For anybody not a secret that with development of communication technologies, in particular the Internet, for many people there were new opportunities to realize themselves and, respectively, to gain income. The directions in which work is offered, weight, we will stop on the most interesting and profitable at the moment – speculation in the currency market Forex (Forex).
The people working at Forex are called traders and they act with such speculative motives – to buy cheaper both to sell more expensively and to earn an exchange difference. But they do it not simply because today in 8.00 mornings there was a wish to buy dollar and when for this purpose there is a favorable situation. For example, if we knew that in 3 days of euro will become 2% more expensive, we could buy now it, and in 3 days to sell, and to earn to itself these 2% of a gain of the price. And search of such profitable situation is also the most important and at the same time interesting moment in trade.
That to carry out it, the trader uses various methods of the analysis which help it to predict change of exchange rates. And we speak "currencies" because business is done not by any one monetary unit, and a set of financial instruments. The main currencies which euros, the American dollar, Japanese yen, Swiss franc, the British pound, etc. bargain, are.
What sum is necessary for ? That to find out it, it is necessary to understand the transaction mechanism.
First, when the trader buys currency, he buys not separately taken euros or the British pound, the currency pair, for example, is bought by euro/dollar. It means that we buy euro for dollars. That currency which is on the first place, is called basic, on the second place – quoted or currency of quoting. Thus the trader buys not any quantity of currency what to it will want, and trade goes lots. 1 lot is 100 thousand units of basic currency. I.e. in our example we buy 100 thousand euros. How many we need to pay for it dollars? There is a concept the quotation – monetary value of cost of a currency pair. And if we say that euro/dollar costs 1,4495, it means that for 1 euro give 1 dollar and nearly 45 cents. And to buy 1 full lot on this currency pair to us it will be necessary to pay 100 $000*1,4495=144950. Naturally, a little who has such sum. Therefore recently most of traders work at a marginal basis.
The margin is a pledge. When the bank opens for the trader a position, he pays for a lot the full sum, and the trader gives to bank pledge in 100 less, i.e. the mechanism of "a credit shoulder" is used. Usually credit shoulder makes 1:100, respectively pledge will make $1449 and 50 cents. When the trade position is closed, pledge to the trader comes back in full, irrespective of result. Therefore the sum which he will pawn is necessary for the trader for transaction, plus on the account there have to be available funds, so-called "safety cushion". In some currency pairs the pledge fixed somewhere this sum depends on the current price of currency, but, generally, pledge seldom exceeds $2000.
After simple calculations of InfoAdvisor.net can tell that the minimum sum necessary for trade in one lot are 2-2,5 thousand dollars, thus, the sum more, the is more comfortable and safer trade. Anyway before opening of a trade position the trader has to carry out at first the analysis to find a favorable situation on which it is possible to earn.
There are 3 main types of the analysis, so-called "3 whales of trade": fundamental, technical and computer analysis. By means of these methods we can with a bigger share of probability predict, the course of the currency interesting us will how exactly change.
was already considered on InfoAdvisor.net earlier. Today we will tell about the fundamental analysis (FA). He allows the trader to estimate macroeconomic conditions in which there is a national currency, to see prospects of development of economy. It is an important indicator, after all if national economy is in decline, hardly someone will want to buy its national currency or to invest means in development of the enterprises (to take shares, for example). FA is in fact long-term because the economy - "long-playing record" if any process began, will stop it not soon. Its use gives to the trader vision of a situation in general that it was impossible as in a saying: "Behind trees of the wood did not see".
And a main issue in the fundamental analysis is tracking of news which can be economic and political character, and also various force majeurs, natural disasters, etc. are considered. It is possible to carry such main indicators to news of economic character as growth rates of GDP, unemployment rate, a rate of inflation, development of industrial production, etc. In total there are about 30 main macroeconomic indicators which will have most impact on a change of course. It is possible to carry to such news as well data on change of the main discount rates, press conferences of the head of the Central Bank. The main discount interest rate is a percent under which the Central Bank of the country gives the credits to commercial banks. Discount rate is the main mechanism which is used for inflation regulation. And the it is higher, the this currency is more attractive to investors.
The publication of these data happens in strictly certain day and time, and information on graphics of their exit we can receive from special economic calendars. And while news appears in the market, depending on the appeared information, in the market there can be a sharp jump of a course.
Influence of news on exchange rate
Let's consider it on the example of January 22, 2008. Let's assume, you plan the transaction and would like to buy euro. And you know that today the decision on change of the main discount rate of the European Central Bank (ECB) will be published. Till this time on the market hearings and speculation went to a subject that the rate can be lowered in connection with some delay of economic growth in the Eurozone, and then appeal of assets in euro for investors would decrease. Therefore falling of euro exchange rate in relation to dollar was observed. When was the decision is published, it became clear that a rate left at the former level (4%), the market breathed sigh of relief, and the course jerked up. Optimism traders were given also by the subsequent press conference of the head of European Central Bank Jean-Claude Trichet during which he reported that the European Central Bank will undertake in due time measures for maintenance of stability of euro.
On graphics you see that at the time of an exit of news rapid growth of euro exchange rate began, and in 5 hours the price of a currency pair eurodollar changed on 170 points. Point is in price expression of cost of currency the 4th sign after a comma, and changes of course consider in points. I.e. if 1 euro cost 1,4555 dollars, and then the price became 1,4565, say that the course grew by 10 points, but not by 0,10 cents. The cost of one point in couple eurodollar makes $10, therefore, in 5 hours it was possible to earn $1700.
Here is how the trader in the trade can use FA. But there is more to come. In the paragraph above InfoAdvisor.net reviewed an example of a so-called short-term position when your transaction lasted only some hours. But duration of trade operation can make also some days, and even weeks. And here, to predict the movement of a course, you too use the fundamental analysis.
Influence on the exchange rate of political events
Let's review the fundamental analysis now an example of a political event because such information too is traced by participants of the market auction on Forex.
You for certain remember sensational scandal in the fall of 1998 which central figures and Monica Lewinski. Long time Clinton did not recognize communication with Monica, but at the end of August, 1998 court session on which the president confirmed officially took place that Lewinski was his mistress. It caused shock in the American community and to Clinton threatened with impeachment.
That fall the dollar fell in relation to some currencies to rather big percent. For example, in relation to Swiss franc dollar failed on 890 points in 2 weeks.
Why it occurred? Because if the president was discharged really of the management, it would mean possible change of the government, and as a result, change of financial policy of the state. And therefore before situation stabilization investors and traders preferred to get rid of dollar, unreliable at that moment, so far.
And thus, if you reacted to the received information in time, your transaction would last about 2 weeks, and you could earn this exchange difference, those nearly 900 points, and, considering the cost of 1 point in a currency pair dollar/franc, your profit would make $4500.
Generalizing the aforesaid, InfoAdvisor.net once again emphasizes that the exit of any news can significantly change the direction of the movement of a course. And when planning the transactions you surely have to consider this moment. After all if you want to buy dollar, and at the same time there will be dreadfully bad indicators and the course will fall off, you naturally sustain a loss. Therefore it is in that case best of all if you beginner in market, to wait this dangerous moment and to work when the market calms down and stabilized.
The working day of the trader always begins with studying of an economic calendar that it was possible to make the plan of trade, without being afraid of any dirty tricks.
Be aware always of events and successful trade!!!