIN CALL
- What additional support (technical, analytical, informational, etc.) you receive from the site.
On what answers you get depend on the conditions for a game that will provide you with space, and accordingly the result of this game. Site selection - the process complex and lengthy. Explore different options and do not take no thought-out decisions.

Common stereotypes

Common stereotypes
The post-Soviet mentality is not always clear to the man, who was born and raised in a civilized civil society. All the benefits of capitalism that emerged in Russia and other CIS countries after the fall of the totalitarian regime and the collapse of the Soviet Union, on our soil gave rise to such a hybrid, that any Michurin never dreamed of. Appeared in 1994-95 in Russia access to the market FOREX once gave food to new experiments with the mass consciousness.
Stereotype 1: FOREX - is a gamble.
Indeed, a leverage of 1:100 or even 1:200, as practiced in many Russian dealing centers, closer trade in this market for roulette. This financial leverage is used in the West rarely. While the average Russian has been taught by bitter experience, talking about the fact that these games do not lead to good, but few people stopped, and advertising dealing centers are sometimes reminiscent of well-known maxim: "torsion verchu (substitute the word on the extent of their education ) I want to. Here's a hundred rubles to buy "Lada". Favourite game Alla Pugacheva and Raisa Gorbachev. " Many of the newcomers, who decided to "play in the FOREX" do not have the slightest idea of ​​what the mechanism of this "game", what factors caused by changes in exchange rates, etc.
Stereotype 2: FOREX - an easy way to wealth.
Easy ways to enrich not the case. In the end, we have to work hard even quite honest individuals in their quest to "earn" a living. Not to mention the people who choose a legal business. Quintessence of this opinion I have recently been able to hear from a friend. He obviously read a lot of online advertising, also said: "So this means you can put ten thousand dollars, and ... not working." Here it is, homespun truth. Sit at home doing nothing while getting paid.
This beautiful fantasy is broken in pieces, when people really begin to trade. Any kind of exchange activity is accompanied by a tremendous mental stress. With regard to income, trading with leverage is not particularly characterized by its yield in comparison with those types of businesses such as telecommunications and mobile communications. But the risk reward in full. And the trader becomes aware of this risk, only when started to work with real money.
Stereotype 3: learn to speculate on financial markets is fairly simple.
This stereotype is caused by advertising of various training courses, after issuing a cardboard "ksivu" tricky with the words "Foreign Exchange Dealer analyst of international financial market."
Profession trader can be equated to the creative professions. Learn how to gamble for three months - it's like learning to play the violin or an external correspondence. There are no clear rules on which the price is moving. Of course, there are markets where the probability of a correct prediction is high enough, for example: the dollar / ruble, the dollar / euro. But, nevertheless, speculation in financial markets requires knowledge not only of international economics and finance, but also methods of mathematical analysis, neural networks, etc.
Meanwhile, among beginners is common assertion that technical analysis - a pseudoscience, and it is all only a knowledge of psychology and experience. Fundamental analysis is generally no attention is deserved, in short ... everything is based on intuition, like a game of roulette. Most interesting is that the story of the failure of technical analysis is supported by many seemingly qualified professionals.
Stereotype 4: using ready-made predictions of analysts, we can speculate, not having special qualifications.
Indeed, many dealing centers provide, and often free, forecasts the market FOREX. This is done, you guessed it, for promotional purposes. In those rare instances when the forecast is present fundamental analysis, it boils down to a listing of key economic indicators and indices. Technical analysis is generally quite uniform. Even on the page such solid companies as Killney Investments, technical analysis is mainly based on the Fibonacci levels. Should we really trust the recommendations of firms interested in the fact that traders are losing?
Stereotype 5: trade within the day - the most lucrative form of trading.
Among the Russian currency speculators intraday trading, become much more popular than in the West. It is caused, first of all, dreams of winning the jackpot in the short term. On top of that lack of funds does not allow Russian investors to put away facing stop-loss, so the medium-and long-term trade is very difficult. The only way out - intraday-trading.
The myth that by trading within the day can earn 100-150% of the deposit of the day, most likely originated as a result of the promulgation of best results of competitive accounts. Someone just very lucky opened all the money and won. And for a real account because the can not get lucky. Keep in mind, the contest accounts people do not risk any real money, but the prospect of a 300-500 USD is very real.
Practice shows that the Russian traders often trade at 1-minute bars, not knowing the history of the instrument. From a mathematical point of view, the intraday trading, such as a 5-minute bars, is an attempt to trade random noise, so it is a waste of time. Over time, those who trade the noise, are doomed to failure.
Although short-term fluctuations can not be entirely random, preddetermenirovanny component in them is negligible. It is therefore extremely unlikely that often sells at a short interval of time a trader can actually make a profit for a long time. In addition, studies say about the absence of cycles in intraday data.
Let's think in terms of common sense. If traders who trade intraday, daily deposit is wrapped with 100-percent return, the man who parlayed a dealing center 5000 USD, will become a millionaire in about ten days. Where are our "new Soros"? Something about them not audible.
Stereotype 6: And finally, mechanical trading system - the ultimate truth.
This stereotype is still only beginning to take root in Russian soil, since the mechanical trading systems have spread recently. Full confidence in the correctness of the system, especially if it is alleged that it is built on cutting-edge technology of neural networks, resulting in a hypnotic state: the trader as fascinated watching the rapid combustion of your deposit at the time when the system shows one thing, and Soros and Buffett are doing something quite different. Market owed nothing to anybody. Huge financial resources are concentrated in the hands of funds and large private investors, and they literally sneeze at all trading systems at once.
The role of advertising in the formation of the myth of FOREX.
The main motif of advertising dealing centers is reduced to the thesis that in FOREX can make money the easy way. To promote this idea to the masses as a promotional tool used mostly pseudo-code posted on the site dealing center. Often they are reduced to a kind of "secrets of famous traders" who are somewhat similar aphorisms Kozma Prutkov:
"The trend is over when it becomes visible.""The trend is impossible to predict, it is necessary to enter.""Trade trends."
But the bulk of advertising copy is a educational program for those who came to this site by accident. Before the 1998 crisis in Russia, FOREX is a market of institutional investors, as there were free money. Investments in FOREX doing all and sundry, respectively, the dealers were not out of work. Now, since, as one of the next Prime Minister of the Government, "davalka ends", the market is reoriented to a private investor (investor-trader). Banking dealer does not need to teach the speculation that he may soon teach staff dealing center. But the new staff needed. Moreover, such frames to their defeat by the dealing center may exist.
Why FOREX?
Too many specialists could not help contrast the market FOREX and STOCKS to each other. In Russia, as mentioned above, FOREX market has historically developed as a private investor, this opposition is expressed even more sharply. Indeed, even abroad, where trading with leverage is the civilized face of the speculators in the market FOREX, as a rule, do not go to the stock market, and professional stock market participants, in turn, go on the FOREX is extremely rare. In Russia, such a "division of labor" is compounded by the fact that the practice of private investment in stocks kicked the bucket after a series of bankruptcies of their issuers in 1994-95. Not only that existed before the collapse of financial pyramid layer of individual investors, investor lyumpenizirovanna was so that trade using leverage, short-term speculation, etc. There could be no question.
If we take into account all the above, it becomes clear why the stock market in Russia has become the lot of only professional money managers of large institutional investors. To FOREX market, even in the same institutional (banks, brokerage houses, etc.) formed a fundamentally different attitude. If you work with shares in a financial institution need not only to higher education in economics, but also the FSC certificate, which mere mortals are, mainly, for some recompense, then candidate for the post trader FOREX market are often not even education. Typically, enrollment in full-time position trader in the FOREX market is based on the results of the qualifying auction.
Another important feature arising from these factors - the attitude of many traders on the FOREX market to their job as a hobby. If those who work in the stock market - professional and otherwise simply could not be, among the traders in the FOREX market is dominated by amateurs. Unfortunately, people often come to this lesson by accident. As a rule, those who become traders, peck on the ads, which offer training and employment of a new specialty, "an analyst of international financial market." Further, in most cases, things are moving in the following scenario: the first stage of a person begins to consider himself quite capable of earning foreign exchange dealing in large sums of money, in the second stage, he proceeds to actual trading, initially winning, and then begins to play, in the third stage, he departs from this activity and return to previous activities. Often, currency dealing is as a hobby, sometimes of income. However, according to statistics, 95% of the graduates of such courses is eliminated after losing the first deposit. They do not come back to this activity, but its income-brokers have.
Conclusion.
The development of the FOREX market in Russia occurred spontaneously, largely at the expense of the establishment of other financial and commodity markets. The reasons for this phenomenon is rooted in the fact that FOREX dealing centers gives owners more revenue than dealing in the stock market where leverage is by law can not be greater than 1:2. Leverage is used in FOREX, sometimes leading even experienced traders to a negative difference between profit and loss, of course, allowing the dealing centers have a stable income. As we see, PR dealing centers directed mainly to the fact that the potential client to prove the incredible profitability of operations on FOREX. Here it is useful to remember a quote from the book by David Spenera "What's going on in the mind of the player", "Son, how much you've seen, what would not have learned, always remember one thing: there is a guy who will show you a new unopened pack of cards and offer to bet on that pops out of her and Jack rush to pour your beer into his ear. My son, do not accept bets, or find yourself with a full ear of beer. "

Stage of development

Stage of development, the trader
I try to describe the stage one after another, which is a trader in the period of training and experience. Of course, this is my opinion, but how many people have so many opinions. Some traders are missing some stage, or start with a better understanding of the basics, or they are so lucky that they start with good teachers.
And yet, many who have similar experiences can be useful to correlate these stages themselves c.
I. NoviceThe market seems to him a mysterious riddle. He sincerely believes that there are some simple secrets that experienced traders know, and if he manages to learn those secrets, or receive instructions from the "pros", it can succeed. He believes that there is some mysterious they who move the market in certain directions. He has to outsmart them, or to avoid traps, or to guess what they're doing to move along with them. He is looking for guidance, "hot" peaks. Asks questions like "When XYZ is expected to move?"
Believes that if the stock on good news goes down - this is manipulation of market makers. He thinks that if he finds the good news, the stock should go up. Excited with every tick in his direction and easy to find justification for each tick, which went against him, and ignore these developments. Without getting a warrant execution, accusing the broker. Suffered terrible losses in a single transaction, when the pain becomes unbearable, because he can not bring myself to take a small loss. The value of his portfolio makes huge fluctuations: up $ 5.000, down $ 10,000.
He buys stocks for a quick scalp, but if the stock goes against him, he finished reading the form of SEC, message boards, analyzing the fundamental of stocks and making sure that it is - a big investment. He buys everything that moves and is referred to, holds many stocks in the portfolio, and not income. Easily goes from excitement to boredom deytreydinga investment. Tries to take revenge after losses. Multiple losses, one after another making it timid and shy. Considering the money that he did, he immediately makes the projection of earnings for one month and one year.
II. Newbie gathered some experienceHe learned that stock does not move straight up or down. Understand the concept of kickbacks and jitter. No longer buy anything that is available. Trying to learn the routing order. They still exist, but no longer have the character of the mystery and stop scaring him.
It uses some elements of risk management, though still in many transactions fails to stop billing issues. Still looking for peaks and tips, but more selective. The books he reads, and traders with whom talks have convinced him that trading is hard work and difficult task. The value of the portfolio does not jump up and down every day, but some single loss is still bad, and much beating on it. He listens to traders with different approaches and tries to find someone with whom he will be comfortable.
III. TraderIt is much more skeptical of the peaks, guidance and news. He understands that the reaction of traders is not easy and it's not always easy to predict. Thus, he himself would prefer to react to what happens than to predict what will happen. Examines rules of reading tapes (and / or charts, technical analysis). He no longer blames the market makers to manipulate. If the stock goes against him - he believes his position wrong and goes without much thought. Nesrabotavshie feet, are rare events. No more mysterious THEM - there is supply and demand. He realizes that he has read the market and likely to go with them than to fight or try to outwit him.
His confidence in the success increases. The value of the portfolio goes up slowly, no sudden drops. He has several Strategies, which he liked, which he understands and uses. Routing order does not bring too much trouble. When the market changes its behavior, it becomes hostage to its own attempts to trade on this market with the help of non-performing models for a while and lose confidence.
IV. Seasoned trader experienceAbsolutely confident in their ability to make money trading. Can anticipate most of the events, because he knows how to operate traders. Can easily notice when things go wrong, and leaves immediately. Transactions take place without emotion, mechanically. He thinks clearly, is not upset by the losses and gains it is not encouraging. Do not blame someone or something when they lose. Has a loss larger than usual, but when there is something totally unexpected and comes up to them philosophically.
He remembers a lot of common and unusual cases in the market and can be easily identified and compared with the past of any event. When he feels the opportunity - makes a trade automatically. Order Routing is done without thinking. First, assess risk, and will never be up to their ears in a deal with the risk greater than he admits. Its activity corresponds to the activity of the market - it is not subject to forced. Reads the current information with regards to market regulations, almost every day learn something new. The value of the portfolio has been steadily going up, slowing down or stripping back a little with changes in the market.

orders

Stock exchange orders (orders)
Transactions carried out by brokers to their customers, obey orders (orders). The simplest is a warrant exchange market (Market Order). This is an order to buy or sell at current prices at the moment ("at the market price"). When you purchase this order means the immediate ad Dealers price (Ask), the sale - the closest bid to buy (Bid).
Let us digress for a moment on the order and specify the following: we already know that at any given time on the market, there are two prices - Bid (Bid) and offer (Ask)."Traders potatoes in the market, easily recognizable by their price tag - it has two prices - one to buy another - for sale." (Out of jokes about traders).
How can you not get confused? At what price display order? How to calculate the profit - loss? Fortunately, it's simple. First, we must remember a simple principle - the transaction is always less profitable for the trader's price. That is, if a trader buys, it is always at a higher price at a price of Ask, if you sell - at a price Bid. The same rule applies when the established orders. Order to buy (regardless of order type) is satisfied when the price of a warrant Ask price and sell order - Price Bid. Second, the trader is not necessary to particularly think about it - today's trading terminals all this is done automatically.
So, the market (market) order. Obviously, the use of such an order the trader opens up wide possibilities for manipulating the broker. A simple analogy - you want to exchange 100 dollars for rubles, but must do so through an intermediary (broker). Then the market order will sound something like this: "buy a $ 100 Dollars for the price, what will happen." In this case, you completely trust the integrity broker. The simplest scheme, which can hold a broker - to fulfill your order at the maximum price, and a counter transaction - at a minimum, putting the difference in your pocket. You do not notice it. That's why experts do not recommend the use of market order under any circumstances. He (market order) is widely used in stock markets and futures, the Forex is used very rarely. Instead it uses its modified version - the "request quote".
Request for quotation used to open a position, although this is not the only way. In this case the trader informs the broker name, currency, he asks for a quotation, and the value of the lot, which he intends to commit a transaction. All this is necessary for the sole reason that I mentioned in my previous article - do not match the price information and broker. The broker, in response, said a couple of prices - Bid and Ask. Broker reports price is not instantaneous, because he needs to check whether the right of a trader to work with a lot, then contact your market - maker and request a quote, to wait for an answer and then indicate the price the trader. On average, it takes a few seconds to half a minute. If more - it is better not to work with a broker or use other orders. Receiving a response to the request (by the way, when the price changes dramatically, the market is unstable, the broker may not give a quotation), the trader must answer - "buy", "sell" or - "nothing" (which means rejection of the open position). After reciting the trader of the words "sell" or "buy" deal is perfect, her agent confirmed the news that bought so much - for so much - that on this - the price. All calls are recorded on tape broker. Somewhat simpler procedure when working through the trading terminal via the Internet, but the essence remains the same. In principle, the trader can ask as many times as a quotation and abandon the transaction, waiting for a better price, but some brokers to limit this right (otherwise, the broker is overloaded with requests and other traders can not get through).
"Request Quotes" - the main and most commonly used command to open a position, but not unique. Consider other tools trader."Limit Order" or "limit order" (not quite the right term, but settled down). Is an indication of the broker to buy at a specified price or lower, or sell at a specified price or better.Many novice traders make the following error: they are considering staging a warrant on the price of open positions. It's just carelessness. You should always consider setting the order for current prices. Confused? Now I will explain with an example. A limit order is always exhibited at a lower price relative to the current market price. That is, if a buy order, then its price should be lower than market prices (cheaper to buy profitable, right?), If for sale - at a higher price. Assume a trader purchased at a price of 1.0150 euros. And the price has dropped to 1.0120. A trader wants to place an order to sell at 1.0140. Since the price of an order above the market price (1.0120), it is - a limit order. A "trader mistaken," looks at the price of open position - 1.0150, and wonders, "limitnik" de for sale should be higher. Now, I hope it is clear what he is wrong?
The last tool - "Stop - an order" (stop - an order). Performs the opposite with respect to the Limit order function. It aims to buy more of the listed value, or sell cheaply. Price stop orders to buy above the current price set for sale - below. Do not rush to decide that this is a useless and unnecessary tool because of its performance clearly leads to losses. This is the most important tool a trader, it is based on protection against deterioration of prices and thus of large losses (although such protection is like a lizard, break off their tail, or a wolf bite off his paw caught in a trap).
An interesting question - and it always orders "trigger" for a given price? The basis of the same principle - minimizing the benefits to the trader. That is, limitnik triggered exactly at the same price, that it specifies. I had a case where the price jumps jumped limitnik my 120 (!) Points. I also broker (bank, among other things) just opened a position at the order price, and I immediately formed a loss of 120 points. As I have argued that there was no intermediate "ticks" in any information system, the broker was adamant - he was such a price! Fortunately, such cases are very rare, as I can remember one or two cases.
Another thing - stop order. Common phenomenon, when it is triggered you will receive additional paragraphs 1-5 loss. This is called "slippage". If the "slippage" more, or is in a quiet market (where it never should be) - look for other, more honest broker.In recent years there have been variations discussed above orders - orders pending when the order takes effect after the operation of another order; order related, when trigger one cancels the other, etc. The presence or absence of these species allows for the use of complex multi-pass strategy (but I'm not sure about the effectiveness of such .) The essence of the warrants is not changed and that these "hybrids" I will not be considered, especially their work should be checked with your broker.
Occupy a special place orders Take Profit and Stop Loss. This is the usual limit and stop orders, but tied to a specific open position. Take Profit closed position when the projected profit margins, StopLoss also closes the position, but when the expected loss in order to protect the deposit from the further growth of losses. StopLoss - guillotine, cut off part of your money and "thrown out" with your market, catapult, it is always painful, but on the Forex as follows: those who can not chop off a finger - often loses his head (but not always).
And what happens if you try to install the "wrong" order, for example, a limit on the purchase at a higher price? Purely theoretical - it is just going to work at a specified price. It's like that in a market where the price of potatoes 12 rubles per kilo, you shout - "buy at 15 rubles!". Of course, the seller at that price there instantly. But at what price? The question is not simple. If you were a market - maker and would put a price on the market, then, of course, 15. But you are a trader, who works at least through two intermediaries. Therefore, your order is fulfilled to the highest available market price that is 12 rubles! If you are in such a situation will put the stop to sell for 10 rubles - he also immediately granted. Who will buy it for 10 if the price is now 12! But it turns stop on 10 (although such a price in the market and not). I think you can guess why. The broker itself might buy up to 10 your potatoes and then sell it at 12, put in your pocket 2 rubles per kilogram. Fortunately, most brokers will not allow you to make such a mistake. They do not need to designate the type of order, and if you place a buy order at a higher price, the broker understands - it's stop at a lower - limit. However, where required to determine the type of order, usually trading terminal has warned that this order is going to work immediately. When working on the phone operator, of course, warn you about the error. But he is a man may be mistaken. So think of the trader and to calculate the consequences of their actions is still needed.
The last question that we consider - the restriction on the price difference formulation. The sections that follow we will, among others, considered "pipsovye" strategy that is focused on making a profit, measured in units of points (a little - but often). It would seem to open a position, immediately became a take profit point, and wait, when due to "fluctuations" (vibration) the price it will work. And so 100 times in a row - there's your 100 points a day. But dreams are divided on the reality. First, you forget about the spread. To obtain a profit item, you must pass at least 6 points (if the spread - 5 points). But even this seems to be a winning strategy, as the brokers who profit from losing a client (the kitchen) are not allowed to put a certain order near the delta (difference) from the current price. This delta can be from 5 to 15 points at different brokers. Since I do not see any objective need for such restriction (although maybe it is introduced into the market - makers and brokers are forced to obey), there is great suspicion that all of the brokers - "kitchen". On the other hand, I have never met a broker without restriction orders. So maybe they're cooking? I do not know ...
In any event, before work, clearly understand, what the broker warrants exist, what are the characteristics of their production and performance, please read carefully the contract, ask the broker questions about e-mail, do some work in demo mode, which try to drive the wrong order with the "wild" prices. And just to fully understand all the nuances, you can begin trading.About how and when to place an order, consider one of the following articles about trading strategies.

How to trade

How to trade on Forex market
Initially, the structure of the market Forex. Like all markets - Forex - set of buyers and sellers of currencies. Call them operators Forex. These are large banks of various countries, including - central banks, the largest investment companies, pension funds (most - North American). Operators are traded between different currencies, making the transaction. The minimum value (contract item) transactions - about 1 million U.S. dollars. Operators of linked special network that allows instant conduct a transaction. What is important is that this is not the physical movement of money, that is, if napimer, the Japanese bank will buy one billion pounds for yen at the London bank, no one will rush to ship them on a plane and sent under tight security in Japan. Really, why? After a day (or few minutes) Japanese bank to sell these pounds a German bank for the euro, and that - a London bank for the yen. Do not look for a special meaning here, no wrinkle brains - this is the problem of market operators. The main thing for us - a small investor to get into this market can not in any way. As he gets there?
Yes, indirectly, what else! Banks sell because why? Or on the instructions of their clients, or speculate (Incidentally, many Western banks is almost the main way of making a profit). Literally in the last 15 - 20 years have so-called brokers or brokers who are on the one hand, customers of operators Forex (banks), on the other hand, the possibility of providing small investor to carry out transactions of purchase and sale of currencies on the Forex market is relatively small lots (tens to hundreds of thousands of U.S. dollars).Here and henceforth I will devote special terms adopted for consideration of us. Try to memorize them at once.
It is now clear - in order to be able to trade in Forex, we need a firm - the broker with whom we signed a contract to grant us access to the settlement of transactions on the Forex.About brokers talk more later, and now must embrace the whole picture, the details can then be considered.We proceed to ascertain the most important - you need to contract with a broker and what we get from a broker? First - a small digression. I hope all readers will understand that to that - you get that first must be - then invest. Of zero is obtained only zero as you did not multiply. Trading on the forex market - type (or method) of investments for profit. Moreover, this species is different investments, on the one hand, potentially unlimited amount of profit, on the other hand, the increased risk. So, if you expect to just come somewhere, sign up for Forex (contract) and to trade profitably, keep these thoughts. But those who have a couple of hundred dollars and just wants them to increase, better go to the casino or spend the money on his girlfriend - good anymore. Work on Forex - work is serious, respected, and, perhaps, respectable, which requires certain financial investments.
So, to conclude a contract with a broker to open an account or have the broker or the bank. How to do this for money? To deal with this issue, find out what the "margin trading" - the most important concept is the foundation not only monetary, but also any other market.
Please read them carefully and think about what they read, as discussed will be very important concepts.Returning to the example, to exchange the item out of 5 chapters. You needed a loan 3.04 million rubles to exchange them for $ 100 000. You came to the creditor, and he said - if a profit - fine, but if the losses, who will fill them to me? Leave a pledge, for example, one hundredth of (30 rubles), will be formed if a loss - subtract the mortgage, the lender do not have to lose money if the profits - you will receive your deposit back after the loan repayment. Here is the pledge and called the margin requirements or margin (Margin). And the ratio of credit granted for the transaction to the margin of leverage (leverage), a stricter translation of the term - leverage ratio. It is now clear to make a deal with a lot USD100, 000 in arm 100 is required margin in 1000 U.S. dollars. All clear so far?
Lender is a broker for us, it determines the rules. Already developed, that the transaction be made the "standard" size lots of 100 thousand and 1 million units traded currency, and the broker provides a shoulder 50, 100, 200. The greater the leverage, the more lots you can throw on the market, the greater the profit, respectively, can get. But the likely loss in as many times as much, therefore, with greater leverage risks increase.
Let us continue the matter any further. Uncomfortable every time you open a position (the value of this term - a little later) to put margins on account of the broker, at closing - to shoot. It is not necessary. Each broker defined minimum trading account, usually ranging in size from 1 thousand to 10 thousand dollars, some brokers - from U.S. $ 100 000. Before you start trading you have to put on your trading account an amount not less than specified in the contract, as a minimum. A possible? This is a must. Why?
Suppose, under the terms of the broker - a minimum lot - 100 000, shoulder - 100, so the required margin - $ 1,000. This amount you and put into the account. Once you have opened a position, depending on the direction of the price (exchange rate) will produce a profit or loss. Well, everything is clear at a profit, but with a loss ... If you decide to close the position - the loss be debited from your account and to again enter the market, need to add the money up to $ 1,000. Uncomfortable, even technically, as long as you look for the money, enroll at the expense of - the law of the "sandwich" miss the beautiful movements of the market and, consequently, the ability to make money. But there are even more dangerous things. But first, let's deal with this important concept, as ekyuti (Equty), or floating deposit. Suppose you deposit $ 1,000. After opening a position at the right price is moving toward you and the position of the profit, say, 105 dollars. Summing up the profit on your deposit get 1105 dollars. It happens that produced a loss, for example - the same $ 105, but with a minus sign, then ekyuti - 895 dollars. Ekyuti - is the real thing is the cost of your deposit at this moment of time, such values ​​will be your deposit if you immediately close all positions. Obviously, if there are no open positions, is ekyuti deposit.
So, the position is open, and the growing loss (by the way, the loss will be called the loss (Loss), profit - profit (profit). So loss is increasing, decreasing ekyuti. How long can this go on? After all, if your loss exceeds the deposit, losses will be the broker already, and that he can not afford. Therefore, there is a so-called stop level, I call it "hitchhike" in overcoming this level, the broker will automatically close your position. The value of this level is usually 10 - 20% margin so that after the "hitchhiking" on the deposit you will be less than $ 100. It's called - to burn the deposit, to depart from the market, we will not tolerate.'s always better to close a position, than to wait for "hitchhiking".
Let us, for example, to deposit $ 1,000. If you have not guessed the direction and decided to wait a losing wave (it is a feasible solution, most of the time the market "swings" around certain values ​​of the price), then, at a cost of $ 10 item, you supply only about 90 points. This is a very small, and, most likely, you suffer the "hitchhiking". That is, you do not have room to maneuver in very small deposit, I call this game - "hang on nails over the abyss." It is very hard work, trust my experience, no one would stretch out a bill. More or less quiet operation begins when the three - five times the excess, normal operation (not tape) - with a ten-fold. That is, if you want to work in one lot with $ 1,000 margin should be at 3-5 thousand dollars account, optimally - 10 thousand dollars.It should be noted that if a trader is undisciplined, blindly repeating his mistakes, he slept a deposit of any size, even a million. The case when a bank manager has lost. So the margin is important for trade, but it determines the success or failure.
In conclusion, analyze another concept. I have already began to use these words: opening position, closing position. What does this mean? Purchase (or sell) on the terms of margin trading is opening a position. You received a loan and made the transaction. After the opening position due to movement of exchange rates, profit or loss are formed. While the position is open, you "are in the market." Mandatory condition of margin trading is a closing position, ie the transaction in the opposite direction on the same amount in the same currency, that is, if you bought at the opening position of $ 100,000 for the euro, closing entries have to sell 100,000 dollars per euro. At this point, the profit or loss is recorded on your deposit and you "get out" of the market.In the next chapter we will continue to consider the relationship between broker and client and get acquainted with the principal - c our "goods", so what are traded on the Forex.

The chances of success

The chances of success in the forex market
Novice traders, and just random people who wandered the site of a broker or dealing center, often ask themselves:

- Is it possible to consistently make money in stocks or currencies without having enough experience?
- And how successful traders make?
- And a chance to make the first deal and not lose the entire deposit?
Let's try in this article highlight some common questions and dispel common misconceptions beginners. For greater clarity and illustrative article is based on concrete numbers and explain everything in terms of examples of transactions.
Suppose you are a man, far from currency speculation, listening to the exchange rates, we decided to try their hand at trading on the foreign exchange market (forex). With a little force on the Internet you can find a lot of different information on the subject. Find how you can obschepoznovatelnye texts, as well as specific recommendations for behavior in the market, which includes advice on when and which currency to buy / sell.
Not having any knowledge, is your chance to capitalize on this market is estimated 50/50. And it is significantly higher than in any lottery or sweepstakes! To explain this very simply: the currency can only increase in price or cheaper or. That is, when making any transaction without any analysis and experience you 50% chance to make a profitable trade. In other words we can say that every other transaction should be profitable.
Now imagine that your existing basic knowledge and skills enable you to make profitable trades than 5 out of 10 (you do not need any knowledge), and six out of ten.
You decide to invest in the work of the foreign exchange market 5000 USD. But to invest in real trading you are ready to only 1,000 USD, while the remainder will serve as an additional insured under warranty. Thus, you set for ourselves the highest possible loss in a month. Now it is necessary to determine the goals of work.
Successful in the foreign exchange market (forex) is the one trader who consistently earns foreign currency transactions of 10-15% every month. We pose for a goal to earn no less. Translate our interest in virtual dollars, and we aim: 5000 * 0.10 = $ 500 per month.
Since an average of 1 point equals $ 10, then a month to earn 50 points. Much or too little? On average, the currency pair during the day oscillates at a rate of 100 points, respectively for the month and 100 * 20 (days) = 2000 points, of which we have only 50.
At one point, all contractual formalities are completed, choose a broker and you are just getting started real work. For convenience, we take that occurs in 10 transactions per month, of which, thanks to some knowledge and information available to you six winners and four loss-making (your knowledge and ability to provide you good luck in 50% of 10% of cases).
Since the beginning we have set ourselves the maximum possible loss per month in 1000 USD, the average loss for each transaction (if you follow our rules) can not exceed 250 USD or 25 points. For more believable take value equal to the average gain is also $ 250 or 25 points.
In the embodiment under consideration for the month you will earn exactly 500 USD. (4 * deal - 250 USD + 6 deals $ 250 USD). That is absolutely real, with an account of $ 5,000 to earn $ 500 every month, while risking only $ 1,000.
By making more deals (while maintaining the conditions that 6 out of 10 trades profitable), you can earn more. With the growth of your skills as a currency trader, winning percentage will also rise, which in turn will generate additional income.
If you have many positive trade balance your transactions will gradually increase over time and you will be able to afford to work not with 1000 dollars, and with a larger sum, which should also affect the rate of growth of your capital.

How to earn on Forex

How to earn on Forex


In contrast to exchange transactions with real supply or real currency exchange, FOREX participants use the trade with an insurance deposit - margin or leverage trading. In marginal trading, each transaction has two obligatory stages (which can be divided arbitrarily long period of time): buying (selling) of currency at one price and then selling (buying) it at another (or same) price. The first is called opening the position, the second - the closing position.
When you open a position, a trader furnishes a deposit sum from 0.5 to 4% of the credit line, granted for the transaction. Thus, in order to buy or sell 100,000 dollars for Japanese yens not need the entire amount, but only from 500 to 4000 dollars depending on your risk management policy. After the position closing the deposit sum returns, and calculation of profits or losses, and any gains or losses arising from changes in currency rates is credited on your account.
Let us now consider a concrete example of a profit when the European currency, the euro exchange rate from 0.9162 to 0.9292. If you are using technical or fundamental analysis have anticipated this change, you can buy the Euro cheaper for dollars, and then sell it back at a higher price. Let's say you choose a leverage of 1:100, then added to 1000 dollars 99,000 dollars of the credit line, granted by the dealing center, and you buy the euro price of 0.9162. As a result of this transaction we get: $ 100,000 / 0.9162 = EUR 109.146,47. When the rate changes (an average daily change in euro is approximately 70-100 points), closing the position and sell euros for dollars, but the rate of 0.9292. Receive 109.146,47 * 0.9292 = 101,418.89 dollars. Your profit is $ 1,418.89. If you performed the same transaction with leverage 1:200, then your profit would be $ 2837.78, with leverage 1:50 - 709.45, with leverage 1:25 - 354.72.
Once again we remind you that the higher the leverage, the higher the profits with the correct prediction of currency fluctuations, but the greater will be your loss if your assumptions were incorrect.
Feel confident in the FOREX market without a thorough knowledge of the terms used there.
Foreign exchange quotes are exchange relationships to each other.
USDCHF - the cost of $ 1 in Swiss Francs.USDJPY - the cost of $ 1 in Japanese yens.EURUSD - the cost of 1 euro in U.S. dollars.GBPUSD - the cost of 1 pound sterling in U.S. dollars.Thus quotes are expressed in units of the second currency for a unit of the first. For example, quote USDJPY 108.91 shows that one dollar costs 108,91 Japanese yens. A quote EURUSD 0,9561 suggests that one euro is worth 0.9561 U.S. dollars.
The last figure in the quote is called point. For each currency, the pip value varies and depends on the leverage and current quote.
The formula for calculating 1 pip is:
where K = 1 at leverage 1:100,K = 2 at leverage 1:200,K = 0,5 at leverage 1:50,K = 0,25 at leverage 1:25.
Examples:
USDJPY = 108.91 leverage 1:100100,000 / 10,891 x 1 = 9,18 USD
EURUSD = 0.9561 1:200100,000 / 9561 x 2 = 20,92 USD
GBPUSD and EURUSD - are direct quotes, ie, when the chart is more expensive up GBP and EUR, and when the chart down cheaper. USDCHF and USDJPY - are backward quotes, and when the chart grows, prices on CHF and JPY fall, and when the chart goes down - are growing.
On direct quotes you buy according to ASK, and the sale of BID. In the case of backward quotes - on the contrary.
Trading on the FOREX market is realized in lots. When you open a position, you can choose the number of lots from 1 to 10. One lot equals $ 100,000. The deposit sum for one lot will vary from $ 500 to $ 2,000, depending on the credit leverage you choose. Leverage (leverage) - is a financial mechanism that allows crediting speculative transactions with a small deposit.
In the trade the opportunity to lock in profits or cut losses on yours, predetermined commands LIMIT and STOP.
LIMIT - set up higher than the current value for money.STOP - set up lower than the current value for money.
With these commands the positions is closed without further guidance on the price reaches a specified level.
In the process of trading you can create pending positions, that will be activated when the price reaches the agreed level (open price). When creating and closing orders, a temporary delay of approximately 30 - 40 seconds. In response to the query you are given a real market price corresponding to the time of proposal, not a request.
Concepts which characterize the account:
Transaction (Deal) - realization of 2 trade transactions, and is bought (sold) the currency and then the reverse conversion.Balance - the sum of the customer's account after the last transaction.Floating Profit - current profit on open positions.Floating storage - transfer fee for the open position over midnight GMT.Equity = Balance + Floating + Floating storageMargin requirement - a necessary deposit sum calculated according to the formula:1000 1000 * K + * K + * K 1000where K = coefficient, and the number of items equals the number of open positionsPercentage - index of an account.Percentage = Equity / Margin Requirement. At Percentage lower than 50% can not open new positions.Margin call - the state accounts for which all opened positions dealing center closes at current prices. Percentage state occurs at below 10%.Please note that even in established companies price levels of client orders may differ from the current price points at 5-8. However, there are rare situations when, due to high market volatility, the orders can be executed worse declared.

Methods of analysis of the Forex market

Methods of analysis of the Forex market
1. Fundamental analysis.2. Technical analysis.3. The advantages of technical analysis.4. The combination of two methods of analysis.
1. Fundamental analysis
Fundamental analysis is an analysis of economic and political status of countries whose currencies are traded in the Forex market. The objective of fundamental analysis is to assess the possible impact of certain events on exchange rate movements.
Fundamental analysis involves the analysis of economic indicators. They are published regularly and provide an opportunity to examine trends in the economies of various countries. The results of these studies help to explain the current exchange rate movements and predict future movements. For example, when the U.S. is undergoing a constant growth in consumer and producer prices, which is accompanied by employment growth, the market may begin to speak of the possibility of raising rates, which in turn can lead to a rise in price of the dollar.
2. Technical Analysis
The basis of technical analysis is based on chart analysis. It is said that the schedule - is the embodiment of the fundamental factors of influence on the market.In the analysis takes into account the following postulates:
1. inside the graphics are absolutely focused all the information about the market;
2. market has a memory and, therefore, based on the fact that in the past, we can predict the future.Based on these postulates, a wide range of technical analysis indicators, whose task is to help in "predicting" the future movements of exchange rates.
3. Advantages of Technical Analysis
1. Fundamental macroeconomic analysis very difficult. In most cases, you can not take into account all factors influencing the market. Technical analysis is much simpler, since it examines only one object - a graph of the price.
2. In technical analysis of a large number of supporters who are active participants in the market. They use the same graphics, thus obtaining similar results, and making the same conclusions. This mass consistency, in turn, influences the price movement, forming it in a positive direction. Thus there is samoispolnenie forecast.
3. Technical analysis is universal - it can be used in various financial markets with little or no change.
4. The combination of two methods of analysis
Between adherents of fundamental analysis and technical analysis, there are tensions about the importance of a particular type of analysis. The first claim that understanding the underlying processes in the economy and politics is enough for successful trading. The latter say that so many events and they are so diverse, it is almost impossible to say unequivocally about their impact on the currency market.
Experienced traders who are working successfully in the Forex market, it is recommended not to neglect one or another kind of analysis. Fundamental analysis helps to understand trends in the currency market in the long run and at this point in time. Technical analysis, in turn, with the help of various tools makes it possible to visualize the current trends and to calculate the possible levels of the beginning of large movements (or their end), the magnitude of movements of a correction, and most importantly - a technical analysis to determine the levels for the opening and closing positions.
Combining fundamental and technical analysis to produce impressive results, as representing the market situation in terms of fundamental analysis, traders need only find the level for entry into the market and calculate the possible stop and limit orders.
In the market sometimes things happen that you can explain (or predict) in terms of only one kind of analysis. For example, if a given period of time there is no strong influence of fundamental factors on the foreign exchange market, the direction of the game can only say technical analysis. At such times, or the motion may continue the trend, a correction can begin to, or course will oscillate in a horizontal channel. Depending on what show trend lines and indicators of technical analysis, and decision-making occurs.
There's also another situation when the big moves can only be explained as a result of the analysis of economic or political events. A striking example of this is, of course, all sorts of crises. During such periods, often forget about all kinds of support or resistance levels and technical indicators (although a more careful analysis, and in those markets can find its technical patterns.) In this case, it is important to identify tools that are particularly susceptible to the influence of the crisis and the likely direction of their movement. When trading in such circumstances will be at the forefront of the chosen direction and the second - the various attributes of technical analysis.

Why move rates

Why move rates

Exports and imports
The higher prices and production costs in the country compared to overseas, the more increased imports compared to exports. Therefore, a high level of domestic prices and lower prices abroad usually means higher prices for foreign currency. This factor, which in the 20s of the XX century was considered the most important is called "purchasing power parity" exchange rates. Under the concept of purchasing power parity exchange rates change in the relationship between the two countries ceteris paribus proportion to the ratio between domestic prices and prices abroad.
The stronger the desire for foreign goods and services overseas use, the higher the price has to offer for foreign currency. With the growth of national income and increases demand for imported goods. This causes a tendency to reduce the cost of the national currency. On the other hand, a high national income abroad reduces the price of foreign currency. All of this is due to the "propensity to import of the country": the growth of national income leads to increased imports of almost the same extent that increased domestic consumption.
Movement of capital
If investors are seeking more foreign debt obligations, bonds, shares, bank deposits or cash, they thus bid up the price of foreign currency. In contrast, payments to other countries in a particular state contributed to the increasing rate of its currency.This factor, which determines the movement of capital, which is closely linked to currency speculation. If it was only on the export of goods or payments on current account, the rate of foreign currency could have been dull and fluctuated only slightly. However, when the euro falls from 1.04 to 0.97 dollars per euro, many are beginning to fear that it will fall even more. So they try to get rid of the euro. The increase in sales the single European currency and reducing the demand for it from short-term speculative capital flows has further reduced its rate.
Thus, small fluctuations in the exchange rate is often exacerbated by movement spontaneously "hot money" that move from one country to another for any rumor of impending problems, change of political direction or currency fluctuations. When this "capital flight" begins in a large scale and in any one direction, it can lead to sharp movements in exchange rates and even the financial crisisWhat causes the movement of the exchange rate
Output data and the expectation of the release of data
On the concept of "data" may include the following events: exit (publication) economic indicators of the host of traded currencies, the reported changes in interest rates in these countries, reviews the state of economy and other events which have a significant impact on the foreign exchange market (for example, the end of the financial in Japan on March 31, Minister of Finance submission to Parliament of the draft state budget, etc.).
Waiting for an event and the onset of this event are strong drivers of currency movements. Hard to say, that has a stronger impact on the market, the event itself, or its expectation, but we can say with certainty that the output of major data can lead to significant and prolonged movements in exchange rates. These are important data: Nonfarm payrolls, GDP, Industrial production, CPI, PPI, and others.
Date and time when a particular indicator is known in advance. There are so-called calendar of economic indicators and the most important events in the life of the individual states (with specific dates, or approximate time of their release). These events prepared the market. Emerging expectations and forecasts of the value of an indicator can go and how it can be interpreted.
Output data can lead to sharp fluctuations in exchange rates. Depending on how market participants apostrophe and interprets a particular indicator, the rate can go as one and the other side. This movement of course can lead to a strengthening of an existing trend, its correction or the beginning of a new trend. Or that the outcome depends on several factors: the market situation, economic condition of the host currencies considered, preliminary expectations and attitudes, and finally, the value of a specific indicator.
For example, after a series of increasing values ​​of the indicators: GDP, Nonfarm payrolls, CPI, PPI in the market can come talk about a possible increase in U.S. interest rates. Even if this change happens within a few months now actively beginning to buy U.S. dollars against other currencies. Thus begins up-trend in U.S. dollars - a steady strengthening of the dollar against other currencies. After the release of reports on changes in rates could begin the correction in this movement.
With the release of certain data (or any information affecting the market) are the following proverb: "Sell the exit of good data" (sell good news), and "buy on rumor, sell on fact" (buy on rumor, sell on fact .) These sayings are suitable to situations where the market expects the occurrence of any event.
Even before the release of information about this event is a movement rate in a certain direction (towards the interpretation of future events), ie market "is laid." So often after the data (if the information meets expectations) is moving in the opposite direction. This is due to the fact that expectations were open position and when there was something waiting for - is the closure of these positions. There is a so-called "profit taking" (the removal of profits). Situations where there are similar events, are characterized by the expression "priced in" (ie, the event occurs already built into the price - which means a rate of one currency against another).
Activity Funds
The first place for its effect on long-term trends in the movement of currency exchange rates hold funds (hedge, investment, insurance, pension). One of the directions of their activities - is investing in certain currencies. With huge amounts of money they can make the course a long time to move in a certain direction. Management of the funds of funds involved in fund managers (fund managers). They are true professionals.
Depending on the operating principles they can open the long-term, medium-and short-term positions. Fund managers make decisions based on thorough analysis of financial markets. They are armed with various types of analysis: fundamental, technical, computer, psychology, analysis of related markets. Fund managers on the basis of the information being processed are trying to predict the consequences of certain events in time to open a position in the right direction. Thus, one of the objectives of their activities is a game ahead of the curve.
Managers are trying to present a picture of the world currency market as a whole (so to speak from the height of its flight) and when the picture is clear, there is a selection of tools for work and direction of trade. Of course, none of the types of analysis can not give perfect results. However, using an elaborate (and perfection) trading system, and having plenty of money, funds are able to start, strengthen and adjust the stronger the trend.
The activities of exporters and importers
Exporters and importers are using the foreign exchange market (market users) in pure form. In a continued interest in exporting to sell foreign currency, while importers - buy it. If established firms engaged in export-import operations, there are analytic divisions that specialize in forecasting the exchange rate to more or less profitable to sell or buy foreign currency.
A significant influence of exporters and importers to market is observed in the Japanese market the dollar against the yen. If the market is not observed strong trends, the exporters are not allowed to rate up high, and importers - deep down. Thus, they are able to hold course for a while in a certain range of levels (create a "range trading"). From time to time in market research reports dollars against the yen indicate possible levels of market access for exports (resistance level) and importers (support level).
For exporters and importers is also important to track trends in terms of hedging currency risks. With the opening of a position opposite to the future operation is to minimize this type of risk (hedging currency risks).
The impact of exporters and importers to market is short-term and not the cause of global trends, because the volume of foreign trade transactions are insignificant compared with the total transactions in the foreign exchange market. Most often, their activities create market reversals (correction), because when you reach certain levels it becomes profitable to buy or sell foreign currency.
Quotes from politicians
Statements that could affect the movement of exchange rates, appear in various reports, summits, meetings, press conferences, etc. (Eg meetings of the leaders of the Group of Seven, or a press conference after a discussion of interest rates).
The journalists of news agencies (Reuters, Bloomberg and others) closely watching such speeches and real-time insert statements to the hottest news columns of their agencies (the so-called "hot lines" or "hot news"). By the force of impact on the market these statements can be compared to economic indicators.Most often, the date and time of a speech known. These events prepared the market, so shortly before the onset of their predictions appear or rumors about what can be said and how it can be interpreted. However, there are times when it happens suddenly on the market. Then the market could start strong movements in exchange rates that are not always predictable.
So, after a sensational reports on the resignation of German Finance Minister Oskar Lafontaine (Oskar Lafontaine), the European single currency (the euro) against the U.S. dollar has risen nearly 400 points in just two hours.If any statements are a long-term effects (for example, the possibility of changes in interest rates, the principles of forming the state budget, etc.), this movement could turn into long-term trends.
For example, two times a year (winter and summer), all markets are closely watching the performances of the head of the Federal Reserve Alan Greenspan in front of the two banking committees of Congress, USA (Humphrey Hawkins testimony). During the presentations, market participants are attempting to find his words at least a small hint on the future direction of changes in interest rates in the United States. Depending on how market participants apostrophe and interprets the words of Greenspan, may be established or that the trend in U.S. dollars.
In relation to the political leaders there such a thing as a "charmed the course." This means that at some point in time when the currency reaches levels that are unfavorable for a particular state, they begin to say that, in their opinion, the course is not going on that they would not allow further movement is possible that intervention, and so n. And because these people trusted (they already have the established authority and they have a mandate), then their words are beginning to have a direct impact on the market.
This occurs most often after a strong and long-term trend in one direction. Therefore, after such statements traders can decide "not to tempt fate" and begin "Square" (closing existing positions). This, in turn, leads to a correction of this trend.When the course is truly at a critical level, the following statements may be followed by interventions by central banks. And this is a very strong impact on the market event - the course can take more than one hundred points in the direction of intervention in a short time (sometimes minutes). In addition, the intervention may cause market participants wary of open positions in the old direction. This, in turn, can lead to avalanche movement of the exchange rate.
Below are the names of public figures who are most often found in the headers of news agencies and whose opinion is important for the market.U.S. Treasury Secretary Lawrence Summers (Treasury Secretary Laurence Summers), president of the Federal Reserve Bank of New York William MakDana (Federal Reserve Bank of New York President William McDonough).
Germany Finance Minister Hans Aichele (Finance Minister Hans Eichel), Bundesbank President Ernst Velteke (Bundesbank President Ernst Welteke), former president of the Bundesbank, Hans Titmeyer (Bundesbank Ex-President Hans Tietmeyer), the Bundesbank's chief economist Hermann Remsperger (Bundesbank chief economist Hermann Remsperger .)European Union: European Central Bank President Wim Duisenberg (ECB President Wim Duisenberg), a member of the Executive Board of the European Central Bank Tomasso Padoa-Shioppa (ECB Executive Board member Tomasso Padoa-Schioppa), the chief economist of the European Central Bank Otmar Issing (ECB Chief Economist Otmar Issing ), the Minister of Finance of the Netherlands Gerrit Tsalm (Finance Minister Gerrit Zalm).
Japan: University Professor Keith, a former deputy finance minister, "Mr. Yen" Sakakibara Eisuke (Keito University professor, Ex-Vice Finance Minister, "Mr Yen" Eisuke Sakakibara), Kiichi Miyazawa Minister of Finance (Finance Minister Kiichi Miyazawa), head of the Agency for Economic Planning Taichi Sakai (Economic Planning Agency Minister Taichi Sakaiya), governor of the Bank of Japan Masaru Hayami (Bank of Japan Governor Masaru Hayami), head of the International Department of the Ministry of Finance Zemba Mizoguchi (The head of the international bureau at Japan's Finance Ministry Zembei Mizoguchi).UK: Gordon Brown (Chancellor of Exchequer Gordon Brown), governor of the Bank of England Eddie George (Bank of England Governor Eddie George), a member of the Monetary Policy Committee Bank of England Governor Mervyn King (Bank of England Monetary Policy Committee member Mervyn King), a member of the Monetary Policy Committee Bank of England Uilem Buiter (Bank of England Monetary Policy Committee member Willem Buiter), a member of the Monetary Policy Committee Bank of England, John Vickers (Bank of England Monetary Policy Committee member John Vickers).
Switzerland: Swiss National Bank Chairman Hans Meyer (Swiss National Bank Chairman Hans Meyer), chief economist at National Bank of Switzerland Georg Rih (SNB Chief Economist Georg Rich), a member of the Governing Board of the Swiss National Bank Bruno Gehrig (SNB Governing Board member Bruno Gehrig).France: Laurent Fabius Minister of Finance (Finance Minister Laurent Fabius), governor of the Bank of France Jean-Claude Trichet (Bank of France Governor Jean-Claude Trichet).
The activities of central banks
Its influence on the currency market the state exercises over the central banks. If the central bank is absolutely certain state does not intervene in foreign exchange operations by buying and selling foreign currency on the foreign exchange market, the domestic currency is in "free float". In practice this happens extremely rarely. Countries with floating exchange rates, from time to time try to influence its exchange rate through foreign exchange transactions. This state of the currency is called a "dirty float".In order to promote production and consumption growth states must engage in exchange rate management. Is commonly used direct and indirect regulation. Indirectly through the regulation of money in circulation, inflation, etc. Direct include discount policy and foreign exchange intervention in foreign exchange markets.
Foreign exchange interventions are associated with a sudden outburst or a sudden seizure of an equally large amounts of currency from the international market. Exit the central bank's foreign exchange market is through commercial banks. As the amount is very large (billions of dollars), the foreign exchange interventions lead to significant movements in exchange rates.For example, in 1998 the central bank of Japan (Bank of Japan) had several foreign exchange intervention, aimed at preventing further podeshevleniya yen against the U.S. dollar. On the market has been thrown out several billion dollars, which led to a significant drop in the dollar against the yen.
The central banks of different countries can also implement and joint intervention in currency markets. During one of the interventions in the market, the dollar against the yen in 1998, it involved the Fed (U.S. Federal Reserve).If at a certain stage of economic development is necessary to devalue (depreciate) the national currency, the government increases the supply of its currency in the international market. This is often done at the expense of an additional issue of banknotes. If you want to raise the price of monetary unit, the central bank buys the foreign exchange market, its own currency.