| FOREX MARKET HOURS At 7:00 pm Sunday, New | | | | or Asia now oly takes a few minutes. Needless to |
| York time, trading begins as markets open in Tokyo, | | | | say, technology has changed everything and millions |
| Japan. Next, Singapore and Hong Kong open at 9:00 | | | | of Dollars are moved from one currency into another |
| pm EST, followed by the European markets in | | | | every second of every day by major banks through |
| Frankfurt (2:00 am), and then London (3:00 am). By | | | | computers and for the average investor, with the |
| 4:00 am, the European markets are in full swing, and | | | | touch of a computer key. Foreign exchange is the |
| Asia has concluded their trading day. The U.S. | | | | backbone of all international capital transactions. |
| markets open first in New York around 8:00 am | | | | Compared to the slim profit margins rendered in |
| Monday, as Europe winds down. Australia will take | | | | other areas of commercial banking, huge profits are |
| over around 5:00 pm, and by 7:00 pm Tokyo is ready | | | | generally produced in a matter of minutes from minor |
| to re-open. All times are quoted in Eastern Standard | | | | currency options market movements. Some banks |
| Time (New York). FX or Forex, currency trading is | | | | generate up to 60% of their profits from trading |
| the trading of one currency against another. In terms | | | | currency aggressively. Transactions in foreign |
| of trading volume, the currency exchange market is | | | | currencies take place when one country's currency is |
| the world's largest market, with daily trading volumes | | | | purchased (exchanged) with another country's |
| in excess of $1.5 trillion US dollars. This is orders of | | | | currency. The price agreed upon or negotiated for |
| magnitude larger than the bond or stock markets. | | | | the currency purchased is referred to as the foreign |
| The New York Stock Exchange, for example, has a | | | | exchange rate. Major commercial banks in the money |
| daily trading volume of approximately $50 billion. | | | | market centers throughout the world are responsible |
| Currencies are traded for hedging and speculative | | | | for the majority of foreign currencies bought and |
| purposes. Various market participants such as | | | | sold. Trading volume has been growing at a rate of |
| individuals, corporations, and institutions trade forex | | | | 25% per year since the mid-1980s and therefore it is |
| for one or both reasons. Corporate treasurers, | | | | not difficult to accept the notion that the currency |
| private individuals and investors have currency | | | | options is the world\'s fastest growing industry. What |
| exposures during the the regular course of business. | | | | used to require days to accomplish in Europe or Asia |
| The FXTrade Platform is an ideal platform to hedge | | | | now only takes a few minutes. Needless to say, |
| any such exposure. An investor, who has bought a | | | | technology has changed everything and millions of |
| European stock and expects the EUR exchange rate | | | | Dollars are moved from one currency into another |
| to decline, can hedge his currency exposure by selling | | | | every second of every day by major banks through |
| the EUR against the USD. Currency markets are | | | | computers and for the average investor, with the |
| ideally suited for speculative trading. The foreign | | | | touch of a phone. FOREX BASICS - What's a PIP A |
| exchange market has a daily volume in excess of 1.5 | | | | "pip" is the smallest increment in any currency pair. In |
| trillion USD, which is 50 times the size of the | | | | EUR/USD, a movement from .8951 to .8952 is one |
| transaction volume of all the equity markets taken | | | | pip, so a pip is .0001. In USD/JPY, a movement from |
| together. This makes the foreign exchange market, | | | | 130.45 to 130.46 is one pip, so a pip is .01. |
| by far, the most liquid and efficient financial market | | | | CALCULATING THE WORTH OF A PIP How much in |
| of the world. Thanks to its efficiency, there is little or | | | | dollars is this movement worth, for example, per |
| no slippage of market price for the execution of | | | | 10,000 Euros in EUR/USD? How much is one pip |
| even large buy and sell orders. Traders are able to | | | | worth per 10,000 Dollars in USD/JPY? We will refer |
| take advantage of intra-day volatility thanks to the | | | | to the size, in this case 10,000 units of the base |
| low spreads and enter positions for short time | | | | currency, as the "Notional Amount". The formula for |
| periods, such as minutes and hours. Unlike equity | | | | calculating a pip value is therefore: (one pip, with |
| trading, where restrictions limit a trader's ability to | | | | proper decimal placement / currency exchange rate) |
| profit from a market down turn, there are no such | | | | x (Notional Amount) Using USD/JPY as an example, |
| constraints on currency trading. Currency traders can | | | | this yields: (.01/130.46) x USD 10,000 = $0.77 or 77 |
| take advantage of both up and down trends thus | | | | cents per pip Using EUR/USD as an example, we |
| increasing their profit potential. The most commonly | | | | have: (.0001/.8942) x EUR 10,000 = EUR 1.1183 But |
| traded currencies are: USD, EUR, JPY, GBP, CHF, CAD | | | | we want the pip value in USD, so we then must |
| and AUD. The most commonly traded currency pair is | | | | multiply EUR 1.1183 x (EUR/USD exchange rate): EUR |
| EUR/USD. Forex Symbol Guide Symbol Currency Pair | | | | 1.1183 x .8942 = $1.00 This is in fact a phenomenon |
| Trading Terminology GBP/USD British Pound / US | | | | you will see with any currency in which the currency |
| Dollar "Cable" EUR/USD Euro / US Dollar "Euro" USD | | | | is quoted first (such as EUR/USD or GBP/USD): the |
| JPY US Dollar / Japanese Yen "Dollar Yen" USD/CHF | | | | pip value is always $1.00 per 10,000 currency units. |
| US Dollar / Swiss Franc "Dollar Swiss", or "Swissy" | | | | This is why pip (or "tick") values in currency futures, |
| USD/CAD US Dollar / Canadian Dollar "Dollar Canada" | | | | where the currency is quoted first, are always fixed. |
| AUD/USD Australian Dollar / US Dollar "Aussie Dollar" | | | | Approximate pip values for the major currencies are |
| EUR/GBP Euro / British Pound "Euro Sterling" EUR/JPY | | | | as follows, per 10,000 units of the base currency: |
| Euro / Japanese Yen "Euro Yen" EUR/CHF Euro / | | | | USD/JPY: 1 pip = $.77 (i.e. a change from 130.45 to |
| Swiss Franc "Euro Swiss" GBP/CHF British Pound / | | | | 130.46 is worth about $.77 per $10,000) EUR/USD: 1 |
| Swiss Franc "Sterling Swiss" GBP/JPY British Pound / | | | | pip = $1.00 (.8941 to .8942 is worth $1.00 per 10,000 |
| Japanese Yen "Sterling Yen" CHF/JPY Swiss Franc / | | | | Euros) GBP/USD: 1 pip = $1.00 (1.4765 to 1.4766 is |
| Japanese Yen "Swiss Yen" NZD/USD New Zealand | | | | worth $1.00 per 10,000 Pounds) USD/CHF: 1 pip = |
| Dollar / US Dollar "New Zealand Dollar" or "Kiwi" USD | | | | $.59 (1.6855 to 1.6866 is worth $.59 per $10,000) |
| ZAR US Dollar / South African Rand "Dollar Zar" or | | | | Spread The spread is the difference between the |
| "South African Rand" GLD/USD Spot Gold "Gold" SLV | | | | price that you can sell currency at ( Bid) and the |
| USD Spot Silver "Silver" CURRENCY PAIRS All | | | | price you can buy currency at ( Ask). The spread on |
| currencies are assigned an International Standards | | | | majors is usually 3 pips under normal market |
| Organization (ISO) code abbreviation. In currency | | | | conditions. Market Hours The spot Forex market is |
| trading, these codes are often used to express | | | | unique to any other market in the world; trading |
| which specific currencies make up a currency pair. For | | | | 24-hours a day. Somewhere around the world a |
| example, USD/JPY refers to two currencies: the US | | | | financial center is open for business and banks and |
| Dollar and the Japanese Yen. SPOT FOREX Spot | | | | other institutions exchange currencies every hour of |
| foreign exchange is always traded as one currency in | | | | the day and night, only stopping briefly on the |
| relation to another. So a trader who believes that the | | | | weekend. Foreign exchange markets follow the sun |
| dollar will rise in relation to the Euro, would sell EUR | | | | around the world, giving traders the flexibility of |
| USD. That is, sell Euros and buy US dollars. The | | | | determining their trading day and the ability to take |
| following is guide for quoting conventions: What does | | | | advantage of global economic events. FOREX or The |
| it mean to be "long" or "short" a currency? Being long | | | | Foreign exchange rate market is an international |
| means buying a currency. Being short means selling a | | | | market where various currency exchange |
| currency. If a trader goes long USD/JPY, he or she | | | | transactions take place; this is in the shape of |
| buys US Dollars and sells Japanese Yen. Buying a | | | | simultaneously buying one currency and selling |
| currency is synonymous with taking a long position in | | | | another. The most commonly traded currencies are |
| that currency. A trader takes a long position in a | | | | referred to as "Majors"; over 85% of daily |
| currency if he or she believes it will appreciate in | | | | transactions on Forex trading involve the Majors. |
| value. If a trader goes short USD/JPY, he or she sells | | | | These seven currencies are the US Currency (Dollar, |
| US Dollars and buys Japanese Yen. Selling a currency | | | | USD), Japanese Yen (JPY), Euro (EUR), British Pound |
| is synonymous with shorting that currency. A trader | | | | (GBP), Swiss Franc (CHF), Canadian Dollar (CAD) and |
| would short a currency if he or she believes it will | | | | Australian Dollar (AUD). The Forex system in |
| depreciate in value. CURRENCY TRADING: BUYING | | | | operation today was established in the 1970s when |
| AND SELLING CURRENCIES All Forex trades result in | | | | free currency exchange rates were introduced, this |
| the buying of one currency and the selling of another | | | | period also saw the US Dollar overtake the British |
| (currency trading), simultaneously. Buying ("going | | | | Pound as the benchmark currency. Prior to this and in |
| long") the currency pair implies buying the first, base | | | | particular during World War II, exchange rate |
| currency and selling an equivalent amount of the | | | | remained more stable. Forex trading in simplest terms |
| second, quote currency (to pay for the base | | | | is the buying of one currency and the selling of |
| currency). It is not necessary to own the quote | | | | another. Forex trading, also referred to, as "FX" is |
| currency prior to selling, as it is sold short. A trader | | | | open to corporations, small businesses, commercial |
| buys a currency pair if he/she believes the base | | | | banks, investment funds and private individuals, it is |
| currency will go up relative to the quote currency, or | | | | the largest financial market in the world averaging a |
| equivalently that the corresponding exchange rate will | | | | daily turnover of over $1 trillion dollars, making it a |
| go up. Selling ("going short") the currency pair implies | | | | diverse and exciting market. It is a 24-hour market |
| selling the first, base currency, and buying the | | | | enabling it to accommodate constant changing world |
| second, quote currency. A trader sells a currency pair | | | | currency exchange rates . According to New York |
| if he/she believes the base currency will go down | | | | time, trading begins at 2.15pm on Sunday in Sydney |
| relative to the quote currency, or equivalently, that | | | | and Singapore and progresses through to Tokyo at |
| the quote currency will go up relative to the base | | | | 7pm, London at 2am and reaches New York at 8am. |
| currency. An open trade or position is one in which a | | | | This leaves investors free to respond to global |
| trader has either bought or sold one currency pair | | | | political, economic and social events when they take |
| and has not sold or bought back an adequate | | | | place, day or night. Unlike trading on the stock |
| amount of that currency pair to effectively close the | | | | market, the forex market is not conducted by a |
| trade. When a trader has an open trade or position, | | | | central exchange, but on the "interbank" market, |
| he/she stands to profit or lose from fluctuations in | | | | which is thought of as an OTC (over the counter) |
| the price of that currency pair. Forex is the backbone | | | | market. Trading takes place directly between the |
| of all international capital transactions. Compared to | | | | two counterparts necessary to make a trade, |
| the slim profit margins rendered in other areas of | | | | whether over the telephone or on electronic |
| commercial banking, huge profits are generally | | | | networks all over the world. The main centres for |
| produced in a matter of minutes form minor currency | | | | trading are Sydney, Tokyo, London, Frankfurt and |
| market movements. Some banks generate 60% of | | | | New York. This worldwide distribution of trading |
| their profits from trading currency aggressively. | | | | centres means that the forex market is a 24-hour |
| Trading volume has been growing at a rate of 25% | | | | market. |
| per year since the mid-1980s and therefore it is not | | | | Learn about Forex Trading and Currency Trading |
| difficult to accept the notion that the currency | | | | here. Get more information and articles on Forex |
| market is one of the world fastest growing industries. | | | | Trading here. |
| What used to require days to accomplish in Europe | | | | |