Economic indicators

Gross Domestic Product (GDP)
GDP Deflator
Trade balance
Unemployment rate
Non-Farm Payrolls (NFP)
Average hourly earnings
Consumer price index (CPI)
Producer price index (PPI)
Employment cost index
Tan Kan, BOJ (Bank of Japan report)
Business climate index (IFO)
Humphrey-Hawkins testimony
Consumer confidence
Industrial production index
Capacity utilisation
Durable goods orders
Factory orders
Leading indicators index
Productivity
Retail sales
Confederation of British Industries (CBI)
Money supply M1, M2, M3
Atlanta Fed index
Average Workweek
Beige book
Building permits
Business Inventories
Chicago PMI (Purchasing Managers Index)
Construction spending
Consumer credit
Current account (Balance of payments)
Existing home sales
Export prices
Help-Wanted Index
Housing starts
Import prices
Jobless claims
Michigan consumer sentiment index
ISM services index
New Home Sales
Personal income
Personal Spending, Consumption
Philadelphia Fed index
Real Earnings
Redbook
Unit Labour Cost
Wholesale inventories
NAPM or PMI (National Association of Purchasing Managers Index)




Macroeconomic performance characterises economic development, indicating economic growth or decline. Based on these measures, price shift trends may be predicted. Thus, it may be said with certainty that publishing of favourable data may lead to considerable and long-term shift in exchange rates. These performance indicators include Nonfarm Payrolls, GDP, Industrial Production, CPI, PPI and a number of other marcoeconomic performance indicators.

The date and time of a specific indicator being published are known in advance. There are so-called calendars of economic indicators and major events in the functioning of some countries (noting specific dates or approximate release time). The market prepares for such events. There are expectations and forecasts on the value of a given indicator and its interpretation.

The release of data may lead to sharp exchange rate fluctuations. Depending on how market participants interpret a given indicator, an exchange rate may swing either way. This swing may either reinforce or adjust an existing trend, or even start a new one. A given outcome depends on several factors: the market situation, the economic situation of countries hosting the currencies, prior expectations and attitudes, and, finally, the value of a given indicator.

Forex strategies

Each beginner on the international currency market approaches their operations with utter seriousness. The very first day poses a very justified question: what is the way to play in order to at least avoid loss in the long term? Forex trading strategies will help.
Forex strategies: programmes for functioning on the market

By applying a specific algorithm applicable to a specific market situation, the Forex strategy determines a trader’s action on the market. On the internet, you will find a number of various Forex strategies invented by traders that will guarantee profit given a specific market state. Successful traders have their own Forex strategies which they will obviously never share with the public because this is their own income mechanism, honed over the course of months if not years.
Newbies and Forex strategies: is success guaranteed?

There is another obvious fact as well: not even the most loss-proof play methodology will bring a new user millions straight away. The market always changes, and newcomers simply cannot adjust to the new situation here in time. Forex strategies are based on success and failure, on chasing profits along a road that is known for its pitfalls.
What Forex strategies to use

There are a number of universal Forex trading strategies that allow you to stay afloat for a long time without going in the red. Overall, using some Forex strategy on the market is required, because random bets will not bring a positive result. This has been proven time and time again. Of course, sometimes this may turn into a very successful deal or two, but stable profit becomes impossibility over time.

The experience of professional traders shows that a personal Forex trading strategy is the most efficient and comfortable solution for a trader. You will no doubt agree that an active, risk-taking person and their more cautious, risk-aware colleague who scrutinises the situation before making a move are unlikely to use the same methods. Only by trying out new things will you be able to select a path that suits you the most. You will see that rules that clash with your own values are hard to follow.

Central banks

Bank of Japan (BOJ)
European Central Bank (ECB)
Bank of England (BOE)
Federal Reserve System (FED)
Swiss National Bank (SNB)
Reserve Bank of Australia (RBA)
Bank of Canada (BOC)
Reserve Bank of New Zealand (RBNZ)
Central banks meeting dates
Interest rates



Central banks are the apex financial institutions of their respective countries. In some countries, central banks are known as Reserve Banks. In addition to overseeing the commercial banking system in a country, a central bank is also in charge of printing of a nation’s legal tender as well as exerting monetary policy controls on a nation’s economy. Examples of central banks are the Federal Reserve Bank (US), the European Central Bank (ECB), the Bank of Canada (BoC), the Bank of Japan (BoJ) and several others. Every nation in the world has a central bank.
Structure of a Central Bank

Generally speaking, a central bank has a head, known as the Governor or the Chairman, and a board of governors. They are responsible for the management of the bank. A central bank will also have several departments which are in charge of the various functions of the bank. So a central bank will have a division that conducts banking supervision and regulation of banks, another division for currency operations (printing, circulation and money supply controls), and another division for carrying out monetary policy functions. The exact structure of a central bank will differ from one country to another, according to the peculiarities of each nation’s financial sector.
Functions of the Central Bank
Monetary policy is the primary task of any central bank. Monetary policy refers to issues such as determining what currency a country will have, whether that currency will have a fixed or floating exchange rate, issues pertaining to determination of interest rates and foreign reserve maintenance policies.
The central bank is also in charge of printing and circulation of a nation’s legal tender, as well as the control of the supply of a nation’s currency.
A central bank is also in charge of maintaining a country’s foreign reserves, and in determining what currency a nation will hold reserves in.
Stability of a nation’s financial system is another function of the central bank. In this role, a central bank becomes a lender of last resort. We saw this function exerted by the Federal Reserve Bank in the US in providing $700 billion bailout for the US banking and automobile sector under the Troubled Assets Relief Program (TARP) following the collapse of several banks in the US during the global financial meltdown of 2008.
A central bank also serves as the bank for the host nation’s government and its agencies.
Central banks provide emergency lending to commercial banks by providing a lending window at the interest rate it has determined. This is another way of functioning as a banker of last resort.

Forex market participants

All operations on financial market are done via the system of special institutions: central banks, commercial banks, dealers and brokers. Every Forex participant has its own volume of deals on the currency market. For example, central banks have the biggest turnover that exceeding hundreds of millions US dollars a day. Commercial banks and dealers have smaller turnover. Daily turnover of brokers is considered to be about 25-30 millions of US dollars that makes 2% from the general volume of all Forex trading.
Central banks of countries

These banks regulate money and credit flows with instruments defined by law. The main functions of central banks are emission (issue) of money, carrying out of monetary and credit policy and national currency policy. For example if a bank carries out currency intervention it may lead to the rise or fall of the national currency rate.
Commercial banks

These are financial intermediaries that accept deposits from legal and private persons, take advantage of investing this money, return it to depositors, close and operate bank accounts. Every country has some big commercial banks that are able to influence currency rates. In 2006 the Deutsche Bank turnover was of 19.26% from the whole Forex market turnover
Brokers

Brokers are legal or private persons that represent agents or negotiators in trading who meet buyer and seller of securities or currency together. Broker works in the name, by order and at the expense of his client and may provide some additional services. Broker gets a commission bonus for fulfilling customer's orders.
Dealers

Dealers are companies or private persons that operate on the market at their own expense and in their own name, in other words they sell and buy currencies or any other assets with their own money.

Forex currencies

The history of currencies
USD
EUR
GBP
JPY
CHF
DEM
Currency codes



The word value comes from the Latin “valeo”, “I stand”.

Valuable currencies today are:
Monetary units of countries with indication of type (paper, gold, silver);
Monetary units of a number of foreign countries, including payment and credit documents expressed in such monetary units and usable for international accounts (cheques, bank bills etc.)

Basically, the Forex currency market is the sum of all transactions made by its participants (banks, exchanges, funds, investment, brokerage and external trading firms, as well as private persons, i.e. traders) to exchange some types of currency. Each second, the Forex market processes thousands of transactions, bringing profit to participants.

The Forex currency market has the following classification of currency types:
Freely convertible currencies have no limit on financial transactions of any kind, may be used by residents and non-residents of a country, and can be converted into any foreign currency;
Partially convertible currencies are usually those with a number of restrictions on use by non-residents and a specific range of allowed transactions. Thus, most Western European currencies are partially convertible; restrictions on use by non-residents were removed in 1958, and now any amount on an account in such currencies may be converted to a freely convertible equivalent;
Non-convertible currencies have restrictions for both residents and non-residents barring a number of financial transactions. They are not convertible and are used only inside their specific countries. For instance, non-convertible currencies are used in developing and dependent countries, and tied to the currency of a metropolitan country that sets exchange rates to give itself an advantage. Non-convertible currencies are not used on the Forex market.

The Forex currency market has two types of operations: buy and sell; each currency has demand and supply, allowing transactions with no real restrictions on volume or time. The Forex currency market also entails regulation of the exchange rates of various countries by balancing supply and demand.

The Forex currency market has a number of so-called primary currencies – most daily transactions are conducted in these:

USD – the U.S. dollar. No doubt the backbone of the Forex market. Traders often call the USD the buck, the greenback, the dolly.

EUR – the euro, common currency for the European space, second on Forex in terms of popularity. Before the euro, the DEM Deutschmark, Germany’s national currency, took its place.

GBP (Great Britain Pounds) – the pound sterling, Britain’s national currency. Financier slang also includes the names sterling, pound, and cable.

CHF – the Swiss franc. The slang term swissy is used alongside the official name.

JPY – the Japanese yen.

The Forex currency market also uses:

AUD – the Australian dollar, often referred to as the aussie by financiers.

СAD – the Canadian dollar.

NZD – the New Zealand dollar, also known as the kiwi among Forex currency market traders.



Another incredibly important concept on the currency market is the currency exchange, which is a key link in the chain of currency market trading services.

Essentially, the currency exchange is a place where transactions are made. In this case, the currency is in free trade, shaping the process of constant currency exchange fluctuations. The main characteristic of the currency exchange is that exchange rates are shaped and noted as part of its operation, through the effect of supply and demand on the selling and buying of currencies. This very process is the main objective of the Forex currency exchange: shaping the exchange rates based on objective effects of the economic factors of specific countries. The currency exchange essentially regulates exchange rates.

With the development of technology, more and more people today use the currency exchange online, trading in real time via an internet connection. The online currency exchange fulfils a number of functions besides affecting exchange rates: it lays the technical groundwork for free trade, creates and applies the rules for trading participants to enter (covering e.g. funds, business reputation), and creates the conditions and rules for making the transactions themselves. The obligation of monitoring observance of these conditions lies with the currency exchange as well.

The largest currency exchanges are in London, New York and Tokyo. Thus, the online currency exchange can cover practically the entire world and provide nearly equal conditions for all currency market participants. This has made the Forex currency exchange the largest exchange in the world, with a turnover of more than several trillion dollars per day.

Forex volumes

Become a forex trader, and buy and sell in the world's largest financial market!

Here are the key figures*:
Over $1.9 trillion dollars a day traded in 2004
That grew to $3.2 trillion by 2007 – a 70% increase
Daily volume is now nearly $4.0 trillion – and the market is still growing

Forex dwarfes other markets:
It has 11 times the daily volume of all other global exchanges combined
Its daily turnover is 40 times the New York Stock Exchange (NYSE)
$300 are traded every day for every person on the planet
A week's worth of forex trading is more than the annual United States GDP

The major forex trading centres are the United States, Great Britain and Japan. Market activity peaks when more than one is open.

How to make profit?

How to make profit?
One of the most difficult things for forex beginners to understand is how you make profits trading currencies. At the same time, since we don't charge commissions, many people don't understand how we make money either.

Here are the answers!
How do you make money?

Let's take an example based on the graph below:
You open an Classic Account with €2,000
You think the Euro will go down against the US dollar
You decide to sell 200,000 Euros once the bid price reaches 1.2850 US dollars
Because you are on 1:100 margin, this costs €2,000 – we provide the other €198.000
There is no margin left in your account at this point
The Euros you sold are worth $257.000 US dollars
You decide to buy Euros once they go down to an ask price of 1.2750 US dollars
The Euro ask price reaches 1.2750 US dollars and you buy
This costs $255,000 US dollars
You have now sold 200.000 Euros for $257.000 and bought them for $255,000
The difference is $2,000 US dollars or €1568 Euros
Your profit for a €2,000 investment is €1568 Euros – a 74.43% return!

Here's another example:
This time you think the Euro will go up
You open a Cent Account with 20 US dollars
You decide to buy 1500 Euros when the Euro ask price goes down to $1.2750
It does and the cost is $1912.50
Because you have 1:100 margin this only costs you $19.12 – we provide the rest
The Euro then goes up to 1.2850 US dollars
You sell your 1500 Euros for $1927.50
Your profit is $15.00 – a 75% return on your $20 investment!
How do we make money?

You've made money trading Euros and dollars. We don't charge any commission, so how do we make money?

Notice in the example above that we talked about bid prices and ask prices. These aren't the same:
The bid price is what you pay when you're buying currency
The ask price is what you get when you're selling - and is less than the bid price

The difference between the two is known as the spread. This is where we make our profit. In the first example above, the spread is 0.0002 or two points, and so our profit is about $30 on $200,000.
Managing your risk

In the examples above, the dollar moved in the direction you expected. However, it could move in the opposite direction, and you could lose money. There are a number of things you can do to manage this risk:
Change the default 1:100 margin for your account - 1:10 for low risk or 1:500 for high risk
Manage your money by spreading it over several investments

Forex History

Forex history
The history of Forex

Back in prehistory, there was no concept of currency. A cow was a cow and a sheep was a sheep. People bartered goods for other goods. The problem was that when you traded ten sheep for five cows, you had to find somewhere to keep the cows. Cows are large; they don't fit in your pocket. Something had to change.
Mesopotamia

Urban societies started to emerge in Mesopotamia about 5300 BC. Wealth was based on agricultural products – primarily grain. Grain was stored in temple granaries, and when people made deposits, they needed receipts – the receipt came in the form of a piece of metal.

By 3000 BC, this evolved into the shekel, a measure of barley. Shekels could be converted into metals such as copper, silver and gold.

Then, around 1700 BC, the Code of Hammurabi established formal laws in Mesopotamia. This included rules around the use of money in Mesopotamian society.

Money was born.
Coins

The problem with most early money was that there wasn't any standard measure. A piece of gold could be small or large, so there was no way to place a consistent value on traded goods.

Coins solved this problem. They had a standard weight, and were stamped with symbols by the state to prove their authenticity. The first standardised metal coins appeared in Greece in the seventh century BC.
The gold standard

The value of a coin continued to be determined by its weight into the early 17th century; a Dutch Guilder had one weight and a French franc had another.

However, as trade grew, coins became more and more impractical. Banks started to issue money in large denominations, using cheap materials such as paper. Physical money no longer had an intrinsic value; instead it could be redeemed at banks for gold or other precious metals.

After the Napoleonic wars of 1803-1825, a number of nations fixed the value for their currencies against gold, and promise to redeem the notes directly. Currencies could now be exchanged based on their fixed values.

This was the gold standard.
The world at war

The gold standard continued until World War I. However, there were growing concerns about some countries' ability and willingness to redeem their banknotes.

The chaos of World War I put an end to the gold standard, and nothing replaced it until 1944.

Although the gold standard was dead, international financial institutions did start to emerge between the wars. The most important was the Bank or International Settlements (BIS), founded in Basel in 1930. Its charter was to support countries without mature financial systems, or those with balance of payments deficits.
1944

In 1944, delegates from 44 Allied nations met in the United States at Bretton Woods. Economic luminaries including John Maynard Keynes and Harry Dexter White worked to create a new global financial system, so that shattered countries could be rebuilt after the war.

The Bretton Woods Agreements were signed in July, 1944 with the following results:
The International Monetary Fund (IMF) was established
Countries who cooperated with the IMF could receive stabilisation loans
The US dollar and British pound were announced as international reserve currencies
Currency values were fixed against the US dollar - with only 1% deviation allowed
The value of the dollar was fixed against gold
Countries could only alter their exchange rates with IMF permission
Currencies became convertible
Governments were required to hold reserves and intervene in currency markets
Nations had to pay a fee in gold and national currency to join the IMF
1947

After World War II, the US became increasingly concerned with the ability of a war-ravaged Europe to resist Soviet communism. In 1947, it established the European Recovery Plan, popularly known as the Marshall Plan after the US Secretary of State, George Marshall.



Over four years, European countries received nearly $13 billion dollars under the Marshall Plan, allowing them to buy the goods and services they needed to rebuild.
1964

In 1964, Japan made the yen convertible. With all major currencies now convertible, it became clear that the US could no longer sustain a fixed dollar rate against gold.

US dollar inflation became a major issue, and the US administration took steps to control US dollar transactions through taxation of exchange differentials. Costs increased for foreign borrowers, leading to the creation of a new eurodollar market.
1967

The British balance of payments deteriorated through the 1960s, and their gold reserves declined from $18 billion to $11 billion. In 1967, the UK had to devalue the pound, striking Bretton Woods a crippling blow. At the same time, US debt continued to grow.
1970

In 1970, interest rates decreased sharply in the US. Investors moved their capital to Europe, where rates were higher. The worst dollar crisis to date ensued.
1971

Events accelerated in 1971:
In May, Germany and The Netherlands allowed open trading of their currencies
In August, the US balance of payments deficit reached crisis point and President Nixon responded by stopping conversion of US dollars into gold

In December, matters came to a head:
A last attempt was made to save Bretton Woods in a meeting at the Smithsonian Institute in Washington
Exchange rates were allowed to deviate up to 4.5% from their fixed values
Central banks made major interventions in the currency markets - including $5 billion from the Bundesbank
Exchange rates could not be controlled despite these interventions
Currency exchanges in Europe and Japan were closed temporarily
The US devalued the dollar by 10%
Developed countries floated their currencies – ending fixed exchange rates
1973 to 1974

Over this period, events continued to unfold:
The US dismantled the tax measures and other restrictions it had introduced in 1964
Central banks stopped intervening in the currency market
Speculators made enormous profits once interventions stopped
Two major banks - Bankhaus Herstatt and Franklin National Bank - went bankrupt
Speculation damaged many other banks
The Bretton Woods system ceased to exist
1976

Representatives of major nations met in Kingston, Jamaica, to create a new global currency system. This had the following results:
Gold was no longer used as the basis of currency valuation
International organisations were set up to control currency conversion
Currencies were used to buy other currencies
Commercial banks became the main mechanism for currency conversion
Exchange rates were floated – and were driven by market forces

Forex trading

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At Forex4you, we're committed to offering the best forex trader services possible. Join today and see what we mean!
What is forex trading? How do people make money in the forex market?

When you go on vacation, you buy foreign currency. When you return, you change back the foreign currency that you have left. The problem is that you lose money, because you pay a high rate when you buy foreign currency and get a low rate when you sell. This is the spread, and it’s how the bureau de change makes a profit.

What if the spread were very small?
You buy $1,000 in London
The bureau de change is selling at 1.60 USD/GBP and buying at 1.62 USD/GBP
You pay £625 for $1000
You would lose £7.72 if you sold the $1,000 back right away – but you don’t
You wait two weeks and the dollar gets stronger
The bureau de change is now selling at 1.57 USD/GBP and buying at 1.59 USD/GBP
You sell your $1,000 and get £628.93
You’ve made £3.93 on forex trading

You can’t get small fx trading spreads from a bureau de change, but you can get them from a forex broker. You can also do fx trading on margin, so you only need to come up with 1% of the money if you have leverage of 1:100. That means you would only have to invest £6.25 to make the £3.93 profit above. Of course, your forex trading profits aren’t guaranteed; the dollar could go down as well as up.

What is Forex?

One of the questions we get asked all the time is “What is forex trading?” When did it start? How big is it? Who are the major players? What makes currency rates change?

Here are the answers to all your questions!
About forex

Forex is the international market for the free trade of currencies. Traders place orders to buy one currency with another currency. For example, a trader may want to buy Euros with US dollars, and will use the forex market to do this.

The forex market is the world's largest financial market. Over $4 trillion dollars worth of currency are traded each day. The amount of money traded in a week is bigger than the entire annual GDP of the United States!

The main currency used for forex trading is the US dollar.
When did forex start?

As the world continued to tear itself apart in the Second World War, there was an urgent need for financial stability. International negotiators from 29 countries met in Bretton Woods and agreed to a new economic system where, amongst other things, exchange rates would be fixed.

The International Monetary Fund (IMF) was established under the Bretton Woods agreement, and started to operate in 1949. All exchange rates changes above 1% had to be approved by the IMF, which had the effect of freezing these rates.

By the late 1960's the fixed exchange rate system started to break down, due to a number of international political and economic factors. Finally, in 1971, President Nixon stopped the US dollar being converted directly to gold, as part of a set of measures designed to stem the collapse of the US economy. This was known as the Nixon shock, and lead to floating rate currency markets being established in early 1973. By 1976, all major currencies had floating exchange rates.

With floating rates, currencies could be traded freely, and the price changed based on market forces. The modern forex market was born.
Who trades on the forex market?

There are many different players in the forex market. Some trade to make profits, others trade to hedge their risks and others simply need foreign currency to pay for goods and services. The participants include the following:
Government central banks
Commercial banks
Investment banks
Brokers and dealers
Pension funds
Insurance companies
International corporations
Individuals
When is the forex market open?

Unlike stock exchanges, which have limited opening hours, the forex market is open 24 hours a day, five days a week. Banks need to buy and sell currency around the clock, and the forex market has to be open for them to do this.
What factors influence currency exchange rates?

As with any market, the forex market is driven by supply and demand:
If buyers exceed sellers, prices go up
If sellers outnumber buyers, prices go down

The following factors can influence exchange rates:
National economic performance
Central bank policy
Interest rates
Trade balances – imports and exports
Political factors – such as elections and policy changes
Market sentiment – expectations and rumours
Unforeseen events – terrorism and natural disasters

Despite all these factors, the global forex market is more stable than stock markets; exchange rates change slowly and by small amounts.
What are the advantages of the forex market?

The forex market has many advantages. These include the following:
It's already the world's largest market and it's still growing quickly
It makes extensive use of information technology – making it available to everyone
Traders can profit from both strong and weak economies
Trader can place very short-term orders – which are prohibited in some other markets
The market is not regulated
Brokerage commissions are very low or non-existent
The market is open 24 hours a day during weekdays