1. What is Forex?
Foreign Exchange (forex) is the simultaneous buying of one currency, and selling of another currency. Daily volume in the currency market exceeds $1.4 trillion, making it the largest and most liquid market in the world. Unlike other financial markets, the forex market has no physical location or central exchange. It is an over-the-counter market where buyers and sellers including banks, corporations, and private investors conduct business. Foreign exchange trading takes place in financial trading centers all over the world, including New York, London, and Tokyo creating one cohesive, international market. more...

2. Rollover charges
Rollover charges are determined by the difference between US interest rates and the interest rates in the corresponding country. The greater the interest rate differential between the currency pair, the greater the rollover charge will be. If, for example, the British Pound has the greatest differential with the US Dollar, then the rollover charge for holding British Pound positions would be the most expensive. Conversely, if the Swiss Franc were to have the smallest interest rate differential to the US Dollar, then overnight charges for USD/CHF would the least expensive of the 8 currency pairs we offer. more...

3. Market Terminology
Base Currency The currency against which other currencies are quoted. Example, the primary base currency is the u.s. dollar. Bear Market A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market). Bear Markets are generally shorter in duration than Bull Markets. Bid The rate at which a dealer is willing to buy the base currency. Bull Market A market characterized by rising prices. Broker An agent who handles investors' orders to buy and sell currency. more...

4. Foreign Exchange - The Basics
Foreign exchange is essentially about exchanging one currency for another. The complexity arises from three factors. Firstly what is the foreign exchange exposure, secondly what will be the rate of exchange, and thirdly when does the actual exchange occur. Identification of Foreign Exchange Exposures Foreign exchange exposures arise from many different activities. A traveller going to visit another country has the risk that if that country's currency appreciates against their own their trip will be more expensive. more...



5. Why Do Exchange Rates Move ?
Floating Exchange Rates In a floating exchange-rate environment, the exchange-rate responds to many factors including the flow of imports and exports, the flow of capital, relative inflation rates, etc. Often, limits are placed on exchange-rate fluctuations according to government policies. One factor affecting the exchange-rate between the Australian Dollar and other currencies is the merchandise trade balance. By definition, the merchandise trade balance is the net difference between the value of merchandise being exported and imported into a particular country. more...

6. Advantages of Forex Vs. Stocks
In order to maintain a diversified and growing portfolio, stock holdings need to be balanced by foreign exchange positions. Currency rates, economic issues and the health of the company in question compound the impact of stock positions in your portfolio. Forex provides the diversity that is necessary to maintain consistent portfolio growth. more...

7. Advantages of Forex Vs. Futures
The forex market is approximately 46 times larger than the combined world futures markets. Greater day-to-day price stability enables trades with higher leverage than what is typical with futures. Forex Provides More Leverage You control the degree of leverage you wish to employ in trading. Forex Capital Management automatically sets your leverage level at the most lenient requirement, based on the size of your account. more...

8. Currency Pairs – Points for Comparison
Foreign exchange is always traded in currency pairs, such as EUR/USD (Euro/U.S. Dollar.) All trades are the purchase of one kind of currency with another. The first currency in the pair is referred to as the base currency. The base currency is the one that provides a baseline for the purchase or sale. Think of the currency pair as an instrument to be bought or sold. You are buying either the Euro or the U.S. Dollar in either case. The following are some scenarios that help to explain these pairs and how to think in terms of the basis currency: more...

9. Seven Steps In Forex Trading
Maximize Your Tools Forex Capital Management provides effective on line tools to help make you a more effective currency trader. This includes free market news and real time charts. Perhaps the single most helpful tool is the FX Demo Account, which enables you to test strategies and learn from the process without risking your cash. more...



10.Types of Orders
Entry Order: An Entry Order is executed when a designated price threshold is reached or broken. These orders are executed under the direct supervision of the dealing desk and remain in effect until canceled by the client. Limit Entry Order: A Limit Entry Order is executed when the exchange rate reaches but does not break a preset value. A Limit Entry Order is placed when the trader believes that, once a currency has touched a certain level, it will move in the direction opposite of its previous momentum. more...

11.Foreign Exchange Risk Management Guidelines
Your business is open to risks from movements in competitors' prices, raw material prices, competitors' cost of capital, foreign exchange rates and interest rates, all of which need to be (ideally) managed. This section addresses the task of managing exposure to Foreign Exchange movements. These Risk Management Guidelines are primarily an enunciation of some good and prudent practices in exposure management. They have to be understood, and slowly internalised and customised so that they yield positive benefits to the company over time. more...

12.Forex Risk Management
The most common and important risk management tool in forex trading is the stop-loss order. A stop-loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against a trader's position. You should decide on a stop-loss level before entering the market and we recommend you always place a stop-loss order immediately after a new position is taken. Liquidity of the Forex market ensures stop-loss orders can be easily executed. You must set up strict stop-loss limits for your losing trades, so that you don't lose more than you can handle. If the market starts going in the wrong direction, don't try to think of excuses why you shouldn't close that position and cancel the order. more...

13.Understanding Forex Quotes
The US dollar is the centerpiece of the Forex market and is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 120.01 means that one U.S. dollar is equal to 120.01 Japanese yen. more...

14.Forex vs. Equities
Forex is a true 24-hour market, which offers a major advantage over equities trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls. more...

15.Understanding Margin
Trading currencies on margin lets you increase your buying power. Here's a simplified example: If you have $2,000 cash in a margin account that allows 100:1 leverage, you could purchase up to $200,000 worth of currency-because you only have to post 1% of the purchase price as collateral. Another way of saying this is that you have $200,000 in buying power. more...



16.Calculating Profit & Loss
For ease of use, most online trading platforms automatically calculate the P&L of a traders' open positions. However, it is useful to understand how this calculation is derived. To illustrate a typical FX trade, consider the following example. The current bid/ask price for USD/CHF is 1.6322/1.6327, meaning you can buy $1 US for 1.6327 Swiss Francs or sell $1 US for 1.6322. more...

17.Factors Affecting USD
Federal Reserve Bank (Fed): The U.S. Central Bank has full independence in setting monetary policy to achieve maximum non-inflationary growth. The Fed’s chief policy signals are: open market operations, the Discount Rate and the Fed Funds rate. Federal Open Market Committee (FOMC): The FOMC is responsible for making decisions on monetary policy, including the crucial interest rate announcements it makes 8 times a year. The 12-member committee is made up of 7 members of the Board of Governors; the president of the Federal Reserve Bank of New York; while the remaining four seats carry one-year term each, in a rotating selection of the presidents of the 11 other Reserve Banks. more...

18.Factors Affecting USD/JPY
Ministry of Finance: The MoF is the single most important political and monetary institution in Japan. Its influence in guiding the currency is more significant than the ministries of finance of the US, UK or Germany, despite the gradual measures to decentralize decision-making. MoF officials often make statements regarding the economy that have notable impacts on the yen. These statements include verbal intervention aimed at avoiding undesirable appreciation/depreciation of the yen. Key officials most likely to move the market are the following: more...

19.Factors Affecting GBP/USD (Cable)
Bank of England (BoE): Under the Bank of England Act of June 1997, the BoE obtained operational independence in setting monetary policy to deliver price stability and to support the government’s growth and employment objectives. The price stability objective is set by the government's inflation target, defined as 2.5% annual growth in Retail Prices Index excluding mortgages (RPI-X). Hence, despite its independence in setting monetary policy, the BoE remains dependent upon having to meet the inflation target set by the Treasury. more...

20.Factors Affecting EUR/USD
The Eurozone: The 12 countries that have adopted the euro in order of GDP: Germany, France, Italy, Spain, Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece. European Central Bank: Controls monetary policy for the eurozone. The decision making body is the Governing Council, which consists of the Executive Board and the governors of the national central banks. The Executive Board consists of the ECB President, Vice-President, and four other members: more...



21.Factors Affecting USD/CHF
Swiss National Bank (SNB): The Swiss Central Bank has maximum independence in setting monetary and exchange rate policy. Unlike most Central banks, the SNB does not use a specific money market rate to guide monetary conditions. Until fall 1999, the Bank used foreign exchange swaps and repurchase agreements as the main instruments to impact money supply and interest rates. Liquidity management has characteristically affected the Swiss franc due to the use of Foreign Exchange Swaps. more...

22.A Primer on the FOREX Market
With the increasingly widespread availability of electronic trading networks, trading on the currency exchanges is now more accessible than ever. The foreign exchange market, or FOREX, is notoriously the domain of government central banks and commercial and investment banks, not to mention hedge funds and massive international corporations. At first glance, the presence of such heavyweight entities may appear rather daunting to the individual investor. But the presence of such powerful groups and such a massive international market can also work to the benefit of the individual trader. FOREX offers trading 24-hours a day, five days a week, and the daily dollar volume of currencies traded in the currency market exceeds $1.4 trillion, making it the largest and most liquid market in the world. more...

23.The Fundamentals of FOREX Fundamentals
Those trading in the foreign exchange market (FOREX) rely on the same two basic forms of analysis that are used in the stock market: fundamental analysis and technical analysis. The uses of technical analysis in FOREX are much the same: price is assumed to reflect all news, and the charts are the objects of analysis. But unlike companies, countries have no balance sheets, so how can fundamental analysis be conducted on a currency? more...

24.The Concept of a Forward Transaction
For transactions entered into on the spot market, one takes delivery and makes payment for the asset within two business days of the contract entry date. Forward and futures contracts are agreements to purchase or sell a given amount of a specified asset, calling for delivery and payment at a specified date in the future. The price to be paid is agreed upon when the contract is made. more...