AN INTRODUCTION TO FOREIGN EXCHANGE RATE

Cost of Money

Modern economies are dependent upon their national currency. It allows the determination of the value of goods across all countries. The foreign exchange rate can be termed as the cost of one currency compared to another currency. For example if you require US dollars and you have British pounds, you can exchange one British pound for $1.52.

The History of U.S. Foreign Exchange Rates

All the world currencies used to be determined by gold reserves. It meant that any paper money issued by a government had to be equivalent to the same amount of gold held in reserve by that government. During the 1930s, the United States set the dollar’s value at a level of $35 to an ounce of gold. After the Second World War, other countries started basing their currency’s value on the US dollar. Since the U.S. had a set value to their dollar, it was simple for other currencies to use the same calculation.

The U.S. inflation rate increased, lowering the value of its currency. This made other currencies more valuable compared to the dollar and the US had to make a decision regarding their currency’s value. It was then determined that the value of the dollar would be reduced and the value of an ounce of gold was placed at $70. The U.S. removed the gold standard completely in 1971. This meant that its currency value was determined by market forces only.

Exchange Methods

Governments of different countries make use of two main systems to determine its exchange rate. These are pegged and floating currency exchange rates.

Floating Rate

• A floating exchange rate is determined by market factors. This means that a country’s currency is valued at the rate buyers are prepared to pay for it. The basis for this valuation is supply and demand which has driving forces such as inflation, foreign investment and other economic factors. This is not a perfect system as countries with unstable economies often suffer under the supply and demand economic law.

Pegged Rate

• A pegged rate is a fixed system whereby the rate is set and maintained artificially by a government. This rate generally suffers no fluctuation.

• National banks have to hold huge amounts of foreign currency to ride the waves of supply and demand. In the event that there is a sudden demand for a specific currency, the central bank has to release sufficient currency to meet that demand.

There are many determining factors related to foreign exchange rates. Those who wish to trade in this market should be aware of these factors.

Automated Forex Trading Robots – How They Can Assist With Forex Trading

To properly familiarize yourself with these programs, you must ask these two important questions: What is an automated Forex trading robot and what does it do?

Trading robots are not actually machines as what one would think. They do not consist of mechanical parts that magically make a profit at your command. The term “robot” is a symbolical term that means helping you with your trades by pointing out what currencies are hot, when to sell them and when to buy them. Forex trading robots are based on artificial intelligence created specifically for the international currency market.

An automated Forex trading robot helps keep the trader up to date with specific currency trends. It monitors the rise and fall of prices in relation to the volatility of the market. It makes use of mathematical algorithms to make computations and predictions of the prevailing trends. In order to validate the algorithms the system bases its data on historical charts and its own careful analysis of market trends.

Forex robots have numerous benefits. One of the benefits these robots have is that they are able to process quite a bit of information very quickly, thus allowing them to make more speedy and rational decisions than humans. Forex robots are an excellent choice for those on limited schedules who are seeking to increase their profit. Another nice aspect of how these robots work is their ability to look at things purely rationally. They don’t become worried, nervous, or upset causing them to be valuable in a market as chaotic as the Forex market.

Just because the robots have their benefits does not mean that they do not have some severe drawbacks as well. It isn’t wise to choose just any Forex robot to do your bidding. Therefore, you must look into the details of each one that you consider. While there are very legitimate Forex robots, there are also several scam artists hard at work trying to grab at your wallet. It is important to seek out any reviews that people may have written along with calling the company to see if it’s possible to speak with a real person and not just an automated recording. It’s important to take note of which currencies a particular robot works best with. This isn’t meant to be bias; some currencies perform differently in the market than others. Each Forex robot is different; therefore, they each perform certain trades differently. Some robots do better with larger trades while others do better with smaller trades. Once again, it is very important to do your homework on the way these robots work.

Though it may be true that a novice trader can use these robots, I personally would not recommend it. You need at least some knowledge and experience as a trader in order to know how to handle your robot. Some robots give you the option of manual control; those are the ones that you want to use. When considering features, you must take into consideration what you’re looking for specifically in a robot. A Forex robot is not a cure-all, it isn’t magic. You have to know what to do with it. It’s also equally important to shop around, just as you would shop around when searching for a new vehicle. Remember, when you combine the efficiency of a good Forex robot with your own skills as a trader it can be very beneficial. You may also learn some things about trading after having a robot for a while.

The History Of Forex Exchange

The lack of sustainability in fixed foreign exchange rates continues to be a potential hardship for commercial companies that do business globally. However, for investors and financial institutions it continues to represent significant new opportunities. The size of foreign exchange markets today is bigger than the world’s stock and bond markets combined, with more than $ 3 billion US traded daily.

Mankind has been buying, selling and exchanging goods and services for thousands of years. In the beginning, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged the establishment of more generally accepted means of exchange at a fairly early stage in history. In different economies, beads, produce, stones and so on served this purpose at various times, but before long metals- mainly gold and silver- established themselves as an accepted means of payment as well as a reliable indices of value.

Prior to World War I, most central banks supported their currencies with convertibility to gold (known as the “Gold Standard”). Although paper money could always be exchanged for gold, in reality this did not occur often. This fostered among some elements of society the (incorrect) notion that there was not necessarily a need for full cover in the central reserves of the government. At times, a sudden increase in the supply of paper money without gold to back it led to rampant inflation and resulting political instability (Germany in the early 1920’s was a famous example of this). To protect local national interests, foreign exchange controls were increasingly introduced in a (usually futile) attempt to prevent market forces from punishing fiscal irresponsibility.

Near the end of World War II, the Bretton Woods agreement was reached in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as a way to avoid the destabilizing monetary crises that were a feature of economic life prior to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD 35/oz and fixing the other main currencies to the dollar.

However, this system came under increasing pressure as national economies moved in different directions during the 1960s. While efforts were made to keep the system functioning as intended, eventually it collapsed, The decision of the Nixon administration to take the US off the gold standard in August of 1971 meant that the dollar was no longer suitable as the sole international currency at a time when it was under severe financial pressure as the result of large increases in domestic spending and the expense of pursuing the Vietnam War.

Nonetheless, the idea of fixed exchange rates of some kind continues to live on. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, known as the European Monetary System. This system all but collapsed in 1992-93 however, when economic pressures forced the devaluation of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro starting in 2001.

What Is Forex Trading?

“Forex” is just one of a number of terms that are used to describe the trading of the world’s various currencies. Foreign Exchange and just plain FX are some other terms used. The Forex market is the largest in the world with an average of $ 3 trillion US is traded on a daily basis.

Most Forex trading is what is considered “speculative trading”; that is buying and selling in the hope of making a profit, rather than doing so for some fundamental business-related need. Only a low percentage of market activity actually represents governments’ and companies’ fundamental currency conversion needs. What follows is a basic introduction to a few of the different types of common Forex trading.

Unlike stock market trading, the Forex market is not conducted by a central exchange. Rather, it is conducted on what is known as the “interbank market”. This is the short-term (often overnight) borrowing and lending between banks, as distinct from a banks’ business with their corporate clients or other financial institutions. The Forex market is considered an OTC or “over the counter” market. This is when trading takes place directly between two parties – whether over the telephone or on electronic networks all over the world- rather than on an exchange.

Over the counter trades can be customised whereas exchange-traded products are often standardised. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. Such a worldwide distribution of trading centres across many time zones means that the Forex market never rests; it’s active 24/7.

A currency trade involves the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a “cross” (for example, the Euro/US dollar, or the GB pound/Japanese yen.). The most commonly traded currencies are the so-called “majors” – EURUSD (Euro/US dollar), USDJPY (US dollar/Japanese yen) and GBPUSD (British pound/US dollar). The most important Forex market is the “spot market” as it has the largest volume. It is called the “spot market” because all trades are settled immediately, or “on the spot” as it where, which in practice means two banking days.

In the case of what are called “forward outrights”, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. This interest rate differential doesn’t usually affect trade considerations unless one plans on holding a position with a large differential over a long period of time. The interest rate differential varies according to the cross being traded. Some interest differentials are fairly insignificant, while others can be quite large.

Margin trading involves buying and selling assets that represent more value than the capital in ones account. A margin deposit is the deposit required when entering into a position as well as to hold an open position. An open position is a position in a currency that has not yet been offset. For example, if someone buys 100,000 USDJPY, they have an open position in USDJPY until it is offset by selling 100,000 USDJPY, which “closes” the position.

Forex trading usually requires only relatively small margin deposits, which is useful since it permits investors to better take advantage of exchange rate fluctuations, which tend to be very small. What this means is someone with a margin of 1.0% can trade up to USD 1,000,000 even though they may only have USD 10,000 in their account. Using this much leverage can enable a savvy investor to profit very quickly, but there is also a greater risk of incurring large losses and even being completely wiped out.

Forex Traders: Are you looking into Automated Systems?

Being in the forex game, I wanted to get an edge and masterfully own every single pip I could possibly get my hand on. Being also that the learning curve was quite opulent and sometimes wasn’t really in my favor, I needed an alternative to the hours of technical analysis and research on news and historical data.

I was pressed to find a solution that would let me be able to make trades without the aggravation of the fore mentioned. I looked into using EMA crosses, and news trading, and a couple of other crazy things, only to lose more money and turn more hairs to grey over it.

One day I found the Expert Advisor. What an Expert Advisor is, is an automated trading system, ported to Metatrader 4’s Trading Platform. The dealbreaker here, is that you need an account with a forex broker, which supports Metatrader 4. There are at least a few dozen forex brokers who use Metatrader, and a couple of them should fit your trading requirements like a glove.

Why should you consider looking into an expert advisor? Easy!

1. They trade while you sleep, and never need rest at all. It is a software module that works with Metatrader 4, and never crashes!

2. They never need a salary, bathroom breaks, sleep, food, benefits, or anything else that a human trader would need.

3. They are very easy to download, install into Metatrader 4, turn on, and throw them to the wolves to start making money! This process from purchase to operation takes not even 10 minutes.

4. 60 Day Money Back Guarantee. Most Expert Advisors have satisfaction guarantees, just in case you are not satisfied with the results that the Expert Advisor provides, or just have a problem with the system.

5. Have a life, be with family or friends. Make the real money and not work a 9-5! You think it is easier said than done, but seriously, the reality is, when you can make a sustainable, survivable income from Forex, you would fire your boss!

 

What are Forex Robots?

What Are Forex Robots?

The Forex market is one of the most volatile markets and yet the most continuous and simultaneous trading in the world. A Forex trader profits from the movement of the different currency worldwide.  It’s market is very speculative and unpredictable.  Currency values can change in milliseconds because of different factors.  This is where Forex robots come in.

Forex robots enable traders to trade without making emotions rule trading.  There would be times when traders exit a trade because of changes, only to find out that the endangered value would come up again.  For some traders, keeping your emotions in check and maintaining composure and being rational can be very difficult. Continue reading “What are Forex Robots?”