Weekly Forex Forecast: February 26 – March 2 2018 – Forex Trading Guide

Welcome to our weekly forex market analysis call and today we are looking for at the week of February 26th to March the 2nd 2018 and just a quick disclaimer before we get started this is for educational purposes only trading is a risky business so please be careful with your money all right so now let’s dive in and we’ll we’ll start with a look at our forex factory calendar here and we are on the 26th ok so we’re starting off oh this is not the right week alright so here we go perfect so we’re starting off Monday with ECB President Draghi speaking and also there are a lot of or you know other Bank members speaking as well so basically with these ones now that the monetary policy stance is changing from central banks we just have to be mindful of the comments that come out so any comments that point words the solid state of the economy and also point out concerns about inflation may be overshooting or anything that suggests that the banks may raise rates that will be considered positive for the currency so that’s what we need to pay attention to Tuesday we have CPI numbers and then we also have German booba present Weidman speaking again this will have an impact but here Draghi speech will have a bigger impact here but we do have a fetcher Powell is testifying so this will have an impact so we saw previously we saw Bank of England they were testifying about the monetary policies which had an impact now this one fetcher Powell testifying will also have an impact on the market so basically the market will just now that they have switched the leadership role the market will be paying attention to what the forward stance would be for the fad because we have been seeing interest rate hikes are they going to continue with that or with the change of leadership things are going to change so that’s the question that everybody will be paying attention to and then core durable goods orders will also have an impact on the US dollar consumer confidence number this is an important number that we do need to pay attention to and it will generally have an impact so if it comes out positive like it’s expected then that would be positive for the US dollar same thing here ANZ business confidence number for New Zealand will have an impact on a New Zealand dollar here as well and then going into Wednesday here not a whole lot of important read data we do have GDP preliminary GDP numbers for the US which will be important and this one here Chicago PMI numbers and pending home sales numbers so these numbers will be important PMI numbers are always important because they are leading indicators that generally lead to retail sales so these numbers will be important we have crude oil inventories which will generally impact US dollar than Canadian dollar as well and private capital expenditure for Australia we have a bunch of PMI numbers coming out on Thursday out of the eurozone again these will have an impact on the euro manufacturing PMI number for British pound that will be important as well so a lot of PMI numbers coming up so that will be important and then again we have fetcher Powell testifying so expect volatility in the US dollar as a result of these speeches and more Isum manufacturing PMI numbers for the US that will be impactful okay and then on Friday a very very key speech will be from prime minister Theresa May here for a British pound here so brexit will be a concern going forward or it already is a concern so right now they’re going through the nose and British Pound has really benefited from the positive sort of the the whole scope of the negotiations right now it seems very positive so as a result of that the British Pound has benefited as well the data that has been coming out of the out of UK has been positive as well so overall British Pound has been good however anytime there are political issues like this things don’t tend to go as smoothly as you know they may appear so just keep an eye on these braixen negotiations and the comments that come out of it right now with Prime Minister Teresa Mae’s speech it will be market moving so if we hear comments about them reaching agreements the two countries reaching agreements in terms of trades and market and that kind of stuff that will be positive for for the especially the British Pound it will also be positive for the euro but overall it’s a British Pound that is getting impacted more by these negotiations so that’s what we’ll have to pay attention to however if there are any comments whether they are in Theresa May speech or otherwise about how they may not be able to reach the agreement or they may not be able to negotiate the right type of terms that will be detrimental for the British Pound so we’ll have to keep an eye on that we also have construction PMI numbers of course those will be important and we have another major thing here Bank of England governor Carney speaking so what Prime Minister Theresa May says or does in regards to brexit as the last what Bank of England governor Carney says both of these will have an impact so it looks like Friday will be a big day for the British Pound so if you are trading the British Pound on Friday just be mindful of that because we could see a lot of volatility in the pound as a result of that and then GDP numbers for Canada which will be important so overall not a ton of critical data coming out so but we do have some central bankers so central bankers have been in the focus right now and what they say does have a big impact on the market so just be mindful of that all right so that is our that’s our fundamental so now let’s take a look at what we have in terms of our charts here all right so what we have seen with the Euro it’s sideways so last week we looked at this range bound move and this week as well it’s sideways went to the high and then went back down now so I’m looking for it to come back towards the bottom of the range into one level or one 2200 level and then it could bounce off so for now I’m gonna trade this as a range my bound move so when price comes into the bottom of the rage arranged at 120 200 I’m looking for a bounce up and if it goes into the top of the range I’m looking for a bounce to the downside so one thing we do need to keep in mind would be any breakouts from the range so general behavior with the range bound market is sell at the top and buy at the bottom right however if the price let’s say comes down here and starts to do this breaks down then we are looking for a further move to the downside but we do have to wait for that breakout for now it is just going sideways there’s really no clear market direction we have gone into our high here so if you take a look at the left-hand side and we see that we are into this resistance area price had trouble here before it really sort of dropped further from this previous downtrend and now we are at that level again so at this point we are just in no-man’s land in terms of market direction for the last one to five weeks here we haven’t really broken out of this range so now we need to see is the price willing to break out of the range at some point price will break out the rain the range we just don’t know which direction it’s going to break out and as a result of that we just have to be mindful when the price gets to these these end of the boundary of the ranges of if the price comes back in to 120 200 we have to watch out for that so basically scenario will be the bounce back into the range once it comes to 120 200 and if once it goes to 125 50 level then I’m looking for a bounce back into the range but I’ll be watching out for any breakouts if it breaks out to the downside then I’m looking for next move to be into 12050 area so those that’s what I’m looking for but for now waiting for price to come in and bounce off of one 2200 so range bound for euro dollar in terms of the pound here we are also we’re also looking at sorry just a quick question can we hedge it I’m not sure what like how I would hedge it I was just wait for I would just trade the range and once we see an indication of breaking out of the range you could so you probably what you’re talking about is a straddle so if you mean can you like put a sell order at the bottom what I’d be concerned about is price spiking through it and then pulling back in I don’t typically do straddle orders because of that very reason there’s a lot of times what happens is price will break through because there are so many stops on the other side of it price will break through that level and then pull back and like this right price will punch through and go back into the range and the purpose of really that pin will be to grab all the orders sitting there and then kind of continue on into the opposite direction so that’s why I’m not a big big proponent of straddling it like that I’d rather see a break of the range and then once the price holds below the range then we can sort of kind of continue on with that so similar to here where the price was just sitting below this level and once it broke through once this candle closed you can just take trade to the downside so that’s my preference but of course there are different strategies that you can use I prefer to just trade the range and wait for the breakout in either direction so with the British Pound here this one has also gone sideways we are in this level here so for now it is overall it is kind of pointing to the downside but if there is no real no real sort of direction here either because we do have this uptrend and now we are seeing this this pullback so it could be a pullback so we could just see one of these moves back into the bottom here into 135 80 so for now I am the weak here has been really not much the candle air is very very small so we had a bullish candle here which was not angling and now we have a higher or lower high and a higher low so it hasn’t really it’s and just inside candle with a little pin so given this situation I’m looking for price to my bias for British Pound and this is just my bias so just be mindful of that we have to watch what goes on my bias is that it breaks down a little bit I think things have been a little bit overly positive for the British Pound because everybody is optimistic that we’ll get these excellent brexit negotiations but like I said before these things rarely go well and I mean there was a reason there was you know brexit vote so having a soft practice brexit is unlikely in my opinion however things could change so that’s why we have to watch what the market does so what I am looking at basically is a retest of this one 3800 level and probably a squeezing like this and my target would be 135 80s I’m looking for price to come down into this 135 80 level and then potentially bounce off of this uptrend line so that’s my that’s how I’m viewing the markets I’m looking for further weakness in pound dollar in to 135 80 however we do have Prime Minister Theresa May speaking so on Friday this could be impacted so keep an eye on that aussie here aussie has been arranged bound here as well but this one is looking more bearish than what we saw with the euro here so for the last three weeks it has held this range but we have a lower high here so price is coming down and we all so have a double top so a few weeks ago we had a double top now prices moving lower so as a result of that I am looking for price to go further down so my bias for Aussie dollar is to the downside I’m looking for a break of this 7760 ish level here and price continuing into 7650 level and potentially even further into 7550 level so I’m looking for price to step down a bit into the next support or resistance level here this has been an important resistance level which has now turned into support so we do need to wake wait for the breakout of this level so what I would be looking for is one of these and then a break to the downside we do have to be mindful of this 7760 ish level overall my biases to the downside and the target for this would be 75 50 New Zealand dollar here similar situation I am looking for price to break down further so price has tested this resistance level several times now and only once did it try to break out to the other side and then reversed right away and with this one here I am looking for a further move to the downside we have had a bearish candle close so I’m looking for a move into 7180 level here that will be the first target and then the second target would be 70 50 level so basically waiting for price to are looking for price to drop so bias for New Zealand dollar would be bearish dollar cad here this has been a bit interesting so we have seen higher lows now surprise is moving higher but it hasn’t been moving high in a very sort of Astra in a very consistent manner so we are seeing kind of back and forth so it’s not as as weak as the Australian dollar for example or New Zealand dollar so for this one my bias is to the upside and again we need to see a break we are into this resistance level right now so we need to see a break of this and resistance that will or the support and resistance level has kind of played out several times but the bias is to the upside so what I’m looking for for dollar cad is maybe so right now we are in the middle of the candle here so maybe back into this 12550 level and then another move to the upside and finally a break to the top here so my target is 120 900 to the up sights of biases to the upside but it’s won’t be as smooth sailing as maybe Australia or Australian dollar a New Zealand dollar here so bias is to the upside and they’re commodity currencies as well so they tend to sort of move at the same time some expecting price to move up higher here it has found stuff so we have a higher low higher low higher low so and higher highs here as well it’s looking for it to move up further euro Swiss franc this one is it’s still in this downward trend here and now I am looking for price to basically again do another leg to the downside make another leg to the downside for two weeks here we have not seen it break the highs so now we have a lower highs as a sorry yeah lower highs and I’m looking for price to go down further into a 3 20 level here so the bias is to the downside for euro Swiss franc pound Swiss franc has been a little bit tougher than our euro but overall though we are still in so we still have this this downtrend here right but it could go up further so with this one I would be careful we do have a bullish candle closed as a result we could see price move either into 130 300 or 13250 so I would look for price to push up first and then do a drop but this one will be tied to whatever happens with the with the British pounds I would be careful trading this one so right now what it looks like is maybe a pullback in the so I’m kind of seeing it as this so looking for price to drop further but it like I said it could pull back into 130 250 or 130 3300 level and then drop from there so that will be my that would be the scenario that I’m looking for for me this is not the best pair to trade this week I am just I’m gonna look for other opportunities probably pound yen and pound dollar will be the better ones to trade instead of pound Swiss franc your Swiss franc I think is a better one compared to this this one here dollar this one is sideways so we have seen it be in this range or staying in this range for the last few weeks now and I am looking for price to potentially retest this level once again and do a double top type of formation so 9450 would be my target to the upside but it is range bound at the moment it hasn’t really gone anywhere in the last few weeks so this one may be another one where we just have to wait and see what the price does here but for now we did have a bullish candle close it did not manage to close above the previous high so it is not overly bullish but because there is still buying going on here we may see price push all the way up into 90 450 level and then drop so I’m going to treat this as a range bound move if the price goes into the hi I’m looking for a potential sell if it goes into the bottom here 90 180 I’m looking for a potential buy so trading this as a range bound market let’s take a look at the yen crosses now with the yen Here I am let’s see so the yen here we are making a lower high here so it’s not overly bullish very very small weekly candle close we have a pen on top so I’m looking for a break to the downside for this one like I said my biases I’m not overly bullish on the British Pound I am looking for four pound to face more hurdles as the whole talks negotiation talks continue so for me I am looking for further breakdown of this my target would be 140 320 level so I do want to see a break of this level of the 148 20 ish level and then I continued move to the downside so we do need to make sure that the price holds below this pin here or maybe 140 level and then I’m looking for a break to the downside so bias is to the downside for pound yen euro yen here the bias is also to the downside and the next target so the next target looking at is 128 50 here so this is we have last this is what we have last three weeks we have seen a downwards move we have a bearish pinbar here for the weekly candle close we are in two support here though this resistance turning into support so we do need to see a break of 130 but my bias is to the downside I’m looking for price to go into 120 850 level so looking for euro yen to drop a bit this one here Aussie yen we were bearish and it has come into this 83 30 level so the bias still is to the downside but as we can see price is struggling at that level and this is the where the previous support resistance is coming from price had struggled in this area before but the bias is still to the downside I’m looking for a retest of this 83 30 level and then looking for 8250 level to the downside so looking for price to draw further overall the bias still remains to the downside here but do keep in mind we are kind of coming in to these levels that are almost to the bottom here and also just to mention with Japanese yen strengthening so much there will be additional pressure or added pressure on on Bank of Japan to react so sorry looking at the weekly here we do have a bearish pinbar so I’m looking for price to go into 8250 and potentially even lower into 8180 level so there will be additional pressure or added pressure on Bank of Japan to intervene so they have said that they’re not likely they’re not going to intervene in the markets but the history that Bank of Japan has is of intervention so what could happen is if the Bank Bank of Japan is not very comfortable with the strength of their currency because if the currency is expensive the exports will drop and they don’t want that Japan is such a big exporting country that it would have material impact the strength of the currency has a material impact on their economy so as a result of that Bank of Japan does not want the currency to be high and before they would just go intervene in the market before really letting anybody know however there has been a lot of pressure on them to not do that everybody’s criticized them because it creates sudden moves in the market that nobody really likes or cares who cares about so as a result of that they have sort of stayed their hand in terms of intervention but the more expensive Japanese yen gets more we see drops and everything else against the Japanese yen the higher the likelihood of Bank of Japan intervention so generally will we see as Bank of Japan will just come and sell a whole bunch of yen and it will create this move to the upside and all the yen crosses so just be just be mindful of that because as the further it drops all the yen crosses drop the more the likelihood of Bank of Japan intervening in the market all right so the last one here is our dollar yen dollar yen we are still staying below this previous support level and now turning into resistance I’m looking for price to drop further and the target will be about 104 50 level right into this one here in this case we could see a push up into this to retest the support and resistance level again 107 80 level and then looking for price to test a 105 50 and then 104 50 after that so bias is to the downside for dollar yen as well all right any other questions or any other anything else you want me to look at first depends when to enter the trade I usually so I look at my weekly analysis at the beginning of the week just to sort of get a get a lay of the land and get an idea of what I’m looking at for the week to come and then based on how things play during the week because the news may come out and things may change market is dynamic so I look at the daily I do the daily market analysis and I look at the daily candle states and that’s when I would start looking at where to take the trades from but when I actually plays the trade I am looking at a lower down lower timeframe to go into the position but at the levels are coming from the higher time frame levels I hope that makes sense anything else um my what indicator do I recommend I personally don’t tend to use too many indicators what I do use our pivot points so these are pivot point levels and these green are pivot points and R 1 R 2 and s 1 s 2 levels so this is one of the indicators that I do like to use and then volume is another one that I tend to look at so I have a point in volume I would say will be the two that I personally prefer alright so I don’t see any other questions alright so that’s all I have if you so we were just talking about daily Market Analysis if you guys are interested in joining me for for the daily market analysis that’s part of trade room option that I have so if some if you want to join me in the trade um there is a private skype group where I share my trade ideas and analysis I also when I take live trades I send out alert so I normally put in where I’m entering the trade the entry level my stop loss level my take profit target and I also manage the trade so when I move my stops and the stuff like that so I send all of that information out and I also we also do daily market analysis so we have a similar call every night at p.m.

Eastern it’s recorded so if you’re not able to make it you can always you know get the call or get the recording of the call and if you join the trade room you will also you’ll be able to based on the daily market analysis call you’ll be will you’ll get the levels that I’m looking to take trades from so you can choose to take the entries that I’m taking or if you wanted to take additional trades we go through all the different crosses so you have levels for all those crosses to trade from you also get my pivot point indicator which is one I that I do reference in the trade room so you can join this on a monthly basis and the cost for that would be ninety seven dollars a month and you can go to trading with Venus Campos trading – signals for that or if you wanted a better price point I do offer some yearly and yearly options as well and these are the different links you can go to to access those alright so that’s all I have I will call it a wrap now so you guys have a wonderful rest of the weekend and I will see you next time

As found on Youtube

2. What are the Major Currency Pairs? TriumphFX Forex Educational Series

What are the Major Currency Pairs? The first listed currency of a currency pair is called the base currency and the second currency is called the quote currency. Major Currency Pairs are the most frequently traded as it constitutes about 85% of the forex market therefore they exhibit high market liquidity. Most of the major currency pairs involve the U.S. dollar paired with one of the other major currencies such as EURO / USD USD / JPY GBP / USD AUD / USD USD / CHF USD / CAD NZD / USD referring as FIBER GOPHER CABLE AUSSIE SWISSY LOONIE KIWI.


As found on Youtube

The ULTIMATE Forex Trading Course for Beginners

Hey hey what’s up my friend so welcome right to the ultimate forex trading course for beginners right so this is for you right if you’re new to forex trading you have less than a year of experience or you want to learn more about a forex markets then this course right will benefit you greatly so let’s begin so first and foremost what is forex trading right so forex trading right or the word forex refers to foreign exchange what you’re doing is trading one currency for another so who treats for x and y so there are numerous market participants or who treat forex for example you have the central banks banks corporations and retail traders so central banks could be because right they want to make their economy more competitive right by devaluing their currency okay so this makes their currency cheaper and exports will be more attractive for banks they could be because they are a market maker they are making a market in the FX market or perhaps they are trying to hitch their own portfolio for corporations right it could be because they need to buy raw material so they need to you know get involved in the foreign exchange for example if I’m Toyota I need to buy raw materials for my tire maybe the tire is a I’m buying from India so what I’ll do is that I would need to sell some Japanese yen right and buy Indian rupee right so that I can take this Indian rupee right and go to companies in India to exchange for the raw materials for my tires an example and for retail traders it could be because right you are trading the forex market to speculate to try and earn a profit to know generate a better return compared to you know putting your money in a bank right so these are the few groups of traders who trades the forex market so as you can see over here this is roughly how the forex market be the inter the web the network of the forex market looks like so in the center right the one which does the bulk of this transaction there are central banks and the major banks right then you have the investment funds and corporations who are trading with the banks and then finally right retail traders like you and me here retail traders retail traders or who traits in the market as well so this is the hierarchy right you can see that at the top of the food chain is the major banks the central banks then followed by medium-sized and smaller banks then the brokers okay H funds corporations and finally retail traders and a bottom so this is from baby bibs right advantages of forex trading so there are numerous advantage of you know forex trading number one there is high liquidity right so unlike stock said sometimes if you trade penny stocks or small cap stocks right there is no liquidity right and you have to pay a very wide bit a spread but for forex trader you typically have high liquidity so this means that you can get in and out of the trade right relatively easy right without paying a huge premium or or spread on it there is low barrier to entry any anyone can just open a forex trading account doesn’t really it doesn’t mean that you must be a high net worth individual and it’s a trap nope barrier to entry is no certain forex brokers allows you to trade nano lot so this in return right allows you to better manage your risk so for example one of the big problems that I think most stock traders face is that let’s say you have small capital let’s say 500 dollars and if you want to apply proper risk management on stocks it can be difficult because let’s say you’re on the risk 1% of your comp so $500 is I got 5 bucks if you pay the transaction cost it’s gonna be more than 5 dollars right for stocks right you you you get your broker to do the transaction or I think maybe one round trip is maybe really 10 or 20 dollars so it’s difficult to apply proper risk management on stocks especially with small accounts but for forex it’s possible because you can treat nano lots right and also Forex it doesn’t have t what we call the traditional transaction cost you only pay the spread right so this allows you to kind of like even risk $5 on a trade in forex if you are having the ability to treat nano lots with certain brokers so it really helps you better manage your risk you can treat any time you want forex pretty much is the market is open to in 4 or 5 from Monday to Friday so you wake up the market is open you sleep market is open and yep low transaction cost as I mentioned earlier so just a quick recap right so forex trading exchange of currencies traded by banks corporations and retail traders and this are the advantages that we covered earlier so now what are some of the different currency pairs in the market right there are three brought currency pairs that you should be aware of right the major currency pairs crosses and exotic currency pairs so the major currency pairs are are typically currency pairs there are the most liquid right and they have a dollar element to it for example euro dollar pound dollar dollar Swizzy dollar yen Aussie dollar and kiwi dollar and dollar Looney notice that they all have the USD element in all of these currency pairs and this seven currency pairs are the most liquid currency pair so that’s why they call it the major currency pairs the most popular and most heavily traded currency pairs and if you look at this right in 2016 right the number one most actively traded currency pairs is USD right number one followed by euro followed by yen pound or Z etc so now let’s talk about the cross currency pair so so cross currency pairs are currency pairs that don’t have a USD element to it for example euro crosses right means that the currency pairs has a euro element to it right euros Swiss franc euro pound euro Aussie the yen crosses right euro yen pawneean Aussie yen pound crosses right means that the currency pair have a pound element to it an Aussie on New Zealand and pound Canadian what about exotic currency pairs so these are usually currency pairs which are thinly traded they have a wider bit asks spread okay and the swings in this market can be more volatile as well so some of these examples are dollar against the African Rand dollar against the Mexican peso dollar against the Thai Baht dollar against the Indian rupee dollar against the Turkish lira okay so moving on right let’s talk about the different forex trading session so unlike the stock markets where you have just in one session the forex market you have typically three different sessions the asian session the london session and the new york session and they all open at different times of the day okay and it’s it’s even worse right there these times of the day are not fixed because it really depends on where you are in the world if you’re in Asia right you’re open I mean you’re your timezone right the time is different compared to someone in you yo so I’m just gonna go with a general example right and assume that you are from the US right so for the Asian section right it starts at p.m.

To p.m. EDT right and this is doing summer period from April to October for the London session is from 3 p.m. to 12 a.m. EDT and the New York session is a.m. to p.m. EDT now what if you are not in US maybe you’re in London maybe in Singapore Malaysia right how do you translate this to your own local timezone very simple just go down to Google and search for forex trading session hours right so I’m sure there are a few results right now the top few one that will tell you right what is the current for accession in your time zone in your local time zone just do a search right forex trading hour session along that lines right forex trading hours right now forex market hour session something like that right and you will know what is the current forex trading session in your time zone and next right if during winter period around October to April right your Asian session starts at p.m.

To 3 p.m. est London is 3 p.m. to 12 a.m. est and New York is a.m. to p.m. est ok so which is the best session to trade forex so I think this kind of applies to almost any markets right the best times to create is when there is volatility in the markets because only when there is volatility only when there is price movement can you make a profit the market don’t move you’re not gonna make a profit at all right you can squeeze blood out of a rock so you need to be trading when there is most volatility in the markets and for day traders especially right the most volatile session is the London session and to be precise right the most volatile period is actually in the London and New York overlap session so you can have a look at this this is from a window you can see that this is the start of the London session end of London session start of New York session end of New York session so you can see that when London session starts right volatility has picked up and historically right the market is most volatile during the London and New York overlap as you can see over here the volatility here is the highest during this three or four hours okay now what about when is the best days to trade Forex so the concept is still the same right you want to be trading Forex when the market tends to move right on a certain base right which case does the forex market tends to move the most so Tuesday Wednesday Thursday generally is where the forex market tends to move the most right if you look at this this is from baby pips you can see that uh this is the currency pair this is the days of the week right and this are the movement of the the movement of the currency pairs on average right on this different days of the week so for example euro dollar on Tuesday it tends to move around 142 pips on euro dollar on Wednesday it tends to move about 136 pips Thursday it tends to move about on average hundred forty five pips so as you can see that over here if you look at it right Tuesday Wednesday Thursday tends to be when the FX markets move the most right so if you ask me Tuesday when I say Thursday those are the best days of the week to trade Forex now moving on right let’s talk about some common forex trading terminology so this might be slightly different from stocks right but generally the concepts right can be applied to C right so we all talk about what is long what is short what is the leverage of margin what is a bit what is a bit and ask and what is the spread so what is long and short so to put it simply right when you see that I’m long euro dollar it means that right you’re referring to the trade direction right you’re bullish on euro dollar you want euro dollar right to go up because that’s where you’ll make a profit so if you are long right you want the market to go up so you can make a profit if you are sure right it means that you want to market to go down so you can make a profit this means that you have a bearish bias okay so what is leverage and margin so leverage we first try to how much more you can trade relative to your account size so let’s see an example right let’s say you have a $10,000 trading account right $10,000 trading account and you’re using a average of let’s say a one to ten leverage one to ten this means where you can actually control ten times more than your initial capital this means your broker lets you trade up to a hundred thousand dollars worth of currency ten times more than your initial capital so this is what leverage means right how much more can you treat right relative relative to your initial trading capital so margin is just another way of looking at it right if you just take a hundred divided by leverage so for example earlier the leverage is 10 so hundred divided by 10 it says that you know your margin requirement right all right yet the margin require is just 10 percent right so if you want rate her at all one hundred thousand dollars worth of currency you only require to put up a ten percent margin which is ten thousand dollars so just different ways of looking at it one thing to point out is that leverage right it’s a double-edged sword you can make more in trading by the same time you can also loose more so let me share with you an example so let’s say again you have the ten thousand dollars trading account all right and you’re using a one to ten leverage of 100k will go with a stock example let’s say we’re gonna buy some shares of Apple right say the shares of Apple is currently $100 so let’s say you know shares of Apple has now moved up right two hundred and ten dollars one hundred and ten all right so it’s an increase of 10% so if there is if you’re trading we don’t leverage right you can see that you have actually made a gain of $1000 1k if you are using leverage you have a made of gain of panky so if you put into perspective right in percentage terms right what has happened is that without leverage you haven’t made a return of 10% with leverage you haven’t made a return of a hundred percent of your money okay this might you know looks looks good right and sounds really awesome but I want you to to take note that what happens if the shares of Apple drops by ten percent let’s say right now from hundred we move down to ninety dollars so your capital with ten thousand that’s right it’s a drop of 10% so you have lost one key you’re trading with leverage right ten times leverage right now a drop of 10% you have lost 10 K so pretty much pretty much essentially you have wiped out your entire trading account right when the shares of Apple has drop 10% so this is why I say that you know leverage is a double-edged sword you want to use this right with a responsibility you really must know what you’re doing so if you ask me if you want to learn more about leverage on how to better position size your trade right this is more advanced stuff you can go down to my website trading with Raina dot-com / 4-h this – Reese – management all right that’s where you can learn more about risk management in position sizing so now moving on right what is a pip a pip stands for point in percentage it refers to the four most currency pairs like the crosses the major currency pairs it’s the fourth decimal place so let’s say for example euro dollar right now is trading at one point two five one one okay so let’s say it moves up by two pips so what this means right is that it does now move up by two pips is big now the price is trading at one two five one three right so you’re looking at a fourth decimal place over here right for the most of the currency pairs for the yen currency pairs is slightly different right so for again it’s let’s say straining a 120 dot 105 pips so it’s now trading one five right you’re looking at this second decimal place over here for the yen currency pairs right so bear in mind right so P basically refers to the smallest price move right in a currency pair and one thing to note right sometimes you know brokers they just try to be funny I knew you can even have something called the pig pen right so P pen right now for most currency pairs is the fifth decimal place right and for this one over here is the decimal place so you can really get email I mean you can really get really precise about it if you want to right so just something to share with you right it’s called the pipette so what is the billion ask all right so this is a the bit right refers to the price that you can sell it and the ask is the price that you can buy it so whenever you trading Forex or whether you’re trading stocks right it’s not just one price it’s always to price the bit and ask so let me share with you an example right again let’s say for euro dollar let’s say it’s trading at 1 200 1/1 203 okay the higher value is always to ask and the smaller value is always the bit so if you look at this right and you refer to to what I just mentioned earlier the ask is the price you can buy it so if you had a long euro dollar right now I’m gonna buy euro dollar this is the price you have to pay one point two zero zero three if you want to sell euro dollar right now this is the price that you can sell one point two zero zero one okay so this is what we mean by the bit and us the price that you can buy and the price that you can sell it and the difference between the ask and a bit is what we call the bid-ask spread right so if you look at this right right now if you take this one – this one you realize that it’s two pips right so this in other words right is that spread the transaction cost that you have to pay to transact with your broker so generally right for major currency pairs the spread right it tends to be tighter tends to be smaller whereas if you are trading exotic currency pairs the spread over here tends to be bigger wider so in other words you’re paying more right to create the exotic currency pairs so what is the spread yep as mentioned earlier right the difference between the beat and ask so now how do you read a Forex chatter I so let me share with you an example okay so this a Forex chart so this one over here is a from trading view you can go to trading view come over here or I didn’t get this access to free charts let’s have a look at candlestick chart right so what do you see over here right now is this red line over here is the the price right now to create New Zealand dollar this is New Zealand dollar okay so if you look at if you want to trade right let’s say on the sell you notice that again there is two price the bid and ask if you wanna say for example you see what I do I click on trade sell New Zealand dollar selling in a bit that’s what we mentioned earlier right you want you always sell at a big price let’s see it right now I want to buy buy New Zealand dollar you’re buying Eddie okay so as you can see right now the bid-ask spread on New Zealand Dollars you just take this one – this one is pips okay so this is the bit ask spread so in other words right let me just you know break it down you know – what it all means so let’s say you want a long New Zealand dollar right now right so your longer this is the price that you have to pay so what this means is that to buy one New Zealand dollar all right you have to pay zero point six six zero one seven US dollar right that is the cost to buy one New Zealand dollar right now you have to pay zero point six six zero one seven you install it okay so that’s a pretty much how it works so moving on that’s how you read a Forex chart all right moving on right what is the Forex lot size so lot size refers to how much of a Forex currency pair you can buy all right so there are different lot size so the first one is what we call a standard law hundred thousand units or currencies right standard lot meaning lot 10,000 units micro lot thousand units and followed by nano lots anything below a thousand units so nano lot is a not offered by by all brokers or I typically brokers that a market maker they tend to be able to offer nano Lots right otherwise the most common Forex lot size that your trade is either the standard or the mini law so how do you calculate your gains and losses right so let me just walk you through an example let’s say you know earlier the New Zealand dollar example let’s say let’s let’s make it euro dollar it is still like the most common currency 1.200 one okay let’s say this is the price that you buy un long L and this is the price that you sow a dry you so let 1.200 five okay so surprise pull it s right sell this is long so what is your game on this trade well you can tell that you have actually earned four pips right you can tell right you and four pips can’t even spell it right you earn four pips right because you take a one point two oh five minus one point two or one that’s a difference of four pips but how much do you make on this trader is dependent on your Forex lot size are you trading a standard lot are you trading a mini lot or micro lot so a standard load right is hundred thousand units right so generally our stand a lot higher a thousand units right each team right is $per people now one thing to bear in mind is dead depending on the currency that you’re trading depending on the currency that your account is funded right this this our figure over here will change over time okay so you might need to check with your broker what is the value of one pip to you for one standard lock so let’s say you know you’re funded for USD account and your trading euro dollar so it will be $10 per peep so if you make four pips just now you saw right you made four pips right okay let me let me I’m a little bit okay okay for people is understandable for people right so what you’ll do is you take four multiplied by ten so there is a gain of $40 for you on that tree right you take the number of pips that you have earned or lost right multiplied by this uh how many dollar per pip that you’re treating right this value over here is dependent on your Forex lot size if you are trading so let’s say ten thousand you need to write it will be one dollar per pip thereabout okay so this is how you calculate your gains and loss in forex so moving on right the different types of Forex orders right so there are a few types right market order Lehman order stop order stop-loss order so let’s talk about market order so market order is an order right that tells your broker that hey you know I want to enter the market right now I’m the boss I don’t enter right now so the pros right of this approach is that you know for sure that you will be in the trade the broker will execute the trade for you and whatever is the markets prevailing price that that was like – this is that you’re actually paying a premium sometimes the market is moving for us it breaks out it’s you know going up up up up up and if you hit a market order you’re paying a premium okay so so that is the pros and cons right of market order limit order and on the other hand sir you enter only if the market comes to your desired price level let’s say you know Apple shares now is trading at $120 you think mid last too high I don’t pay her $20 for Apple shares what you can do is use a buy limit order all right and put it at let’s say $100 so this means that if Apple shares comes down $200 only then will you get filled on the tree so the pros of this approach is that you are typically right entering at a cheaper price right you let the market come to your price level the downside of this approach is that you might miss the move because Apple might not come back $200 it might go up to 150 200 and hey you miss the boat man and the other downside is that you’re actually trading against the current momentum because if you think about this right it’s the market fill you on the trick you’re actually trading against that down move against you all right so that might be a something that you want to know be aware of as well what about stop order right so a stop order is typically used right when you want to trade a breakout when the market is moving in your favor then you hop on and get on board the trade so it’s like let’s say Apple shares right now is $120 and you notice that this price right of Apple shares has not break above hundred and thirty dollars over the last two years all right so you want to trade a break on it on Apple because you might believe that hey if Apple hits hundred thirty dollars there’s a good chance it could be at 140 150 in a few weeks time so what do you do is you can place a buy stop order on Apple shares at 120 dollars and so you only enter the trade if the price hits hundred and thirty dollars and above so this is what we call a buy stop order the pros of this approach is that you’re entering your traits all right with momentum because the market right now the market has your back right Whitney said your back right so this is why you only enter when there is momentum in your favor the downside to this is that this might be of Spreaker right so what’s the false breakout is actually say the market right over here it breaks out and then it does a reversal and goes back into the range so this is what we call a false breakout all right so that might be possible right if you are using a stop order and stop-loss order right is pretty much an order right to exit your trick if it goes against you it’s somewhat like a insurance right to protect yourself to protect your account if the trade goes against you so let’s say again for example Apple shares you buy it $100 okay and you have a stoploss order at $90 so what this means right is that if the market if the price comes to $90 you will exit the tree all right so this is what we mean by using a stop loss order right so the the beauty of this is that you’re actually no cutting your losses you’re limiting the damage that could be done to your trading account the cons of this is they’re you know often right if you I would say often right depending how you set your stop-loss everybody there’s a very possible likelihood right there the market could hit your stop-loss right and then reverse back in your initial direction and then you might say oh man why do I use the stop-loss I’m so silly now I’m out of the trade and the market has went back in my favor so yeah you’re gonna get dead quite a number of times in your trading journey right it’s a fun and parcel of trading so you wanna Brit embrace this fact all right so this could jolly well happenin if you think about this this is worth it right because what if the price doesn’t go back into your internet direction what if it drops to like five dollars right you have pretty much you know wipe out a huge chunk of your capital so stop-loss order is like paying insurance right it’s like to give you a comfort of mind to know that you know you are protected no matter what happens right but sometimes right I would say that stop-loss right it’s like paying insurance it’s such like to pay insurance but you know when when the shit hits the fan right you’re glad that you have your stop-loss there to protect you right so that’s the the message there on a bring across okay so now the different types of Forex charge so generally there are or there are many types of Forex chart but we’re just gonna you know share with you dear three common ones the line shot bacha and the candlestick cha so if you look at this one over here I let’s look at line shot first line shot typically it’s a it’s a line on your shot right so he only shows you what it does is that it connects the closing prices of the chart okay see okay you can choose it already on the choose the closed open hi whatever but by default it’s usually connects the closing prices on a chart and it shows in a form as a line on this on the chart it’s very useful to identify the direction of the trend if you if you’re not sure you know what is the trend okay so there is a line shot moving on right we have what we call a bar chart so a bachelor different okay so I’m just gonna share with you how to interpret it so let’s talk about the the green one you see over here the green one typically means something like that right goes up okay okay so this is a green color bar chart so what this means right is that the open price right or rather than the closing price is above the open so this is why it’s bullish right the market has closed higher for the day so this over here this line and you see over on the left is open okay this one over here is the closed and this is the high of the day and this is the low of the day I mean sorry this is the low of the day alright so if you’re looking at a daily timeframe this is what it means if you’re looking at a one hour time frame then this is the high of the one hour time frame this is the low over the last one hour okay and if you’re looking at weekly timeframe this is the high of the week then this would be the low of the week okay the Kulu of the week right so this the again open and this is the close now what if you see a red color bar what does it mean well it’s just the opposite actually so getting the tools okay so if you see a red color bar so what this means right is that again right if you are looking at a daily timeframe this is the high of the day low of the day this is the open and this is the close this should be a quite common sense because this is a bearish but because the price has closed lower for the day alright has closed below the open so the close has to me below D open so the open is on top the close is below right so this is how you read a bar chart and for candlestick chart okay let’s have a look right same thing the concept is the same for green color bar okay let’s say green color bar this is the high of the day the low of the day it’s called LH so for it to be green for it to be bullish right where must the open B well the open must be below the close right so this over here is the open and this over here is the close make sense so now what about the rate color bar that you see so with the red color bar is just the opposite the red color bar like this right here so again this is the high of the day low of the day H no this is the low and this is the high and where is the open on the top or the bottom well if you recall right for the bar to be bearish right the open has to be on top right open and this is the close price close lower for the day okay does it make sense then let’s move on so now that you know how to read the different types of Forex chart let’s you know understand the different types of Forex analysis right so your fundamental analysis you have technical analysis and sentiment analysis so what is fundamental analysis so fundamental analysis typically deals with information like GDP across domestic product interest rates right a non vampiro consumer price index all right the macro in economic numbers figures right these are all things to do with fundamental analysis on the other hand right when you are dealing with technical analysis you are using tools like you know support and resistance candlestick parents Fibonacci ratios and etc right typically stop that you know gills with chatting right boils and there are falls down and falls under technical analysis and as for sentiment analysis you typically try and engage the sentiment of the markets you’re trying to identify what are the players doing so what you can do is to use you know tools like the commitment of traders report it tells you what are the commercial traders doing what are the speculators doing what are the was there about commercial speculators and I think was it was at the third cake that category right so this is what the common problem one of traders report would tell you right what are the different players of the market doing and to give you a sentiment in the market then you serve that the longshots ratio right know how many traders a long company a short to kind of give a sentiment do you know our traders bullish or bearish so moving on right let’s talk about the different types of trading strategies right so there are many trading strategies out there but generally it can be broken down into you know one of these three position trading swing trading and day trading so let’s talk about position trading so the idea right behind position trading is there you wanna you know okay let me just get the color right is that you want to capture a trend market so let’s say for example the market is in an uptrend okay and then it comes down a bit so it’s a position trader what you’re interested is to capture the meat of the trend right the meat of the trend right you can’t possibly get in near the lows or the highs but you’re just focused on capturing the meat so the meat of the trend right now in the bulk of it so that is what a position trader tries to do so you’re typically trading on the four hour time frame and above the for our daily or even weekly time frame and it’s very suited right for those with a full time job because you don’t need to monitor the markets all the time right you can just put on a trade go to work right settle your commitments and just come back before you sleep just check your charts once or twice per day that’s enough right because position trading takes time to play up swing trading on the other hand right it’s usually between the 1 and 4 hour time frame and it’s for those with full time jobs but you want a little bit more right not so you know passive like a position trader so swing trader right your goal over here is just to capture one swing in the market so what is one swing so this over here is one swing this is one swing this is another swing and this is one swing so as a swing trader you’re just interested in just capturing one swing in the market and that’s it you’re not interested in writing the entire move so if let’s say the market right it’s a in a trend right what do you want to do as a swing trader is to buy near the lows of the pullback and then as the market hits high you just capture this one swing over here and that’s it ok so day trading right is I would say a faster form of trading right it’s really trading below the one-hour time frame and it’s for those want rate for a living right day trading I would say it’s quite hard for those of you who have full time job because you know day trading week requires you to actively watch your trade manage your positions and if you have you know full time commitment elsewhere day trading is the last thing that you want to do alright so for day traders right typically you are just trading off the lower timeframe in capturing the introduced volatility right so that’s pretty much what day traders try to do so now let’s talk about the different types of forex brokers right I think this is an important topic and a topic that many of you are want to know more about right so for forex brokers generally it can be broken down into one of these two categories right dealing this broker and a non dealing this broker okay so let’s talk about dealing this broker right so dealing this broker and I pretty much brokers that are otherwise called market maker some of you might think what man rate a market maker right so you have you know like sort of bet blood against market maker because the handle stops yada yada right but just the thing right market maker is nothing wrong it’s just the way the business model works right what they do is that for market maker you’re a trader right you would treat if the broker okay so the broker would then what they do is they were if you’re like you know consistently profitable trader they would you know usually try to make your trades with other traders that you have on hand so they kind of net off their position or pass your trades right to other liquidity providers okay so they don’t have to have anything dude however if they kind of see that hey you know treated it loose consistently what they’ll do is just do you know trick against your position right they won’t purposely no ha no stop loss and stuff like that but it’ll just trade against your position take the opposite side of your position because they know in the long run right you tend to lose overtime so that’s the way you know they they handle their business operation right they won’t go out of their way to purposely you know stop your of your traits and the reason I say this is because the broken industry is highly competitive if you’re gonna do this to your customers right it’s gonna be a matter of time right through social media to reporting right before the word gets out right and you can have a bad reputation and you know you might even lose your entire business license altogether so it’s not worth right just to turn a few measly pits from a few traders to risk losing your entire business operation okay but the fact is that they will take the opposite side of your trade see they look at your past record and realize that hey you know you are not a very profitable trader you tend to lose over time and to make things easier for them they just take me opposite side of the trade right and you know squared off so on the other hand right you have what we call the okay let’s let’s turn a little bit more about this right so basically their market maker they take the opposite side of your trade and you it depends right sometimes they can offer you a fixed prep sometimes the spread is not fixed eyes slightly variable right but more or less right over time you tend to realize that the spread of your traits are pretty much fixed and for market maker they allow you to treat men a lot so if a broker it allows you to treat smaller than a thousand units high chance right it’s a market maker okay and again I repeat right there is nothing wrong or bad about market maker it’s just the way they run their business is their business model so now not dealing this you have what we call ACN electronic communication network and STP straight through processing so let’s have a look right an on dealing desk broker right so for example this one is an EC n right what they do is that the trader right will trip the broker and a broker will just connect you directly to the interbank market right means you can see the order flow of the other market participants for ecn okay you can directly interact with other liquidity product providers or other ECM participants right and usually you’ll be charged a commission on your trade so for example not only will you have to – a for easy and right you can actually queue at a bit and offer so you may or may not have to pay the spread right if you get filled on a bit on the offer okay but one thing for sure is that you will be charged a commission for every trade right depending your broker how much we trust you right you will pay a fixed Commission on it for this so-called service that a broker is offering you so another type of a Nandi link this is what we call a straight-through processing a broker what they do is again right here the trader right is the broker so the the broker will get a quotes from all the different liquidity provider right and then share share the most competitive one right with you right so what they’ll do is that this are currently the bid and ask right by this liquidity provider a B and C so what they’ll do is they’ll mock up this this spreads slightly right and then pass on the cost to you so what they learn is the the spread right the additional spread right from this uh course that you receive from the other liquidity providers okay so this is how a straight-through processing broker works so you can link you with other liquidity providers right and a spread is variable for this right so what they’ll typically do is that they link you with the other liquidity providers right they would then help you find you know the prevailing bid and ask spread right and then they bring back this piece of information to you and then just add on their own mark up their own spread right and that’s how they kind of earn it from you right for this service that they provide you with the other liquidity provider so this is like kind of you know one step behind the easy na you see earlier the EC it can go directly to the liquidity pool put in your orders and see the orders for this STP right straight through processing you can see the orders directly right the only the only the brokers that you trade with can see the orders okay so this area’s a little bit gray over here so who to choose right over here as your broker so you go with the ECM STP or market maker so for dealing des right or otherwise known as market maker I recommend it for new traders because primarily right they allow you to trade near no Lots this means that you can trade less than a thousand units and help you better manage your risk all right so this is important for new trainers because you don’t want you know go in with a fixed minimum lot size like one lot and then if your account size is too small you can apply proper risk management you might you know end up losing a lot faster so for new traders I recommend going with idling this also if you are a swing opposition trader I’ll see a dealing this isn’t that bad after all because as a swing and position trader your stop-loss so it tends to be pretty wide you know to 300 pips no problem and for dealing that’s right even though they’re spread might be slightly higher the if you copulate the spread right as a as a hard call it a spread as a function of your stop-loss right the spread is usually like what one over hundred of your stop-loss so it’s very small as well so if you’re a swing opposition trader right I don’t see why you might not want to consider a deal in this so for non dealing this I would recommend for traders who trade actively right you’re always in and out of markets right so this is where you want to get the best competitive spread right so I recommend it for day traders or scalpers to go with the non dealing deaths and this is usually for traders who are more experienced definitely and have a decent account size you give a thousand or two thousand dollars it’s not gonna make sense to be going with a non dealing desk okay so now how do you select a Forex broker so I’m gonna share with you a few things you know that you want to pay attention to right number one regulation execution customer service ease of weed roll right so let’s talk about this right so regulation right you want to make sure that your broker is regulated and regulated in the right countries if you ask me right if you tell me that you know hey this broker is regulated in Cyprus I don’t care you know that is regulated because it’s in Cyprus I don’t even feel safe so if you wanna you know make sure that your broker is regulated I would suggest right make sure it’s regulated by through reputable authorities like you know hey Amy yes monetary authority Singapore I think you have the FCA and a few others right from UK Australia as well so those are regulatory bodies right that you have more confidence in okay second thing to take note of is the executioner and how are your traits being executed is it like pretty instantaneously or is there like always a delay you get a record you know your your your orders get rejected right so you want to pay attention to how the brokers execute your trick shotting is a customer service I think it’s important right to have a life help desk when the market hours are open right you know speak to someone like you know maybe there’s a big news release that’s coming out maybe your position got stopped out you wonder why that happens right you want to speak to a customer service that have offers live chat support know you know send an email and wait five days for reply right it is that is bad and is a withdrawal you want to get your money you know pretty quickly right I would say in this day and age you should get it within five working days so I know it is you know telegraphic transfer and stuff like that so either withdrawal or it should be quite easy nowadays all right so let’s say for example you treat if your broker and you know you find that your broker did something unjust to you how can you protect yourself right so here a few things that you can do right number one record and screen capture everything right every time you put on a trade or you for example you get stopped out right for no rhyme or reason right record the trade the chart right and screen capturing okay second thing you can do right it’s a so once you record and screen ship capture everything right before you go to step two and three right you want to know reach out to your broker first and ask hey why is this happening right sometimes it could be because is that there is a big news event that’s coming up right so this is why the spread tend to widen right and it’s not the broker wants to purposely widen the spread to stop you sometimes it’s because there is lack of liquidity in the forex market like before NFP right the spread tends to widen so if your stop loss right etcetera is near the market where is trading right now there’s a good chance it could get stopped down so anyway screenshot your chance and bring it up to your broker first and ask for an explanation if you are happy the explanation right and then you know trait in a way that you know it doesn’t happen or makes it unlikely for it to happen to you again however if you’re not happy if the explanation and you feel that now they are doing something fishy behind the scenes right you can always bring up to social media okay I don’t know there are so many forex trading groups out there share the post right and let others you know kind of you know give you their opinion if they feel that hey you know is something fishy something is wrong right the post will go viral right and the broker would get a bet read from it and the last thing the broker one is you know to have such a bad reputation to effect no future business and finally right if you still you don’t want to do something about it right bring up to the authorities right you for example if you’re in Singapore you can go to mes and you know hey them say hey you know this broker is you know I suspect it’s no it’s not being fair right you bring them to mes mes would then you know find the broker right and say hey I received XYZ email from this person right you know what’s going on blah blah blah so the broker will get scared because they might risk losing their license if you know many traders you know reporter of such cases so you can also bring up to the authorities right and you know to have them look into the matter so I’ll say these are a few things that you can do to protect yourself right when you are when you are trying to trip with the right forex broker all right okay so with that said right I have come to the end of this forex trading course I hope you’ve got as much value out of it and if you want to learn more okay you can go down to my website trading with Rainer calm at the top over here okay trading with Viacom right and over here right we will cover more in depth about different trading strategies and techniques right so what if you learned so far just the basic foundation of forex trading we have not covered you know technical analysis you know or in debt right so what you can do is go down to my website trading with Rainer calm and over here I’ve got two trading guides for you alright the first one is the ultimate trend-following guy we’ll talk about how we can go about writing massive trends in the market and the other one is the ultimate guide to price action trading how we can better time your entries and exits in the forex market so go to my website click this blue button right and I’ll send it to your inbox for free okay so with that said I’ve come to the end of this video I hope you have you know enjoyed it you’ve got you learn something from it right and and if any questions for me leave it in a comment section below and you think this video is good hit the like button on this video and subscribe to my youtube channel right I would really appreciate it so with that said I wish you good luck and good trading till next time you

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5. What is Lot? TriumphFX Forex Educational Series

What is a Lot? Currencies were traded in specific amounts called lots. It is the transaction size in forex transaction which means the number of currency units that you will buy or sell. There are four different unit for each lots. The most common is standard lot. A standard lot worths 100,000 units of base currency. A mini lot worths 10,000 units of base currency. A micro and nano lot worth 1,000, and 100 units of base currency respectively. .

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El mejor curso de Forex en español – Clase de muestra GRATIS #2 – ¿Qué es Forex y cómo funciona?

Financial Education ♪♪♪ What is Forex? Let’s start with the basics! Forex is the abbreviation of Foreign Exchange and it is nothing more than the currency market. What does this mean? Suppose you want to buy food Where would you go? Well, to the food market, that’s where you can buy what you need. In the same way, if you need clothes you go to a clothing market. And the same with shoes or anything else you need. In this way we understand by market that place where you pay money in exchange for the good or service that you require. It is a trade in goods. Now, Forex is a money market. You pay money in exchange for money. Does it sound confusing? It is not so! Let me explain to you! Each country has a different coin or currency.

Some countries share the same currency but in general there are dozens of currencies in circulation. For example, Mexico has the Mexican pesos, The United States has the dollar, Peru has soles. Venezuela has bolivars, The countries of the European Union such as Spain, Italy, France, etc. have the euro, Chile has the Chilean pesos, and so on. And each of these currencies has a different value, so that in this money market you pay with the currency of one country to buy the currency of another country. It’s that simple! These coins have an international ISO code that consists of three alphabetic characters where usually the first two characters refer to the name of the country and the last to the name of the currency. For example, the Chilean peso code is CLP, where CL is for Chile and P for Peso, the United States dollar code is USD where US by United States and D by dollar, since the euro is a shared currency among all countries of the European Union the code is only an abbreviation of the name of the currency, therefore it is represented as EUR, the ISO code for the pound sterling is GBP, that is, Great Britain Pound, and so on.

When negotiating with currencies not only negotiate with one currency, there are always two, that is, you pay with one currency and you receive another. This is the reason why when you look at the Forex quotes you will always see the currencies quoted in pairs, because each transaction involves the purchase of one currency and the sale of another, so we have for example euro/dollar, pound/dollar, dollar/yen and these currency pairs are known as financial instruments. For each pair you will see a quote or price for the exchange rate, the first currency is known as the base currency and the second as the quoted currency, variable or counterparty. The exchange rate or price tells the buyer the amount of the quoted currency or variable that must be paid to obtain a unit of the base currency, that is, if you are trading the euro/dollar pair (EURUSD) and the quote is of 1 dollar 3125 cents, this is the price of one euro in US dollars. Therefore you must pay 1 dollar with 3125 cents to get 1 euro. Now, who buys foreign currency and why? This market was born with the objective of facilitating the monetary flow derived from international trade, that is, imports and exports.

For example, Venezuela produces oil and sells it to many countries in the world, mainly to the United States. Then, the United States pays Venezuela in US dollars and then Venezuela theoretically uses those dollars to buy bolivars and reinvest the capital in their country. In the same way happens with Chile, the main copper exporter in the world. Chile produces copper and sells it to China and other countries and transactions in foreign currencies also occur. So governments and private companies buy and sell coins from other countries to trade with them. International banks also buy and sell large amounts of foreign currency and finally people buy and sell foreign currency either because they are going to travel, for vacations, for business, and so on. So the main operators in the forex market are the following: Financial Institutions, Commercial Companies, Central Banks, Management Companies of Investment Funds and Private Investors through intermediaries, these are us, the common people.

Nowadays it can be assured with total veracity that the currency exchange market Forex or FX as it is also known, is the financial market with the greatest projection of growth in the modern financial world. Thanks to this market, specialized companies have emerged that are in charge of providing Forex account management services, investment funds and automatic systems. Currently there are specialized companies in the participation and support to the operators of this market that offer different types of services, these financial intermediaries are called brokers and they offer you the possibility of opening an account in a certain currency; dollars, euros, or your local currency so that through purchase and sale orders issued by different channels allow you to obtain benefits taking advantage of the fluctuations of the exchange rates of the different currencies. These companies given their importance in the financial system are usually subject to various controls and audits, however when you are talking about the financial intermediary or broker it is advisable that before choosing one you investigate very well its solidity and trajectory, as well as taking into account the legal framework by which they are governed.

In class number 4 I will talk more about this topic and I will show you in detail everything you need to review to choose a suitable broker, reliable, safe and in tune with your trading strategy. Not all brokers are good, not all are reliable, and even among the reliable ones, not all will be appropriate for your strategy or your trading style because there are conditions and characteristics that are not compatible with certain investment strategies. So it’s very important that you pay attention to this class number 4 before deciding on a broker and opening your account. I think I can not be emphatic enough at this point, do not open an account in any broker no matter how good and reliable it is before you have seen class number 4 of this course.

Trust me! You will thank me and your pocket too! Now, for you to have an idea of the size of the Forex market, the daily volume of transactions leads to moving around 3 trillion US dollars per day. Forex is the largest financial market in the world, it is bigger than all the stock markets of the United States together. Trillions of dollars are traded daily in the Forex market. From 1997 to the end of 2000, the daily volume of foreign exchange operations increased from 5 billion dollars to billion dollars. The Forex market continues to grow at an incredible rate. This high volume is advantageous from the investor’s point of view because transactions can be executed quickly at a low cost. Before the emergence of the internet only companies and very wealthy people could make foreign exchange investments in the Forex market through the banks’ private currency exchange systems because these systems required a minimum of 10 to 50 million dollars only to get started.

Today, thanks to advances in technology, an investor who owns only 1 dollar can open an account in a broker and access the Forex market 24 hours a day with just a computer, an Internet connection and all the information that You will receive throughout this course. This traffic activity with currencies is known as trading and the person who makes it is known as a trader, so this thing of being a trader is a profession, as well as being a doctor, accountant, pilot, engineer… although it is not the same as a job. Trading is an activity that you can carry out from anywhere in the world and in parallel to your employment or you can even be a full time trader and live on trading millions of people do it and believe me when I tell you that it is a profession highly lucrative, although I will not lie to you is also highly risky. However before continuing, I want to talk to you a little about the risk of investments.

Let me ask you this: How dangerous is it to drive a car? It depends on the driver, isn’t it? If a person who has never driven a car, who has never done a driving course, places it on the street behind a steering wheel, that person will be a very high risk both to himself and to other drivers and passers-by. However, the risk can be drastically reduced with study, practice and experience, right? The investments are exactly the same, the investment is not risky in itself, it is the investor who is risky because if he does not know what he is doing, the investment is not only a risk but terribly dangerous and is almost guaranteed to end with terrible consequences. Therefore, before investing you must study, practice, experiment and perfect your techniques, your knowledge and your skills… Thus, an investment will be as risky as the investor is, and as lucrative and profitable as the person who directs it.

Most have the idea that a job is safer than investing, it is not surprising that people think so. Almost all of these people have spent their entire lives studying and practicing to perform their work. A doctor studied at least 8 years of specialization, if he had not done it… would you trust your health in the hands of a doctor who has not graduated from university? A surgeon who has not studied enough is also risky, although he has a job, not only is it a risk to the health of his patients, it is also certain that he will run out of work in a short time. However, despite having studied and being a great professional, having a job is not exactly safe. The truth is that nothing guarantees that you do not wake up unemployed tomorrow, your income can be stopped at any time without you being able to do anything about it, either because the company went bankrupt, because you fought with your boss, because they replaced you with another resource or by the nephew of the boss… The list is very long! It does not seem so safe anymore, is it? If you have doubts that this job is not yours, tell me…

If you get tired of that job, can you sell it? When you die, can you inherit it to your children so they do not run out of food? It is not yours! It’s temporary! And you never know how long you’re going to have it! Can you say the same about the Mcdonald’s owner on the corner? That guy can sell the business, or inherit it. He is not going to be fired! He does not have to go every day to meet a schedule to guarantee his money and without doubt his income is much higher than average. Who is more secure? Let’s continue! Unlike other financial markets like the New York Stock Exchange, the Forex market does not have a physical location, everything is executed electronically within a network of banks without interruption 24 hours a day except on weekends.

Forex is what is known as a spot market, this means that everything is negotiated at the current price of the financial instrument. Financial instrument? Yes, remember, two currency pairs euro/dollar, dollar/yen, euro/pounds and… What are the currencies that can be negotiated? Actually, all legal tender currencies can be negotiated, however, the most commonly traded currencies are: the United States dollar also known as Buck, the euro also known as Fiber, the Japanese yen, the pound of Great Britain or Cable, the Swiss franc or Swissy, the Canadian dollar or Loonie, the Australian dollar or Aussie, and the New Zealand dollar or Kiwi, you will hear these nicknames frequently in the slang of the traders to refer to these coins. Now there are hundreds of currency pairs but I recommend that you only pay attention to the main currency pairs that are the most traded. It is considered that the activity of these currencies involves more than 85% of the volume of the daily market. In addition, the cost of transactions in foreign currencies is much higher because these currencies do not have as much liquidity as the main ones, and liquidity is essential in this market.

Also, they are more likely to fall into atypical conditions where opening and closing positions is not possible due to lack of counterparty, that is, you want to buy and there are no sellers, or you want to sell and there are no buyers. This graph that you have on the screen shows the world activity of currency exchange. The dollar is the most traded currency, participating in 87% of all transactions, the share of the euro is in second place with 33% while the Japanese yen has a 23% share. Now when you see the quotes of the different pairs of currencies you will see that there are two prices called Bid (Offer) and Ask (Demand). The large international banks provide the currency market with a purchase price Bid (Offer) and another sale Ask (Demand) The difference between these prices is called Spread and is usually constituted as the profit to the entity by its role as an intermediary between those who buy and those who sell using their channels. In general, the Spread in the most traded currencies is only 1 to 3 bips or basic points.

Do not worry, in the next class I will tell you in detail what a bip is, but for example if the purchase price or Bid in a euro/dollar quote is 1 dollar with 3100 cents while the asking price or Ask is set to 1 dollar with 3103 cents the three spread points can be clearly identified. I explain it better! Every commercial transaction has two parts, when you buy someone is selling you, isn’t it? So you are a party and your seller is the counterpart and that transaction takes place at a defined price, that price that for you is the price at which you are buying, the purchase price, from the point of view of your counterpart is the sale price because it is the price at which he is selling you. If you go to a store to buy $40 shoes, that price is what you are going to pay, and from the point of view of the trade it is the price that you will receive in exchange for the merchandise.

So, 40 dollars for you is the purchase price and for the merchant it is the sale price. However, in Forex, three parties are involved in each transaction. On one side are you who want to buy euros paying with dollars, and on the other side there may be a person like you who wants to sell euros receiving dollars in exchange but so that both of you, who do not know each other, can carry out this transaction you need an intermediary that is the broker. That broker provides them with the platform so they can buy and sell. So let’s suppose that the purchase price of the euro/dollar is 1 dollar with 3103 for the purchase and 1 dollar with 3100 for the sale, that is, you pay 1 dollar with 3103 cents to receive 1 euro in exchange, but that’s what the broker charges you.

Then that broker goes with your counterpart and buys the euro you need by paying him 1 dollar with 3100 cents. That is, the broker keeps 0.0003 cents as a kind of commission for having helped them make this transaction and that commission is what is called Spread. If you have not been very clear about this Spread, Bid and Ask… do not worry! All this, as well as other important concepts will be studied in detail in the next class so that you can master the terminology of trading like professionals.

I will go point by point explaining each word and its meaning. When can you Operate? Forex is unique in world markets, it is open 24 hours a day, you can operate at any time, from anywhere in the world, day or night … the forex market follows the sun and remains open always, except on weekends. However, the fact that it is open 24 hours does not mean that it is active all that time, that is, the prices go up and down and you can make money when it goes up and also when it goes down but you can not make money when the prices are not move or when they move very little. Therefore you need a high volume of transactions, that is, many people buying and selling so that the prices vary a lot. In fact, transaction volumes are higher when two or more markets are open at the same time. How is this? I’ll explain! The main trading centers are the London, New York and Tokyo exchanges. First open the Asian markets, they receive the sun first, then the Europeans and finally open the American markets. Taking the time of the East Coast of the United States as a reference, the market opens on Sunday afternoon, because while in the United States it is Sunday afternoon, in Tokyo it is already Monday morning.

So the market is open and you can start trading. And the closing occurs on Friday at 4 o’clock in the afternoon. Remember that we are talking about the schedule of the east coast of the United States which is the last to close. This allows permanent access to markets with the benefit of greater liquidity and a capacity to respond quickly to economic or political events that have an effect on them. The moments in which the main stock exchanges of the world open and the moments of the day when more than one market is open at the same time are those of greater liquidity and movement, that is, when the most radical price changes take place and it is the moment in which the most profits can be generated or the worst losses.

Let’s see a table where you can visualize the openings of the world markets. Again, we are talking about the time zone of the east coast of the United States. As you can see between each session there is a period of time in which two sessions are open at the same time from 3 to 4 in the morning the markets of Tokyo and London coincide and are open at the same time, and from 8 in the tomorrow until 12 noon the markets of London and the United States are open at the same time. Obviously, these are the most active hours in the market as there is a greater volume when two markets are open at the same time, with the London market producing the biggest changes but it is also true that there are certain days of the week where all markets tend to show more movement. And these days are: on Tuesdays and Wednesdays for the four main pairs of currencies which are euro/dollar, pound/dollar, dollar/franc and dollar/yen. The worst times to operate are on Fridays, Sundays, Holidays and when there are important news reports.

Fridays because they are unpredictable and there is usually little activity, Sundays and holidays because of the low volume and little movement, and finally operating during news is a guillotine because nobody knows where the price will go, the prices are unpredictable, there is little liquidity and great volatility . However, there are strategies that allow you to take advantage of these situations but you must know very well what you do and be a professional trader. Now, why would you want to trade in currencies? The benefits and advantages are many in Forex, these are just some reasons why so many people have chosen this market: There are no compensation rates, no exchange rates, no government fee no brokerage fees. Brokers are compensated for their services through the Spread or a variable commission according to the size of your investment. There is no intermediary! Forex eliminates intermediaries and allows you to negotiate directly with the market responsible for the pricing of any currency pair. There is no fixed lot! In the next class I will explain what a lot is but in Forex you determine how much money you want to invest, this allows you to participate with accounts as small as 1 dollar.

Low Transaction Costs. In retailing the Spread is normally less than 0.1% under normal market conditions. In the larger brokers the Spread could be as low as 0.07%. Of course, this will depend on your leverage and the type of broker, two aspects that I will also detail later. 24 hours Market As I mentioned, from Sunday afternoon until Friday afternoon the Forex market does not sleep and you can operate. This is great for those who want a business or part-time activity because they can choose if they want to do their trading in the morning, at noon or at night. Nobody can control the market! The currency market is so large and has so many participants that no entity, not even a central bank, can control the market price for a prolonged period of time. Leverage This is the biggest advantage and also the biggest danger of Forex because with very little money you can control a much larger amount. Leverage gives you the ability to make good profits while keeping venture capital to a minimum. For example, there are Forex brokers that offer a leverage of 200 to 1, which means that if you have 50 dollars in your account you can buy or sell up to 10 thousand dollars in currency value, similarly with 500 dollars you could negotiate 100 thousand dollars, and so on.

However leverage is a double-edged sword, this high degree of leverage can lead to large profits but without proper risk management it also gives large losses. High Liquidity Because the Forex market is so huge it is also very liquid, this means that you can always buy and sell at will instantly because there are always buyers and there are always sellers. Free demo accounts, news, graphics and analysis. Most Forex online brokers offer demo accounts for trading practices along with breaking news and graphics services. All free! These are very valuable resources for you to perfect your skills by playing with fictitious money before opening a real account, that you risk real money. The demo account will allow you to invest with toy money so you can make all the mistakes that are necessary while you learn. Investing in Forex is dangerous when you do not do it right. So the best part of your learning stage is that you can practice your techniques in a real scenario to perfect them and make sure they work without risking a single dollar out of your pocket.

So if you make a mistake, you will only have lost toy money. If you try to do that with real money, when you make a serious mistake you could be ruined, the only problem is that most demo accounts have a money limit, or a time limit. That is to say, they give you for example ten thousand dollars toy for you to practice and when you run out… you’ve run out! You can not keep practicing! Or they give you a demo account with an expiration time of 1 to 3 months, so when it expires you will not be able to continue practicing. But in class number 4 I will show you how to open an unlimited demo account in which you can deposit virtual money the amount you want and how many times you want without expiration, without conditions, without restrictions of any kind so you can practice with total freedom. And then in class 19, I will teach you how to use the platform with your demo account so that you can put into practice everything learned in previous classes and start investing in virtual money until you are sure of your success and can invest your real money feeling comfortable with what you do.

Mini and Micro Accounts Starting as a trader does not cost a ton of money, online Forex brokers offer Mini and Micro accounts some of them with a minimum deposit account of $10 or less. Now, I do not tell you that you should open an account with the minimum but Forex makes it much more accessible to the average individual who fears to risk initial capital. These are the tools you need to make Forex trading: A computer with an internet connection! And all the information of this course! How do you earn money in Forex? Your main objective as an investor is speculation about future changes in the price of currencies, and by buying and selling them according to fluctuations in exchange rates you can get profits or losses.

The purpose of trading is to exchange one currency for another with the expectation that the price will change. So the currency you bought increases its value in relation to the one you sold. But it is easier to see this in an example! Suppose you have seen the news and you have realized that the economy of the United States will weaken, perhaps you have seen that unemployment is growing or that a major company listed on the New York Stock Exchange went bankrupt, or maybe the United States has some complicated political situation… Any of these factors would weaken the US economy which is bad for the dollar. This means that the value of the dollar will decrease. At the same time you realize that the countries of the European Union are having a rebound in their economy, so it would be a good idea to buy euros with dollars, therefore you must execute a purchase operation of euro/dollar.

Suppose then that today the price of the euro against the dollar is 1 dollar 28 cents, then you buy ten thousand euros paying 12 thousand 800 dollars… Remember the leverage, you do not need $12,800 in your account. Two weeks later, the price of the euro has risen to 1 dollar and 35 cents. So, you change your 10.000 euros that by then they represent $13,500, obtaining in this way a profit of 700 dollars in the process. As I explained to you a while ago, currencies are quoted in pairs such as euro/dollar or dollar/yen because each transaction involves the purchase of one currency and the sale of another. For example, the exchange rate of the euro against the dollar looks like this EURUSD = 1.3100 It can also be seen in this way… EUR/USD = 1.3100 The currency on the left is the base… the euro And the one on the right is the currency traded. When you want to buy, the exchange rate tells you how much you have to pay in the quoted currency to get a unit of the base currency, that is, you pay 1 dollar and 31 cents to get one euro.

When you want to sell, the exchange rate tells you how many units of the quoted currency you get for the sale of a unit of the base currency, that is, using the example again, you will receive 1 dollar with 31 cents for each euro you sell. When you execute a euro/dollar purchase order it means that you are going to buy euros and at the same time sell dollars, and when you execute a euro/dollar sales order it means that you are going to sell euros and at the same time buy American dollars.

Are you going Long or Short? The first thing you should do is decide what you want to do, Do you want to buy? Do you want to sell? If you think that the euro will appreciate, that is, if you think that the value of the euro will increase with respect to the dollar… Then you must buy euro/dollar. And if you think it is the dollar that will gain value against the euro… Then you should sell euro/dollar. If you are buying it is because you expect the value of the euro to increase and then sell it at a higher price. and that means you’re taking a long position or going long. So in Forex, long equals buying, and as you will be imagining, going short is the same as selling. Get used to these terms because they are widely used in traders’ slang. You will often hear things like: “I’m long on the dollar/yen” or “I have a short position in the euro/pound”.

You should also know that everything that has to do with rising prices, upward trends, buyers, they are known as bulls, and this is due to the way of attacking the bull, which is from the bottom up. For that reason the symbol of Wall Street is the famous bronze bull of New York, located in Bowling Green Park, it is a symbol of optimism, aggressiveness and financial prosperity because it represents price rises. On the other hand, the downward movements, the bearish tendencies, the sellers, are known as Bears, and it also has to do with the bear’s attack, which is from top to bottom. Can I become a millionaire in Forex? And… Can I become a millionaire by investing in Forex? The quick answer to this question is yes. However, do not get confused. This is not a magic wand, nor is it the genius of the lamp. The foreign exchange market, like the stock markets, has the potential to make you earn a lot of money quickly but also to take away your capital in the blink of an eye. So you must be very careful! There are certainly thousands of success stories about people who have earned millions from capitals as low as $2,000 in a few hours, but you will also have heard those who have lost millions in the same period of time.

In fact, the statistic is that approximately 95% of people who invest in this market lose all their money in less than 6 months, and only 5% is profitable in the long term. These scandalous figures should scare you only if you are not willing to devote the time and effort required to learn things correctly, because the root problem, the reason why 95% of people who invest lose their money is due to lack of education. It’s like trying to fly a commercial plane without having even done a basic flight course, and most do that for the promise of getting rich in a stroke of luck, because they enter the market thinking this is a casino or a lottery…

Yes, it may be that you win a good amount of money from one day to another but if you do not know what you are doing, if your profit was the result of a stroke of luck, in the same way you won it you will surely to lose because you are not operating with your skills but throwing the dice, unless, of course, after winning you never return to operate in this market. But we know that no one does that either in the casino or in the financial markets. If you want to be profitable in the long term and make money systematically… You have to put your feet on the ground! Have realistic expectations! Define a goal of daily, weekly or monthly production. And make that goal consistent with your investment capital, with your trading system, with your risk management, with your personality and your trading psychology.

So stop dreaming of magical solutions and be professional with it. Forex is not a game and if you treat it as such, the toy will end up being you and your pocket will not thank you. Now you know what Forex is and what it is for, so I invite you to the next class where I will teach you some basic concepts so you can become familiar with the traders’ slang and begin to understand how it is spoken in Forex. Financial Education .

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Key Concepts in Fundamental Analysis for Forex Traders

Hello there, this is Michael for Forex training group and today we’re going to discuss the key concepts in fundamental analysis for Forex traders. What is fundamental analysis first of all? Well, the basic skill involved in fundamental analysis in Forex trading requires an analyst to determine how a currency will react to macroeconomic events, Central Bank monetary shift and political and social news from the currency�s nation of origin. Namely, you are analyzing or comparing two different economies that are being represented by the currencies that foreign currencies pair.

And based on the differences between those two economies the currency pair is going to move. The next thing that is of use is presented by technical analysis and there is always a big debate regarding which one is more important fundamental analysis or technical analysis. I would say both of them are mandatory while the focus on the fundamental analysis generally remains on news, sentiment and the release of economic indicators, Technical analysis on the other hand relies on the price and price movements of the underlying asset or the exchange rate of a Forex currency pair. What are more the most important economic releases to be watched? First of all employment reports, these employment reports include the unemployment rate, number of claimants or jobless individuals applying for services, payroll levels and so on.

In the United States for example, the most important jobs related data is the N.F.P. the non-farm payroll. This non-farm payroll, it is being released on the first Friday of every month together with the unemployment rate. And it is important or market was violently because of the dual because of the dual mandate the Federal Reserve the central bank of the United States is having namely to keep inflation below or close to 2% and to create jobs. It means that traders know that the Fed is looking at the job data in order to move on rates and that it is all that it is all that matters. Trade balance basically the difference between the countries the imports and exports which has a direct effect on the demand for the nation’s currencies. The bigger all the trade balance is of course, the better for the currency. Current Account on the other hand, one of two components of a nation’s balance of payments the current account is the balance of trade and net cash transfers for a country. Let’s say a positive current account is desired rather than a deficit so the bigger the current account the more positive the currency will be.

G.D.P. or the total value of goods and services an economy produces it is really important . G.D.P. that is growing or a positive G.D.P. that is growing, shows an economy that is expanding and therefore you know whether to avoid an economy that is expanding to size then the central bank Will, and hike the interest rates. C.P.I. or consumer pricing that’s basically represents inflation. Now inflation is on the mandate that of each and every major central bank and not only. So the mandate is to keep inflation below or close to 2% so if inflation at any one moment of time, falls to or or rises to or then the central bank will intervene. Higher inflation means that the central they will hike the rates hiking the rates, the currency will be more attractive. P.P.I . will represent still the inflation but it is the inflation on the produce a side and it is being believed that in time it would be transferred to the consumer as well.

P.MI.. The purchasing managers index represents a survey. And in this survey businesses from different sectors are being asked to answer questions relative to people who are going to be laid off Or if a specific activity in that sector or in that company is going to influence business how is business being viewed in the next period and so on so forth. And everything is interpreting to the fifty level, namely, if the P.M.I. for a specific certain sector like the services sector is bigger than fifty then it is being said that the sector is expanding . If the sector is expanding then the Central Bank will come in hike the rates. Hiking the rate means attractive for a currency. Of course below fifty, this means contraction and P.M.I.s are related to services or calculated to the services sector, manufacturing and construction in some countries. It depends very much on the type of the economy you have in a specific country, for example, in the United States we have a service based economy And it means that the P.M.I services is more important and will affect the currency more than the P.M.I.

manufacturing as the results in the G.D.P. will be more visible. Commodity Prices. The price of commodities can have a significant effect on the currency of both producing and consuming nation . .

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Hong Kong – Currency Exchange Counters @ Hong Kong Airport & in City

Hong Kong Currency Exchange At the airport currency exchange counters are located right before you enter the main Arrival hall. Currency Exchange Counters are available all over town, in hotels, and currency exchange kiosk in tourist areas like Tsim Sha Tsui, and Causeway Bay Chungking Mansions in Tsim Sha Tsu has many exchange counters and is popular with tourists (and locals) Make sure to shop around for the best rate Happy Travels! Subscribe to this channel to see more!

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Mod-01 Lec-08 Exchange Rate Arithmetic

Good morning today we will be discussing about exchange rate arithmetic here you will discuss how exchange rate that is currency exchange bit among different currency take place how the exchange rate determination take place or the forward exchange rate calculation we do in the market actually we will be discussing actual market phenomenon and how exchange rate among different currency we destroy men by the buying and selling of foreign currency how the brokers the banks the participant exchange rate market decide the exchange rate value will start with method of coating of exchange rate as we discuss in the earlier example earlier session there are two way of coating of an exchange in the market the first way is how the direct and indirect code that is when you mention the REC code the value of the domestic currency vary and the value of the foreign currency remain constant the value mean number of unit here in when you mention indirect code that is value of the domestic currency remain fixed that is how many foreign currency equivalent to one unit of domestic currency in India after 1994 economic reform particularly foreign exchange market liberalization the exchange rate quotation as present taking place on direct methods indirect method the value of the foreign currency that is the ways dollar here the one unit of way still how many rupees and rupee is varying here the new number of unit of foreign currency that is one unit of dollar per US dollar constant when if when you estimate or calculate actual actual value of the foreign currency that is the buying and selling rate we should always we have we are customers and Bank always try to text for more for us in this process if you see here the example the red code us del one u.s.

Dollar I write here one US dollar each rupee Indian rupee 25 and 45 50 here you see the you ate a number of unit of you Angela remain constant and the value of the domestic currency the number of Anita domestic honestly vary so it is called the rate code when you when you ask about buying and selling that means when a customer go to a bank and access for encode for then the bank will give a two way quotation assignments as we discussed earlier to a quotation is essential because the banks do not want to disclose whether is buying or selling the foreign currency so when the bank would sell the range dollar because bank would say sales of which dollar US dollar ad rate of fifty three forty five fifty because being want to take more from customers bank will buy US dollar means when the bank buy you a teller bank will give rupee to the customer the bank will give less rupee to the customer in this context bank will give a code forty five fifty three forty five twenty five so this is Bank will sell us teller bang will take more Indian rupee and give you one dollar bank will when you have in US dollar give it to Bank annex for Indian rupee bank will give you less Indian rupee and take base dollar so this is buying rate this selling great so purchase bank will purchase US dollar at 45 25 bangle sale you a teller at 45 50 so this is called offer and bead bead and offer price so when earlier earlier session we discuss about offer – bead read offer a – bead read that is called the transaction cost transaction cost bank will recover the transaction cost and also profit margin so bit of a red bead of the offer rate – we dread give you the transaction cost in profit margin for the bank so here bead rated Bank is bidding US dollar bank is purchasing US dollar as for as 45 25 $20 as 45 50 so y-you need two way quotation to a quotation there are some advantages for the – a quotation the – a curtain is an important sir we cannot know that whether the player is a buyer or seller in the foreign currency market because the bidder that is the banks particularly authorized delays are there in the market in foreign currency they do not want to disclose whether they are buying or selling us tell this eliminate the risks of bed-rid suppose a bank need foreign currency and go for giving the rate for purchasing of foreign currency then foreign currency will be costlier for that all other participant in the market they will very they will give bed read or very high rate for foreign currency so when B Dax raids are there with the Builder aid and offer rates are there this eliminate what is called a bed rate or unfavorable rate for a particular customers continuous buying and selling rate would be available when there is a bid and offer rates are there there will be continuous buying and selling at this rate because one offer rate and the vide rates are there the market always there is a continuous buying and selling will be there at this rate difficult distinguish between market maker and market takers because earlier session to discuss about market maker market makers are those who have a command over foreign currency market market takers are those who accept the foreign currency rate so market maker and market taker always change their position because in foreign exchange market huge volume of transaction take place it is very difficult to command over market for long run at the same time is very difficult for a particular particular authorized dealer to decide the market so market maker and market recur change their position continuously whenever there is a buying and selling rates are there or two-way quotations are there it is very difficult to distinguish between who is the market maker with the market taker similarly the two way quotation also help it limits the profit margin within the be displayed when we discuss the bid offer rate and bed-rid that decide what is called transaction caution profit margin so when banks give two way quotation the difference between the buying and selling rate decide the transaction cost profit margin this indicates that how much profit the bank is charging what is it transaction cost the two way quotation limits the profit margin and transaction cost bankage to reduce the transaction cost so as to get so sizable amount of profit in foreign currency transaction process after discussing the to a cut is and let us come to the cross exchange rate because when you discuss because in actual market you very difficult to get what is called a direct exchange rate when you want us the lab then you can get in the Indian market us telephone by one by interbank market you can get US dollar when you surrender rope you get the US dollar but very difficult to get Japanese chains French franc or some other currency which are not tradable in in Indian market you have to go from one market to another market in this process what is called cross exchange rate important when the red coat is not available between pairs of currency cross exchange rate process is used to find the exchange rate so let us let us give discuss about one examples if you see the example here if exchange rate in Bombay interbank market age exchange rate in Bombay interbank market is one dollar is equal to 53 25 26 and in London interbank market is one front one dollar is equal to French franc seven point zero five five zero and seven one double zero what would be the exchange rate between Indian rupee and French prank here if you see the example there is no direct quote available Indian market Indian foreign currency market between Indian rupee and French franc so however we can get a direct code between dollar and Indian rupee and in onion market will get a direct code between dollar and French franc so somebody in India once French franc that person is to travel from Bombay exchange and market to the London exchange market that is there to go to the authorized dealer authorised dealer will surrender will he’ll purchase US dollar and US dollar will be sold in London market to get the French franc so the cross currency exchange rate importance here so answer will be here the question answer here answer will be a Bombay interbank market you need to purchase US dollar by surrendering rupee and you have to sell the US dollar in London interbank market to purchase the French franc in this process you can decide the exchange rate between French franc and Indian rupee let us know estimate this in the Indian Bombay interbank market Bombay interbank market we are purchasing dollar we are purchasing US dollar so when you purchase US dollar bank will charge more rupee so the rate will be one US dollar when we a seller would be fifty three need to surrender more rupee so twenty fifty 2600 so in in the london in the mumbai inter-bank market US dollar will be quoted for purchasing US dollar you have to surrender at 53 26 an after purchasing US dollar you have to go to London interbank market in London market London interbank market the you have to say leave a dollar when you are selling US dollar the market will give you less Frank so in the London interbank market Frank will be available as seven point zero five five zero seven one one zero seven one double zero so when you sell US dollar you will get you will get less Frank’s so frf will be available to you less the less amount is here seven point zero five five zero that will be available to you now US dollar in London interbank market will be one US dollar is equal to f RF seven point zero five five zero now though the US dollar actually if you integrate the London market and US market in London market and Bombay market then you will get a direct code for the cross currency or the direct code for Frank and I Indian rupee so in a dollar in London Bombay cost Rs 53 26 and in Frank value it will be French Frank value it will be seven point zero five five zero so that means if you see in this way that means rupees fifty 326 is equivalent to fr a seven point zero five five zero in other word in other word if you see the exchange rate in other word in other word one Frank fr is one will be one will be you have to divide 53 2600 by seven point zero five zero it will give us seven point five four nine three fr F so actual market the FI the Indian rupee will be in Indian rupee term Indian rupee term so frf will be one frf will be rupees seven point five four nine three this is the calculation of frf we have migrated cross currency way that means the christine’s direct coat is not available in indian between Indian rupee and French print we are purchasing US dollar in an indian bombay offer interbank market then you are migrating london interbank market selling ways dollar to get Frank and then you convert between Frank and Indian rupee the valuation side so one front will be seven seven rupees fifty for 93 paisa so this will be the exchange rate calculation what is called cross currency calculation rate so the answer is here here you can see that answer so we are purchasing US dollar at 53 26 in London a Bombay interbank market then you are sir going to the London interbank market there you are surrendering you a dollar and getting a franc of seven point zero five five zero and this exchanger take place between Indian rupee and French Prime in this in this frame way so one US dollar will be seven point zero five zero and it will be seven fifty three point two two six rupees so one franc will be seven point five four nine three rupees this is the one this is a way of cross currency exchange rate take place now let us do the second example here second example is the exchange rate in Bombay interbank market it US dollar one with fifty five 22050 and two one one zero and in London interbank market 81 euro is one point two seven four zero and two seven four five what will be the exchange rate between Indian rupee and euro here also same problem since in Indian market we are not getting a direct Corbett in Indian rupee and euro so we have to migrate from Mumbai interbank market to London interbank market to decide the decide the exchange read between euro India and Indian rupee so when you have we have only within our hand Indian rupee you want to purchase euro since in India direct code for euro and l0 and Indian rupee is not available we are purchasing the dollar from Bombay market selling the dollar in London market to get the Euro so we have Indian rupee so we want to purchase dollar so in bombay inter-bank market same thing we have to do in one by interbank market so for us we are purchasing dollar you have to surrender more rupee the rupee will be 55 to 1 1 0 so if you surrender 50 500 to 1 0 0 then we will get 1 dollar in bombay inter-bank market then you would go to london interbank market london interbank market you are selling US dollar and getting euro so but euro is available ad 1 euro is costing how much US dollar US dollar 1.2745 because in under under by market you have to purchase euro when you want to purchase euro you have to surrender more dollar so by surrendering 1.2745 we are getting 1 euro so so for 1.2745 is equivalent to 1 euro so however when you calculate the Indian rupee euro so 1 euro 1 euro will be year dollar 1.2745 in in in London market and 1 dollar is equivalent to in India market 1 dollar is 55 55 to 1 0 so the other ways other way seven four five into fifty five point two one zero zero we’ll give you that one what is the cost of one euro in Indian rupee because for us for us one dollar is 55 to 1 0 0 and 1 euro is 1.2745 US dollar so 1.2745 US dollar is equivalent to how much rupee that you have to purchase since one rupee is a one dollar is fifty five point two one one zero so to multiply multiply one point two seven four five year into 5521 we’ll get the ruku yupi equivalent of one euro so this will become this will be something around 70 point seven two point three six five two so how do we solve the problem we are purchasing you a tailor from indian market and paying how much you surrender rupee fifty five point two one zero zero and we are going to London market purchasing euro by surrendering 1.2745 you hey Taylor so one euro will be 1.2745 a dollar and one US dollar is fifty five point two one we are multiplying these two and this will give you ruku rupee equivalent of you one euro that one euro is seventy point three six five two you see here we have done in same way the transaction process take place in purchase USA in bombay inter-bank market by surrendering inr then purchasing euro in london interbank market by surrendering US dollar the bombay inter-bank market dollar will be available to us as zero and under interbank market one euro will cause 1.2745 at the crust exchange rate take place it in one euro is equal to one point two seven four five into fifty five so we are getting rupee equivalent of you one euro is 72 P is 36 5 36 52 paisa so that is called cross currency exchange rate between euro and Indian rupee now this is what we estimate here what is called as what market red spot market rate between direct quote and also between indirect code what is called direct code for direct availability or to market and cross currency between three currency involved to calculate the two currency exchange rate but in actual transaction in foreign currency market also takes place forward that is after two month after three month what will be the exchange rate that also available in the Indian in different foreign currency market the question is we discussed earlier session that exchange rate for settlement beyond the spot rate is called forward rate after two days any exchange settlement takes place it is called forward rate so forward rate is estimated by adding forward premium to spot rate when spot rate is available up to two days beyond two days you want foreign currency then you have to go to the forward market rate and forward market rate decide the rate by adding either addition or or or deduction some points some point in the spot rate so that will be this forward rate the forward market is forward market rate may be a currency of a premium currency or a currency may be a what is called a discount currency so if the spot rate the forward price is higher than the spot price forward price is higher than the spot price it is called the currency is as a premium currency is a spot forward price is lower than the spot price it is called discount currency so under the rate code appreciation of currency is a premium currency and depreciation of currency is a discount currency so in case of appreciation of currency the forward points are deducted in case of depreciation of currency the forward point as added so spot rate on the spot rate if you are adding then the base currency base currency appreciated currency in the spot rate you are deducting that base currency a discount currency so generally the forward price forward price day forward price is calculated spot price plus minus the premium or discount if it is premium they are added it is discount to deducted in case of indirect code the spot price the premium is deducted and discount is added in Indian context since you are a direct code the premiums are added and discount current discounts are deducted from the spot price so now let us let us do a example then you understand the intricacy of our preferred word forward rate calculation this in this example in the interbank rupee market is quoted on November 12 as a number 12 the spot rate is given to you the spot reach $1 is November month November 2 n 2012 in Indian interbank market that is Bombay interbank market Mumbai interbank market US dollar is quoted as 53 25 50 and 25 26 what does it mean it means that you want to purchase you a dollar then it will be 53 26 you want to sell you a tailor you will get 53 25 50 now in that this is a firm spot rate spot rate spot market rate during the month of November now suppose the forward points are given to you forward point for December we will be discussing about December forward point is 25 30 January for point is January 2013 forward point is 40 50 and also February for January 13 February 13 December 12 so favorite 13 forward point is 75 85 so now you have to calculate what will be the forward buying and selling rate of vs dollar and Indian rupee in different month suppose what does it mean it means that we have in November month 2002 and November spot rate and we want to estimate what will be the rate of US dollar in Indian rupee in December 2012 January 2013 and February 2013 so but what we have given what the question is given to us the question is given towards the forward point between in November December January and February so you have to read the forward point first here the forward point is December month forward twenty twenty-five thirty what does it mean twenty-five thirty first number twenty five second number is 30 that means rupee is depreciating against US dollar first number is second number is higher than the past the market reads the rupee depreciate in December 2012 similarly now January 2013 40 50 similarly first number is 40 second number is 50 so 50 is more than 40 here so rupee is further depreciating in the Diamonds of January similarly in February 75 85 rupee also depreciating in place up against the US dollar suppose you want to estimate the spot rate in month of December so what you do spot rate in November 2012 so for us you $8 53.2550 and fifty three point two six zero zero this is you want to purchase US dollar if to pay this much and sell you a delegate is much now we want to calculate the forward rate December 2012 so here the forward points are given to us 25 30 that means 25 30 first number is lower second number is higher rupee is depreciating against nature that means US dollar is appreciation appreciated currency rupee is a depreciated currency then what if you do that since you know the forward point so in December 2013 what we do you have to add these forward point so 425 here is zero zero two five and here 30 so here zero zero zero three zero so what will be this this is five seven five 250 350 325 75 here fifty three two six three zero that means in month of December the bank will give you a forwarder suppose you want you go to the bank Oxford in Oxford a forward point further November for the December 2012 bank will give a code 53 25 75 and 53 26 30 that means you want to purchase US dollar a for December 2012 then you have to pay 53 26 30 when to say leave a dollar for December 2012 you will get you have to get a rupee or 53 25 75 this is a calculus ever month forward premium ember month spot rate that the member month you know the rate but December you do not know the rate but we know only the forward point you can calculate December month forward rate the forward rate is 53 25 75 for selling wave dollar and for purchasing US dollar 53 26 30 so this is called the forward point forward rate for December suppose you want to calculate again for the for the month of forward rate for January 2013 and January 2013 the forward point is available to you the favor point four January 8 the forward point for January is 40 50 and spot rate November is 53 25 3 and 53 26 so since thus January is 40 50 so yes dollar is appreciating rupee depreciating why the 50 is more than 40 so you have to add now you have to add the forward forward point so now here the forward point for calculation of January 1 January 2013 forward rate will be zero point zero zero four zero here zero point zero zero five zero e to a chi you a calculate this then you will get the 53 here 25 90 here 53 53 26 50 so this is the forward rate per January month so buying rate of jewelry 53 26 50 selling gross selling rate for u.s.

Dollar is 25 90 now similarly for every month every 2013 so spot reach November month remember spot member 2000 spot is given to you the spot is 53 25 5-0 and 53 26 6-0 and February February forward point February for forward point is available to us is 75 85 that is also appreciating duplicity 2p depreciating so you have to add the forward point here here 85 then you will get five to seven to fifty three point two seven two five and here five eight two six two fifty three point two six two six a fifty three point 53 Pawnee when you see that right here calculation is here then where you are reading here fifty three point two six seven five two six eight five two six seven five two six eight five so this is a calculation of forward point now you see the exam the answer is here for the month of December the spot rate is 5325 that is selling rate of dollar and buying a dollar is 53 26 so we are adding the spot that is your forward premium changes will twenty-five which more than 25 which is less than 30 rupees depreciating where the forward premium so we are adding point zero zero two five we are getting 53 25 75 if the buying selling rate of u.s.

Dollar similarly were adding 30 here so we are getting 53 26 30 is a buying of buying of u.s. dollar similarly in the case of December January month January the forward point is 40 and 50 so it is a rupee depreciating here we are adding on the spot rate similar 5325 58 you are getting 53 25 90 is the selling of US dollar and similarly here also 53 26 50 it is the buying of the US dollar in the month of February similarly 75 85 at the forward forward rate forward points so see in the 75 which less than 85 rupee is depreciating so we are adding the forward premium here then we are getting 53 26 25 is the selling of retailer and 53 26 85 is the buying of US dollar so what are the words what we understand from here from the spot rate it is possible to calculate the forward rate how to calculate the forward Freight on the basis of availability of forward premium when a currency is depreciating forward premiums are added when currency is appreciating forward premiums are deducted from the spot rate in this by adding or deducting the forward premium as per the premium discount we can calculate or estimate the forward rate in actual market forward rates are available for nearly one year though let us do a another example here the example is in the interbank market rupee is quoted as one euro is seventy point two five zero zero there is a buying of Pierrot a selling of Euro and buying of zero seven two point two sixty now forward points are available December 25 30 January 2010 and February twenty five ten twenty five ten now we calculate the buying and selling rate of euro here so buying rate of euro is we want to buy euro then it will surrender more rupee that will be seventy twenty six you want to sell euro then you will get lazy from the bankers so it will be seventy twenty five twenty six twenty five fifty now how to estimate the forward rate from the spot rate you have to add it now spot rate is similarly spot rate spot rate of Euro Indian market is one euro is equal to seventy twenty five fifty and seventy 2600 now you have to calculate a December month to calculate the December month for December month if you see the December month forward premium forward point forward point month of December December month forward premium is a forward rate is available or a PowerPoint eight twenty five thirty then how will read the currency since twenty thirty is more than 25 so rupee will be depreciated in the month of now for depreciating currency because 30 is more than 25 2 rupee depreciating so for depreciating currency forward premium will be added so December month for next forward rate forward rate December will be 70 25 50 and 70 2600 now we have to add the forward premium here 25 and similarly zero point zero zero three zero add here now we will get five seven five to seventy point two five seven five here seventy point two six three zero is a buying and selling up you had tell you you want to purchase euro in the machine in the month of December then you have to pay 70 point two six three zero you want to buy with the euro you know Sayle euro and during the month of December we will get 70 point two five seven five two P so this is called December month forward forward rate like similarly in the January month January month if you see is that Denari month in the month of January the forward rate forward forward point you read the forward point for the January the forward point is 2010 now we see to attain is less than 20 so in doing the month of January rupee is appreciating against the euro because 10 is less than first number second number is less than first number there is a market to market way of market you have what is a quoting the forward premium so market code the forward Windham 2010 what does it mean it means that 10 is less than 20 the second number is less than first number then market expecting rupee will be appreciated during the month of January so for appreciating current see the forward premium is deducted so in the spot rate the spot rate is zero spot rate is how much zero for rate spot rate 70 70 point two five five zero and seventy point two six zero zero and for the January January forward rate will be zero point it will be minus zero point zero zero two zero zero point zero zero one zero six Lee – now it will be seventy point two five three zero and seventy point seventy point if you see will be two five nine zero so now since currency is depreciating rupee is appreciating during the month of January against a euro now this against the spot rate you are getting the forward rate from January less so now you want to purchase zero then you could surrender seventy point two five nine zero during January when to sell euro we will get seventy point two five three zero in January similarly here we have calculated you see the calculation process in the month of February similarly rupee is appreciating where the forward premiums are deducted from the spot rate yeah we are getting selling rate of dollar selling rate of Euro seventy point two five three five and sell buying rate of zero seventy point two five nine zero in case of in case of February month every month against the November against the November month so what you understand here in case of similarly in case of buying and selling up forward buying and selling of any currency forward depends upon the Premium discount premium is added if the currency is directly code premium it deducted if the currency appreciating so the question is how we got the forward points twenty-five thirty or twenty four forty fifty whatever the forward premium where you got it so what is the determine which are the determinant of forward points in the market so if you see market participant take forward position as per the demand in the currency so forward premium depends upon the position in the market who take the position the exporter importer or the market participant on the basis of their expectation that the forward premium also determined in a primary demand and supply interest rate differential of the two major variables or major determinants of forward premium so in actual calculation process we do not very difficult to understand or very difficult detect what is the position in the market position means how much demand the exporter importer importers have exporter supply dollar or foreign currency importer demand foreign currency so how much demand how much supplies are there very typical to decide however the one variable with generally influenced forward point it is the interest rate interest rate between two currency or two countries in case of US dollar in India what is the sort very short-term interest rate in India what is the very short-term interested in u.s.

That did they decide the forward point because each rupee is depreciating then people will borrow from the US market and sell in Indian market rupee is appreciating against the US dollar then people borrow some Indian market and sell is US market in this way they take the arbitrates of it so interest rate differential is the primary variable in determining the forward points now if you if you do a problem then is understand how interest-rate decide the forward points let us discuss about the interbank market rupee is quoted for November you see the example here the interbank market rupee is quoted for November 2012 and this much 25 50 53 26 if the interest rate in u.s.

Is 4% and in India it is 8% what would be the arbitrage opportunity what would be the 1-year forward point so as to remove any arbitration what we have got it we have given here two things first thing the spot rate spot rate of November 12 the November 12 pause spot rate is one dollar is equal to 53 25 50 and 53 26 and in u.s. in u.s. the interest rate is 4% and in India interest rate is 8% and since the group is the US dollar Indian rupee is getting coated in India as one dollar is equal to 53 25 50 and 53 26 26 hundred now we have got that two interest rate differential if you see the interest rate differential between India in u.s.

The differential interest rate is 4% now what does it mean seen in u.s. the borrowing rate is less compared to noon here people borrow from us and sell in India in this case in India they will they will get 8% but they have to repay 4% in u.s. so there is interest rate differential or 4% is 4% they get the profit they get the profits so interest rate differential of 4% they get the profit now question suppose let us take a hypothetical example like we are borrowing $100 100 you a tailor from the law US market so 100 US dollar you have to borrow formula US market so borrowing borrowing USD $100 so how much interest you have to pay in US interest payment interest need to prepare four percent that is $4 so end of one year end of year one we are paying how much we are paying 100 rupees pinch it $100 principal and for $4 interest so 104 we are paying 104 dollar end of one year in u.s. now what you will do is this $100 you are borrowing you are coming to India now so India interest rate 8% so we will get in India 8 to 8 percent so for $100 in India so in India $100 will are 8 $8 $100 on $8 and interest on an end of the one year end of one year we have in India dollar amount another net they interest a India we all.we borrow the hundred dollars and you paid interest our interest a trip $8 so end of the year 1 you are also end with hundred dollars so end of one year we have to repay hundred and four dollar to the US market but Indian market we got one $8 so there is a profit of $4 this $4 profit is there so now question is here this one an 8 dollar equivalent of how much money how much Indian rupee because hundred dollar on an 8 dollar we have so $108 we’ll sell in the market Indian market how much rupee will get because you are surrendering dollar in Indian market so we will get less rupees so we will get this much of rupee so the rupee equivalent of $108 will be 108 into per dollar if you say give it to my bank bank will give you 50 325 50 so 50 325 because bank will give you always less so this much of rupee we get this is equivalent to how much if you multiply this this will be this will be 57 52 this virtual rupee we got it this much of rupee you got extra this much a rupee you got it so but you are the arbitrage opportunities for dollar here but we have got 50 57 52 now question is this 57 52 equivalent to how much if equivalent to $104 then there will be no arbitrage if we this abound 57 52 in Indian rupee equivalent 204 dollar there is no equal there is no arbitrate because arbitrable level because where the 4% interest rate differentials are there if there is no 4% interest rate differential there will be no retrace the 4% is nothing about this $200 of 100 for each equivalent to rupee 57 52 then there will be no arbitrage opportunity then what will be the cost of US dollar the cost of joy it is nothing but 57 52 divided by 104 that will be the cost of US dollar and this will be nothing but if you if you calculate this this will be nothing but how much how much the US dollar will be equivalent to fifty seven fifty to five hundred for each equivalent to fifty five point three zero three three three zero three three so what does it mean it means that if if end of one year the rupee is available at $55 is available at fifty five point three zero three three there will be no arbitrage opportunity that means that means you have to come the interest rate differential should reflect in the forward premium so in this example what we will learn the learning learning part is here interest rate differential provides a evening for inflow or dollar a particular country we’re interested which opportunity available so reining in in case in case here the u.s.

Is a four percent interest rate India has eight percent interest rate India having more interest rate there is interest rate differential four percent dollar will migrate to India where people will purchase borrow dollar from US market at four percent sent to India in2 India I get an opportunity of four percent interest rate differential that will be a vehicle that will be incentive for the flow dollar from u.s. to India and this four percent differential is arbitrage opportunity available however if the market the forward premium or the market decide that there is a arbitrage opportunity everybody borrow from e-waste and sell in India then orbit which a person is reduced and slowly slowly the interest rate the interest rate interest rate equivalent that dollar value of rupee will will migrate to fifty five point three three where there will be no arbitrage opportunity between India and us the arbitrage opportunity provide the basic Avenue for the movement of dollar from one country to another country now the question here what you are learn the interest forward point how to estimate the forward point as I mentioned you mentioned that interest rate differential is the primary variable further for the moment of the layer for the moment of forward point so interest rate differential decide the forward point when you know the interest rate differential you can calculate the forward point what is the formula here the formula is here in forward point nothing but spot rate into interest rate differential into forward period how many month one month two month three months in our earlier example with one year one year so it is 365 and divided by 100 into 360 360 here because in actual my foreign exchange market the transaction take place for 360 day despite being a 24-hour a entire year market but there are five holidays in the market and that five holidays market generally close and we take into account only 360 day for calculation of foreign exchange so forward point is portrait into interest rate differential into forward prayer divided by 100 into 360 if you use this formula for our earlier example our spot rate was our spot rate was how much if you see our earlier example our spot rate is 53 26th and interest rate differential is 4% and forward prior since is one year 360 the forward point if you calculate this interest rate difference as portrait is fifty three point two six six and our interest rate differential is four and our entire each one-year calculation 360 divided by 100 into 360 this will give you the forward premium or two point one three two point one three and portrait purchase of dollar is fifty three point potato dollar is 53.2550 plus that if you add these this will give you rupee equivalent of the furrow forward rate for one year is fifty five point three eight five two three eight five two here when you have dollar you will sell dollar at 53.2550 and you have a forward premium forward point you are adding here to point one three this will give fifty five point three eight five two in our earlier example if you see our earlier example we have calculated the earlier example you have calculated fifty five point three zero three three the forward rate but we got fifty five point three eight five two the differential is here here interest it is calculated for 365 days here interest is calculated for three sixty days okay so there is a differential problem for adjustment problems are there so now so once you know the interest rate differential if you know the forward spot rate then automatically for any period for any days for any you can calculate the forward point okay the through the interest rate differential calculation process so once you know the interest rate difference and once you know the interest rate differential and the spot rate you can estimate the forward point once you know the forward point you can estimate the forward exchange rate for any period let us forward cross exchange rate since we what you have discussed is your exchange rate or one way only that as you know the for two currency forward rate in K you can estimate the forward forward point however whenever there is a three currency or cross currencies are there how you can decide the foreign exchange rate here you can discuss about one example you see the example here mrs.

Merchant Co wants to buy Euro against rupee 3-month forward the market is quoting London market via dollar eight 1.2745 one one point two seven five zero and forward points are given to you and in the Bombay market with a teller and Indian rupee is given to you and forward points are given to you what will be the exchange rate between what is called the euro euro against Indian rupee so here two way forward calculation will be done but we have done rupee first one rupee will be we have Cal two three we are calculating three month forward rate so you want to purchase dollar from the Indian market by surrendering more rupee then we will go to the London market surrendered dollar and purchase euro so in the Bombay market the Bombay market in Bombay you have to purchase dollar the spot rate will be spot rate will be one dollar is equal to 53 5500 and since the three month three months if you see three month forward premium will be 2015 3 third month forward premium here is given year 2050 2015 means second one is less than the first one so rupee is appreciating here so you have to repeal a depreciating two in a minus or deduct the forward premium so minus forward premium less so 0.001 five so we got zero zero zero point zero four we got through Pete appreciating here rupee is appreciating we are – sing it so we got fifty three point four nine eight five as the rupee after three month that is dollar equivalent of rupee after three month one dollar after three month will be quoted at fifty three four nine eight five okay now once you got the dollar rupee after three month rate then you go to the London market in the London market you want to purchase euro let me have to surrender more dollar so learn if you surrender more dollar one dollar will be 1 0 will be costing you in the London market London market euro will be costing you how much you a dollar one point two seven five zero and if you see the forward premium three month forward premium three month forward premium in London market third one 4550 third month 45 50 that means London market euro is appreciating euro each euro it appreciate group dollar is depreciating you have to add the forward premium now you have to add the forward premium zero zero five zero here it will be coming one eight two so US dollar one point two eight one zero now US dollar after three month will be this much after three month rue dollar will be this much in London market in Indian market so what will the equivalent calculation the calculation will be here the calculation will be here so what L do that now so one euro will be after three month USD one point two eight one zero into the one dollar will be fifty three so fifty three point four nine eight five this will give you something around something around rupee amount of rupee amount of sixty eight point some we multiply these two will get the rupee amount of sixty eight point four seven eight one rupee amount of one euro so this euro calculation will be in two-way or cross currency perverted calculation is like that so similarly you can do this example in Kolkata exporter in Kolkata exported goods drawn bill of exchange in pound sterling payable on September 30th he approaches it bang in July and purchase this export be what word read Bank will code that here also two-way market in India we get the dollar and rupee quotation in London you get a pound sterling and dollar quotation similarly and forward premiums are available to market you have to calculate this in a similar fashion what you discuss tensor here Mumbai interbank market potato dollar will be 53 55 zero and September forward point 25 rupee is appreciating Hin for our premium will be deducted so 53 4975 in the London interbank market pound sterling spot basis will be 1.5750 dollar so September month fifty point dollar is appreciating the pound the three month forward exchanger the free month forward premium will be deducted so we got the after three month forward exchange rate will be one pound sterling will be 1.5250 and once you go to the pound sterling the rupee equivalent the 1.5250 is the dollar rate and per dollar the amount of rupee will fifty three four nine five zero if you multiply this then you will get the rupee equivalent of pound sterling then what is the after three month pound sterling one pound sterling will be eighty one fifty eight five three seven three seven rupee shoe once you so these are the references you can go through that and in small questions are having available to you the multiple one question are you a rupee a depreciation of INR referred to what when I honor a rupee depreciating that means the fall in INR price of exchange foreign currency or increasing I honor price of foreign currency the rupee depreciating rupee to date 53 and tomorrow 854 then repeat presetting foreign currency value will appreciate so the second increase in I honor price of foreign currency similarly in the second question you have given us USD and INR conversion that and USD Japanese conversion that you have to calculate the Japanese then I honor chorus currency exchange rate here you have to follow the cross currency exchange rate and calculate that if we have to calculate the exchange rate so third question is Canadian exporter exporting goods to USA will receive one Latvia dollar for three after three month the code for three month Canadian and US dollar is available to you and how much the current exporter will receive in terms of in the forward contract here our contract the Canadian the person is having dollar he will sell dollar in the kenedmac Canadian markets you will get less amount of Canadian dollar so the exchange will be one point two three zero two you multiply one point two three zero two with the Tao one leg USD will get the exported mo export amount in terms of Canadian dollar thank you next session we’ll be discussing continuing with the merchant rate and foreign exchange calculation side you

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Risk Reward Ratio for Forex, Stock Trading and Day Trading

Welcome to this video on risk reward ratio for forex, stock trading and day trading, and well this applies to swing trading as well for that matter so here’s the big issue a lot of people out there will say things like well I won’t take a trade unless it has a better than three-to-one reward to risk ratio four to one reward to risk ratio five to one reward the risk ratio whatever it might be and that’s all great but I want to share with you some real-life considerations when you’re taking a stance like that so the first issue is that risk reward ratios are generally inversely correlated to win loss ratios so that poses one problem right there if you want to have more winners than losers you’re going to have to be willing to take some trades that don’t have as good a reward to risk ratio and that’s a psychological issue we’ll come back to that a little bit so trades with a higher risk reward ratio tend to have a lower win-loss ratio why is that there is a very clear reason that’s because it’s simply easier to determine a short-term move in the market why is that well because as more time goes by where things can happen in the market to change the market sentiment and this is why one of the reasons why I should say that the trades that have a better risk reward ratio they take more time to develop and therefore they’re less likely to complete and so when I want to say they have a worse win-loss ratio I mean to completion what we’re expecting it to have as a final target doesn’t mean you’d lose money necessarily if you manage them any well but it’s less likely to complete its pattern so for example let’s talk about a trade that has the best risk reward ratio which is a reversal trade where you get in I mean at the end of a trend and then you’re looking to trade a new trend in the opposite direction that is the single asked rewarded a risk ratio tree there is so let’s get to our charts here a little bit and the average trend last five waves so there is wave five right there so now we would say okay this is statistically the time to take a trend reversal trade and catch a trend in the opposite direction before it even confirmed and therefore we get a fantastic reward to risk ratio definitely better than three-to-one usually even better than a five to one reward to risk ratio these are so phenomenal so sure we all love to risk a little bit to make a lot and that’s fantastic so yes I like that too here’s one of the challenges in there you go okay so this particular trend went seven waves instead of five and this is one of the challenges is that it is very difficult to determine when exactly a trend will end so five is statistically the average but because it’s an average by definition there’s gotta be some trends that last lasts only three waves now there’s two they go seven waves and so therefore again you’re not going to have as good a win-loss ratio you’ll get stopped out here for example and this will turn into a losing trade another problem with trend reversal trades is that yeah they’re the best reward risk ratio trade but most trends don’t actually reverse in other words even if I were to take this trade here and go short odds are that the market will yes it’ll stop trending but it’s not typically going to then immediately reverse and go into a downtrend what happens at the most ever at the end of most trends is that they just kind of go sideways there is a cycle in the market of trending and non trending and what most likely will happen is that the market will go into a non trending cycle so then again trading trend reversal trades sure great risk great reward to risk ratio but only when they complete and they do not complete most of the time so here’s another example and again you’ll see that we get the same thing where we get five waves and then it goes down and whoops that’s not it if we would have taken this long for a trend reversal trade by golly darn it it went down to meet another lower low so first of all let me give you one solution to this when I trade trend reversal trades yes five waves are is the average trend I don’t want to trade within the average so when I take trend reversal trades I actually wait for a wave seven now that means that sometimes yes the market will stop trending after wave five and I won’t get an opportunity to take a trend reversal trade I’ll just never get that opportunity that’s okay I want that market to be more extended I want it to be beyond the average because I have actually a really good chance then that seven is going to be the final low now does that then give me a guarantee the market will go up into a new Uptrend no but what I like to do is what I call a hybrid trade so scalp trades okay let’s take the other side of the equation here what has a better win-loss ratio since these big long trend trades or trend reversal trades that have very good reward to risk ratio traits don’t have as good of a win-loss ratio what has a good win-loss ratio well scalp trades but then again conversely scalp trades don’t have as good of a reward to risk ratio so I do a hybrid oh let me move the chart here for you I’ve gotta take my drawing tools off in order to do that so what I simply do is I will take some profits if I take this long which this is a typical turn reversal trade for me all right that’s a half cycle right there and so I’ll lock in some profits there in other words as a hybrid I’m doing a little quick little scalp trade lock in some profits and then adjust my stop put in a trailing stop and this way I’m golden right at this point really can’t lose especially if I have my position hedged and so forth and that’s really key psychologically it’s very important for most traders including myself to have more winners than losers and if I have more winners than losers and then I get some big trades in there as well then wow that’s just the best of both worlds for me so this is what I do so I’ll take a full position I’ll take part of a position off some of my profits at the half cycle by the way if you’re interested my cycle indicator to share with you how these cycles work and how we measure them mathematically with precision feel free to send me an email at birria top dog training com and if webinar is pretty much every week sometimes twice a week where I actually give away my cycle indicator for free and give you a 40 minute tutorial on how to trade it and that’s how we determine where these numbers go you see the notations of the numbers and the ABCs and so forth that’s all done with my cycle indicator so happy to give that to you for free anyway so we we trade a half cycle we lock in some money because that half cycle is a super-high win-loss ratio rarely do I get a loss on that then I move my staff in now I’m golden and wouldn’t that be great to be golden on every single trade and again then our win-loss ratio goes through the roof and even if it’s small a bunch of small little winners at the end of the day or the end of the week is wow it adds up and then not only that but you end up then getting some big wins as well okay now let’s take that off and a lot see what happens here because I want to share with you another problem when people say I will only take these big win-loss ratio trades so okay we’re going we’re going going going going going going going going going going going and there we go okay good it all fit in the chart so this one worked right this trend reversal trade worked and indeed our risk is tiny this is literally the risk on the trade and our reward is huge that’s some where they’re probably probably right in about there be our reward and so yeah Oh reward to risk racial fabulous fabulous we love it we’d like to have these every day of the week or every hour of the day problem here though if you look at this is that the longer the trend continues this in this case trend reversal trade but the longer the market moves the more fluctuations come in their journey to the top so for example psychologically this would be a bit challenging from here to here and not a big deal from there to there not a big deal from here all the way down to here here’s the question could you stay in when it broke this low for example would you still stay in and this is very typical of long-term moves they get these big fluctuations from the time you get in over here to the target over here and become psychologically challenging to hang in there for the whole move because you see your P&L you’re given money back give you money back giving money back and so these are things that you need to consider and some of them are personal decisions as to your own trading psychology what you’re comfortable with and so forth so the bottom line is I’ll end with this a lot of it is personal you need to decide what works for your brain cells so understand to that scalp trades occur more frequently that gives you more trades every day or every week if your swing trader and they give you a satisfaction and they help you with the problem of getting bored if you’re only going to take trades that have a very high reward to risk ratio you’re gonna get bored and you’re going to get antsy and when traders get bored and antsy they tend to make mistakes and it’s not as satisfying now if you’re a really patient person and you can do that that’s fantastic then that might be the way to go for you if you find yourself needing more trades and getting reckless because you’re not getting enough trades you might want to incorporate scalp trading into your trading as well pick up some of those quick profits along the way waiting for the big moves and to me again that combination is really the best my friend if you like this video please understand that yep it’s free I give away a lot of free education and I just ask that if you got value from it you pay it forward by clicking on the share button and sharing good things with other people that’s really the best thing that you can do also if you’re watching on YouTube give it a thumbs up and leave a comment because I really love your comments they encouraged me to keep providing more free tutorials for you all so I’m giving you one of my favorite trade strategies called the rubber band trade which has a very very high win-loss ratio talking about high win-loss ratios this is probably the highest win-loss ratio trade I’ve ever seen in my life happy to share it with you absolutely free just click on the little icon there at the top right hand corner of the video and I’ll be happy to email it to you also there’s a link in the description box below you can click on that if you’d prefer and once you do that I will personally email the video to you with the rubber band trade strategy you

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