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