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  1. 1. FOREX Trading
  2. 2. What is the Forex Market?The FOREX (Foreign Exchange) market is the market in which differentcurrencies are traded. It is the largest, most liquid financial market in theworld with an average traded value that exceeds 3.18 trillion per day.
  3. 3. How does the Forex Market work? Financial centers around the world function as anchors of trading between different types of buyers and sellers everyday except weekends.The Foreign exchange marketdetermines the relative values ofdifferent currenciesThere are huge speculative returns that can be made by predicting thevalue of international currencies.
  4. 4. Who trades in the Forex Market?Traders in foreign exchange include large banks, central banks, institutionalinvestors, currency speculators, corporations, governments, other financialinstitutions, and retail investors.Commercial companiesCentral banksForeign exchange fixingSpeculatorsInvestment management firmsRetail investors
  5. 5. How does the Forex Market work?In a typical foreign exchange transaction, a party purchases a quantity of onecurrency by paying a quantity of another currencyTop Forex Traders (Global)5% Deutsche Bank5% Barclays Capital 20% 6% UBS AG Citi8% JP Morgan 14% HSBC8% RBS Credit Suisse 8%14%Goldman Sachs 12% Morgan Stanley
  6. 6. Functioning of the Forex Market Transactions in foreign currencies are not centralized on an exchange, theytake place all over the world. Dealers quote all major currencies. After the currency is decided, the investor purchases through a dealer. Investors speculate on currency prices by getting a credit line and vastlyincrease their potential gains and losses known as marginal trading.Did you know?The exchange market originated centuries ago in the form ofthe Barter system, whereby the value of goods wasexpressed in terms of other goods.Right: A labour for labour note used in the barter system
  7. 7. Trading Characteristics There is no unified or centrally cleared market for the majority of trades. There are many inter-connected markets where different currencyinstruments are traded. A particular currencys quoted price is usually the London market price. Major trading exchanges: EBS, Reuters and some major banks
  8. 8. The Indian Forex Market Foreign Exchange Market in India works under the central government in India. The Indian foreign exchange market is made up of the buyers, sellers, marketmediators and the monetary authority of India. The Foreign Exchange Management Act, 1999 or FEMA regulates the wholeforeign exchange market The foreign exchange market India is growing very rapidly and the annualturnover of the market is more than $400 billion.
  9. 9. Factors Predicting Forex Market Movements Interest Rates Economic Growth Geo-Politics Trade and Capital Flows, Merger and Acquisition Activity
  10. 10. Interest Rates Always buy currencies from countries with high-interest rates and financethese purchases with currency from countries with low-interest rates. As a countrys interest rate rises, the value of the countrys currency alsotends to rise
  11. 11. Economic Growth The greater the possibility that the central bank will raise its interest rates to tamethe growth of inflation The higher a countrys interest rates, the bigger the likelihood that foreigninvestors will invest in a countrys financial markets.Geopolitical Factors Currencies represent countries rather than companies, they are political as well aseconomic assets. The key to understanding speculative behavior with respect to any geopoliticalunrest is that speculators run first and ask questions later. The general rule of thumb in the currency market is that politics almost alwaystrumps economics.
  12. 12. Trade and Capital Flows Trade flow refers to how much income a country earns through trade. Some countries are sensitive to trade flows, while others are far moredependent on capital flows. Before you decide on a currency, categorize the country as dependenton either trade flow or capital flow.
  13. 13. Mergers and Acquisitions Mergers and acquisitions do not affect FOREX trading extensively. However, it can be the most powerful force in staging near-term currencymoves. This activity occurs when a company from one economic region wants tomake a transnational transaction and buy a corporation from anothercountry.
  14. 14. Market never sleeps, 24 Hr market Cant always rely on past results tosystem predict future trends Best option for those seeking Fluctuations and other factors makeconsistent investment movestrading foreign exchanges on margin very risky. Simply make trades whenever yousee fit High degree of leverage involved Whether its Bull or Bear, FOREX isalways stable Controlled by a huge market andnot any corporation.
  15. 15. ConclusionThe basics of FOREX are very easy to understand. However, actual currencytrading can be relatively tricky.To analyze the foreign exchange market you must be acquainted with theinterplay of the various factors affecting the trade.There are no specific trading style that will offer an unblocked path to profitsand success. A smart trader will always pick a method he feels comfortablewith. Although, it is important to adhere to the basic principles combining itknowledge of the market and experience for a successful career in the FOREXmarket.
  16. 16. Thank You! READ MORETwitterWebsiteFacebook
  17. 17. Registered office: Kotak Securities Limited, 1st Floor, Bakhtawar, 229, NarimanPoint, Mumbai - 400021. SEBI Registration No: NSE INB/INF/INE 230808130, BSEINB 010808153/INF 011133230/INE 011207251, OTC INB 200808136, MCXSX INE260808130. Disclaimer: Investments in securities are subject to market risks, please read theSEBI prescribed Combined RDD prior to investing. * Awarded Best Brokerage Firm in India by AsiaMoney in 2006, 2007, 2008 and2009