Thursday, November 5, 2009
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Monday, October 5, 2009
Forex trading
An investor has a margin deposit with Saxo Bank of USD 100,000.
The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.
The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.
Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.
Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.
Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.
Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.
As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.
This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000
Forex Trading Basics
The global foreign exchange market is the biggest market in the world. The 3.2 trillion USD daily turnover dwarfs the combined turnover of all the world's stock and bond markets.
There are many reasons for the popularity of foreign exchange trading, but among the most important are the leverage available, the high liquidity 24 hours a day and the very low dealing costs associated with trading.
Of course many commercial organisations participate purely due to the currency exposures created by their import and export activities, but the main part of the turnover is accounted for by financial institutions. Investing in foreign exchange remains predominantly the domain of the big professional players in the market - funds, banks and brokers. Nevertheless, any investor with the necessary knowledge of the market's functions can benefit from the advantages stated above.
In the following article, we would like to introduce you to some of the basic concepts of foreign exchange trading. If you would like any further information, we suggest that you sign up for a FREE Membership on this website, where you will be able to exchange views with other Forex traders and get answers to any questions you might have.
Margin Trading
Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market. For trading the main currencies, Saxo Bank requires a 1% margin deposit. This means that in order to trade one million dollars, you need to place just USD 10,000 by way of security.
In other words, you will have obtained a gearing of up to 100 times. This means that a change of, say 2%, in the underlying value of your trade will result in a 200% profit or loss on your deposit. See below for specific examples. As you can see, this calls for a very disciplined approach to trading as both profit opportunities and potential risks are very large indeed. Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions.
Base Currency and Variable Currency
When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. Or buy euro and sell Japanese yen, or any other combination of dozens of widely traded currencies. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.
The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.
Dealing Spread, but No Commissions
When trading foreign exchange, you are quoted a dealing spread offering you a buying and a selling level for your trade. Once you accept the offered price and receive confirmation from our dealers, the trade is done. There is no need to call an exchange floor. There are no other time-consuming delays. This is possible due to live streaming prices, which are also a great advantage in times of fast-moving markets: You can see where the market is trading and you know whether your orders are filled or not.
The dealing spread is typically 3-5 points in normal market conditions. This means that you can sell US dollars against the euro at 1.7780 and buy at 1.7785. There are no further costs, commissions or exchange fees.
This ensures that you can get in and out of your trades at very low slippage and many traders are therefore active intra-day traders, given that a typical day in USDEUR presents price swings of 150-200 points.
Spot and forward trading
When you trade foreign exchange you are normally quoted a spot price. This means that if you take no further steps, your trade will be settled after two business days. This ensures that your trades are undertaken subject to supervision by regulatory authorities for your own protection and security. If you are a commercial customer, you may need to convert the currencies for international payments. If you are an investor, you will normally want to swap your trade forward to a later date. This can be undertaken on a daily basis or for a longer period at a time. Often investors will swap their trades forward anywhere from a week or two up to several months depending on the time frame of the investment.
Although a forward trade is for a future date, the position can be closed out at any time - the closing part of the position is then swapped forward to the same future value date.
Interest Rate Differentials
Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.
Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!
Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.
Stop-loss discipline
As you can see from the description above, there are significant opportunities and risks in foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict stop-loss policies in positions that are moving against you.
Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out. Of course, the market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level.
But the main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events, such as G7 meetings, are normally scheduled for weekends.
For speculative trading, we always recommend the placement of protective stop-lossorders. With Saxo Bank Internet Trading you can easily place and change such orders while watching market development graphically on your computer screen.
Wat is Forex ?
Forex (een afkorting van Foreign Exchange) is het real-time kopen van een munteenheid en het verkopen van een andere. De Forex markt is een van de grootste markten ter wereld. Met Forex kan men valuta verhandelen en geld verdienen door te voorspellen welke valuta zal stijgen in waarde ten opzichte van een of meerdere andere valuta binnen een bepaald tijdsbestek. (Zoals 15 min na de originele investering) Bijvoorbeeld, men verwacht dat de US Dollar om 4 pm meer waard zal zijn dan de Euro.
De Forex markt is de grootste financiele markt ter wereld en iedereen vanaf 18 jaar kan er aan deelnemen.Misschien dat Forex traden in eerste instantie ingewikkeld klinkt, maar de basisbegrippen zijn relatief eenvoudig. Om mee te beginnen onthoud dat de eerste munteenheid de "base currency" is. Dit is normaal gesproken de US Dollar.
De meeste traders verhandelen de US dollar tegen andere munteenheden zoals de Japanse Yen.De Amerikaanse dollar is meestal de basis munteenheid wanneer men naar koersen kijkt. Bijvoorbeeld, een koers van USD/JPY 2.34 betekent dat 1 Amerikaanse dollar 2.34 Japanese Yen waard is.
Wanneer de US Dollar de basis munteenheid is en de koers stijgt dan betekent dit dat de dollar nu meer waard is en de andere munteenheid minder. Als na het verstrijken van de tijd van de 'deal' de koers van USD/JPY nu 2.50 is dan is de dollar gestegen in waarde. Er zijn uitzonderingen zoals wanneer men de Engelse Pond of de Euro tegen de Amerikaanse dollar verhandeld. In die gevallen is de Amerikaanse Dollar de zwakkere munteenheid , ie EUR/USD of GBP/USD.
L'euro fringant face au dollar, malgré les voeux pour un dollar fort au G7
L'euro grimpait face au dollar lundi en début d'échanges européens, en dépit de souhaits en faveur d'un dollar fort émis samedi par les ministres des finances du G7, tandis que le yen baissait face à l'euro et au dollar.
Vers 09h00 GMT l'euro grimpait face au dollar, à 1,4615 dollar contre 1,4572 dollar vendredi soir.
L'euro montait face au yen à 131,36 yens contre 130,87. La monnaie japonaise cédait également du terrain face au dollar, à 89,88 yens contre 89,80 yens vendredi soir.
La monnaie unique, qui avait été mis sous pression vendredi par de mauvais indicateurs américains sur l'emploi, avait néanmoins réussi à surmonter cette déception. Lundi, elle confortait son avance face au dollar grâce à un bon chiffre européen: l'activité économique s'est redressée en septembre pour le deuxième mois consécutif dans la zone euro, s'établissant au final à 51,1 points, contre 50,4 le mois précédent.
En outre, le dollar semble pâtir de la passivité des ministres des finances du G7, qui ont réaffirmé samedi à Istanbul leur volonté d'un marché des changes stable, à l'invitation notamment des Européens, mais sont restés muets sur les moyens d'y parvenir.
"L'excès de volatilité et les mouvements désordonnés des taux de change ont des implications néfastes pour la stabilité financière et économique", a estimé le G7 dans un communiqué publié au terme de sa réunion.
"Cette déclaration relativement faible laisse la porte ouverte à une baisse plus prononcée du dollar", estime Mitul Kotecha, analyste chez Calyon.
Par contraste, la détermination affichée par les autorités japonaise à juguler la hausse du yen, qui pénalise les exportations du pays, semblait agir lundi matin.
La devise nippone était sous pression après les déclarations du ministre japonais des finances qui a promis des "actions appropriées" si la monnaie japonaise montait trop.
"Nous prendrons des mesures appropriées si les mouvements à sens unique devenaient excessifs", a averti M. Hirohisa Fujii samedi lors d'une conférence de presse à l'issue d'un G7 à Istanbul.
Mais le yen pourrait bientôt rebondir, estiment les opérateurs. "Les marchés testeront la volonté des autorités japonaises, en poussant le yen plus haut", au delà du seuil des 90,00 yens pour un dollar, a commenté Mitul Kotecha.
La monnaie japonaise avait touché son plus haut depuis 8 mois la semaine dernière, à 88,25 yens pour un dollar, après que M. Fujii s'est dit contre les interventions sur le marché des changes pour affaiblir la monnaie et soutenir les exportations.
Vers 09H00 GMT, la livre baissait face à l'euro à 91,56 pence pour un euro, mais montait face au billet vert à 1,5961 dollar pour une livre sterling.
La monnaie helvétique fléchissait face à l'euro, à 1,5109 franc suisse pour un euro, mais progressait face au dollar à 1,0338 franc suisse pour un dollar.
L'once d'or valait 1.005 dollars contre 1.003,50 dollars vendredi soir.
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Cours de lundi Cours de vendredi
09H00 GMT 21H00 GMT
EUR/USD 1,4615 1,4572
EUR/JPY 131,36 130,87
EUR/CHF 1,5109 1,5101
EUR/GBP 0,9156 0,9148
USD/JPY 89,88 89,80
USD/CHF 1,0338 1,0408
GBP/USD 1,5961 1,5938
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