Foreign Exchange Trading Is The Simultaneous Buying Of One Currency And Selling Of Another.

The foreign exchange market (Forex or FX) is the largest financial market in the world with a daily turnover of over $4.0 trillion. Examples of currency trading pairs are Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY). Most currency transactions involve the “Majors” – US Dollar, Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

Unlike other financial markets, the foreign exchange market has no physical location and no central exchange. The Forex market operates 24 hours a day through an electronic network of banks, corporations and individual traders. Forex trading begins every day in Sydney, then moves to Tokyo, followed by London and then New York. The major market makers, or dealers, consist of the commercial and investment banks, the exchange traded futures, and registered futures commission merchants.  To get a free live Demo click here.

Foreign Exchange (Forex) Prices

Foreign exchange markets and prices are mainly influenced by international trade flows and investment flows. The FX markets are also influenced, but to a lesser extent, by the same factors that influence the equity and bond markets: economic and political conditions especially interest rates, inflation, and political instability. Those factors usually have only a short-term impact, which makes Forex attractive as it offers some of the diversification necessary to protect against adverse movements in the equity and bond markets.

Foreign Exchange prices, or quotes, include a “Bid” and “Ask” similar to other financial products:

Bid: Price at which Dealer is willing to Buy and Traders can Sell Currency.

Ask: Price at which Dealer will Sell and Traders can Buy Currency.

The difference between the Bid and Ask is called the “Spread“, which is the Trader’s cost of the transaction.

Currencies are usually quoted to four decimal places, such as the Euro/US Dollar trading at 1.2400/1.2403, with the last decimal place referred to as a point or “pip“. A pip for most currencies is 0.0001 of an exchange rate; the one exception is the USD/JPY quote in which each pip is equal to 0.01.

China posted encouraging results this week. Exports rose 5.6 percent beating expectations in October. Analysts had forecasted a 3.2 percent growth. Imports grew less than expected by rising 7.6 percent. Both numbers resulted in a net surplus of $31 billion in October. September's surplus was half of that at $15.2 billion. The market took the Chinese trade data as a suggestion that global demand continues to improve.

The figures support the statements by Chinese Premier Li Keqiang that the Asian economy is on track to reach the 7.5 percent growth target in 2013. A far cry from the 10 percent pace China set in the past three decades, but a sign of the impact the global economic crisis has had on growth.

China is one of the largest consumers of commodities, so good news regarding continued growth benefit producers. China is set to become the number one consumer of gold this year, after India's efforts to curb the metal import. Coal, steel and copper are markets where China leads both as a producer and a consumer.

The focus for the Communist party Plenum will be how to increase internal consumption to cope with the external drop in demand. Urbanization, financial reforms, ,social security, land ownership and pollution are some of the major topics that will be discussed.

Investing In Stock Rights And Warrants

Companies that need to raise additional capital can do so by issuing additional shares of stock. However, these additional shares will dilute the value of existing shares, which can be a concern for shareholders. Many companies, therefore, choose to issue rights or warrants as an alternative means of generating capital. These instruments give shareholders the preemptive right to purchase additional shares of stock directly from the company, typically at a discounted price.

Basic Characteristics

Stock rights are instruments issued by companies to provide current shareholders with the opportunity to preserve their fraction of corporate ownership. A single right is issued for each share of stock, and each right can typically purchase a fraction of a share, so that multiple rights are required to purchase a single share. The underlying stock will trade with the right attached immediately after the right is issued, which is referred to as “rights on”. Then the right will detach from the stock and trade separately, and the stock then trades “rights off” until the rights expire. Rights are short-term instruments that expire quickly, usually within 30-60 days of issuance. The exercise price of rights is always set below the current market price, and no commission is charged for their redemption.


Warrants are long-term instruments that also allow shareholders to purchase additional shares of stock at a discounted price, but they are typically issued with an exercise price above the current market price. A waiting period of perhaps six months to a year is thus assigned to warrants, which gives the stock price time to rise enough to exceed the exercise price and provide an intrinsic value. Warrants are usually offered in conjunction with fixed income securities and act as a “sweetener”, or financial enticement to purchase a bond or preferred stock. A single warrant can usually purchase a single share of stock, although they are structured to purchase more or less than this in some instances. Warrants have also been used on rare occasions to purchase other types of securities such as preferred offerings or bonds. Warrants differ from rights in that they must be purchased from a broker for a commission and usually qualify as marginable securities.


Both rights and warrants conceptually resemble publicly traded call options in some respects. The value of all three instruments inherently depends on the underlying stock price. They also resemble market options in that they have no voting rights and do not pay dividends or offer any form of claim on the company.

Different from Market Options

Rights and warrants differ from market options in that they are initially issued only to existing shareholders, although a secondary market typically springs up that allows other buyers to acquire these securities. Shareholders who receive rights and warrants have four options available to them. They can:

• Hold their rights or warrants for the time being
• 
  
• Purchase additional rights or warrants in the secondary market
• 
  
• Sell their rights or warrants to another investor

Simply allow their rights or warrants to expire
The final option listed here is never a wise one for investors. If the current market price of the stock exceeds the exercise price, then investors who do not wish to exercise them should always sell them in the secondary market to receive their intrinsic value. However, many uneducated stockholders who do not understand the value of their rights do this on a regular basis.

Pricing Formulas 

As with market options, the stock's market price could fall below the exercise price, at which point the rights or warrants would become worthless. Rights and warrants also become worthless upon expiration regardless of where the underlying stock is trading. The values for stock rights and warrants are determined in much the same way as for market options. They have both intrinsic value, which is equal to the difference between the market and exercise prices of the stock, and time value, which is based on the stock’s potential to rise in price before the expiration date.


Both types of securities will become worthless upon expiration regardless of the current price of the underlying stock. They will also lose their intrinsic value if the market price of the stock drops below their exercise or subscription price. For this reason, companies must set the exercise prices on these issues carefully to minimize the chance that the entire offering fails. However, rights and warrants can also provide substantial gains for shareholders in the same manner as call options if the price of the underlying stock rises.

Rights Pricing

The formula used to determine the value of a stock right is:

Current market price – subscription price of new stock / number of rights needed to buy one new share

Example

Current market price of current outstanding shares = $60

Subscription price of new stock = $50

Number of rights needed to buy one new share of stock = 5

$60 - $50 / 5 = $2 (value of each right)

Warrants Pricing

The formula for determining a warrant's value is:

Current market price of stock – subscription price of warrant / number of stock shares that can be purchased with a single warrant

Example

Current market price of stock = $45

Subscription price of warrant = $30

Number of stock shares that warrant can buy = 1

$45 - $30 / 1 = $15

Tax Treatment

Rights and warrants are taxed in the same manner as any other security. The difference between the exercise and sale prices of these securities is taxed as a long- or short-term gain. Any gain or loss realized from trading rights or warrants in the secondary market is taxed in the same manner (except that all gains and losses will be short-term).

Conclusion

Rights and warrants can allow current shareholders to purchase additional shares at a discount and maintain their share of ownership in the company. However, neither of these instruments is used much today, as stock and market options have become much more popular. For more information on rights and warrants, consult your stockbroker or financial advisor, you may also visit http://www.gcminternationalinc.com/en/partner/brokers-affiliates.html .

How to Avoid a Bad Investment Property Deal

When considering investment property of any type, it may appear to be in top shape and without a flaw. However, looks can be deceiving, to ensure that you are indeed getting the deal of a lifetime there are some things you want to look out for, which leads us to this article "How to avoid a bad deal-five signs". We are certain you do not want to purchase any investment property of any type, only months or even a year down the road find out that the investment property was a bad one or it is simply hard to sell when the time is right, well, here is how you can avoid these things.

Say No to Flood Regulation Lines and Flood Plains

For those of you that do not know, a flood plain is defined as level land within an area that borders a lake, pond, or river. Typically, flood plains can be determined quite easily, if you notice any indications of delta plains, levees, back swamps, or oxbow lax, this will tell you it is a flood plain. A flood plain has high instances of flooding or high water levels.

You definitely want to stay away from these areas when considering a piece of investment property. The offer for that particular property may seem too good to pass up; however, you may find yourself having to face a great deal of headaches, frustration, and even damage later on.

Say No to Rising Damp

Again for those of you unaware of what rising damp is. This occurs when the ground water flows in a vertical manner through the wall structure of the investment property. The pores in the masonry allow the water to rise and effect the entire structure. Age, Bridging, and Earth levels can all lead to rising damp.

There are many different ways of identifying rising damp. For example, if you attempt the paint the walls in a piece of investment property suffering from this occurrence, the paint will simply not take. Additionally, you will find that wallpaper will experience the same result. In fact, existing wall paper, if it has lifted from the walls, will possess stains underneath.

Take a moment to feel and inspect the plaster walls. When feeling it, test it to find if it will flake easily or feels soft and spongy. Furthermore, inspect the way the plaster actually looks, if it looks like crystals or a powdery substance, the investment property likely has rising damp. Further indication of rising damp may include falling or fretting mortar, skirting boards, mold, or rotting floorboards.

Inspect for those Annoying Pests

Pest inspection should be one of the very first things on your list when looking into any type of investment property. It may cost you a little bit of extra money, but in reality, the inspection alone could result in actually saving you money at the same time, not to mention the hassle of dealing with pests.

Peace of mind with investments comes with having a pest inspection done by a professional service. With a professional pet inspection, the property will be completely inspected and you will receive a report with findings on pest issues, such as termites. Experience, knowledge, and reputation all must be considered when looking for a pest inspection service.

Summary:

When you are looking into investment property, the one thing you want to stay away from are bad investments. A good deal, comes with a great price and sound surroundings and structure. Anything less, may point to a really bad investment. Find out here, what you should be looking for to ensure you end up with a good investment.

Learn Forex Trading - 7 Essential Points you Need to Consider

1. Forex Trading Requires Effort 

It amazes me how many people think they can buy a forex trading system from a vendor and make huge amounts of money, following someone else - and only paying a few hundred dollars for the privilege!

If you fall into this category, change your view quickly or lose - life is not that simple. When there are big profits to be made, you need to take responsibly for your actions.

Success relies on you. The good news is that in terms of the effort you have to put in, the rewards are huge.

2. Forex Trading Requires Self Confidence & Discipline

The reason you can't buy a Forex trading strategy from anyone else is, that you need to have confidence in what you are doing and this only comes from an understanding of what you are doing.

Confidence is vital, as it leads to discipline and you need discipline, to apply your currency trading system. If you don't have the discipline to apply it, you don't have a system.

This simple point is one most novice traders ignore - but it's impossible to follow someone else's system or one you don't understand - that's why you have to do your homework.

3. Forex Trading Doesn't Take Long To Learn 

You hear a lot of people telling you that knowledge is essential to forex trading success - its not.

You need the right knowledge and that doesn't take long to acquire.

You also here people talking about, how you should analysis each trade after the event and why it won or lost - What's the point of that? If you have a system you follow and it trades the odds it will lose and win, there is no point in wasting time looking at further.

Once you have a logical system you understand, you execute it and that it.

Don't waste time learning knowledge for knowledge sake, or pouring over what might have been.

4. Forex is an Odds Game 

Forex is a game of probabilities not certainties - ignore anyone who tells you that markets can be predicted by scientific theory - they can't.

If they could we would all know the price in advance and there would be no market. Forget theories such as, Gann, Elliot wave and Fibonacci - leave them to the far out investment crowd and learn ones that can make you money.

5. You Don't Need To Spend Much Time Trading 

Your trading, should take about 30 minutes a day that's it.

You only need to work of closing prices and forget day trading (it doesn't work) which is great, as you don't have to do any intra day monitoring.

Don't spend more time than you need to on trading.

You Only Need a Simple System

Simple systems work better than complicated ones and that's a fact.

Why?

Because - they are more robust in the face of brutal market conditions, with fewer elements to break.

6. You Will Have Periods Of Drawdown 

They will last for weeks or even months and you can't avoid them - so make sure you're prepared for them and have the patience and discipline to ride them out

7. You Need to Know Your Trading Edge

Before you start trading ask yourself one question:

What's my trading edge - why should I be a winner when the vast majority of traders lose?

If you don't know the answer, you don't have a trading edge and are 100% guaranteed to lose, so make sure you have one, understand and what it is before you trade!

There you have it some simple points to think about.

If you approach forex trading in the right way it can make you more money than almost any venture in terms of the effort involved.

Keep in mind though that it's not as easy as most traders think and that's why they lose. Hopefully, the above points have given you something to think about which will help you learn forex trading in the right way and to enable you to get the right forex education.

Using stop losses

Protect your trading account

A stop loss is an order that automatically closes your trade at a specified price. They are used as a fail-safe mechanism to protect your trading capital in the event that the trade does not work out. Stop losses are therefore vital in protecting your trading capital, but there are different types of stop losses and a number of ways to determine where they should go.

Knowing where to place a stop loss order is not always clear. For example, you can use technical analysis to find levels of support and resistance, or you can place a stop loss based on nothing more than the amount of time for which your trade has been open. There is also a difference between a fixed stop loss and a moving stop loss.

This lesson will explain a number of methods of applying fixed stop losses, as well as some alternative types of stop losses that you can use when trading.

Fixed stop losses

A fixed stop loss is a stop loss that is placed without being adjusted during the trade. A trader will have to determine the best place for them to go at the time of entry.

Using swing highs and swing lows

If you enter into a trade, you can use the swing highs and lows to place your stop loss. These are logical places to put stop losses because they are the most recent prices at which the sellers and buyers were willing to sell and buy at respectively.

The following chart shows an example of a long trade where the stop loss has been placed under the most recent swing low:

If you enter a short position in a downtrend then you can use the most recent swing high to place your stop loss, as the following chart demonstrates:

Support and resistance

One of the most common methods for determining a stop loss placement is by using support and resistance.

Support and resistance indicate where buying and selling is likely to take place. In other words, you can see the highest price and the lowest price at which other traders are willing to buy or sell in the current market conditions.

For example, if you refer to the chart above, you will see that price is trading in a range with a clear resistance line, in which case you can look to enter into a short position. You can then place the stop loss just above the resistance level, because you know that this resistance level is the most recent price at which sellers are entering the market.

Determining where buying and selling is taking place by using support and resistance effectively allows you to place your stop loss in the safest place. If the price breaks through these levels and triggers your stop loss, then you know that current market conditions have changed – the buyers or sellers have not finished moving the price, and you can simply look for a new trade.

Using trend lines or channels

Another common method to place a stop loss is by using a trend line or a channel.

Once a channel has been established, it is unlikely the price will move outside, which means that you can use either the upper or lower boundaries to place your stop loss. If the price does break through the channel, then it is likely that the channel is breaking down and no longer valid.
One frequently used option to set the stop loss is outside of the upper or lower boundary of the channel.

The chart below demonstrates that after a channel had been established, one option is to place the stop loss just below the lower boundary:

Using moving averages

Moving average can also be used as support or resistance, in which case the best place to set a stop loss is on the other side of the moving average, much the same way that horizontal support and resistance or channels are used. In the following chart, you can see an example of a long entry where the stop loss has been placed underneath the moving average:

Trailing stops

Trailing stops are stop loss orders that follow a trade as it moves in favour of either your long or short position.

Some trading platforms have an option to set a trailing stop after the trade has gone a certain number of pips into profit. As the price moves in favour of the trade, a trailing stop loss will initialise and move in the same direction as the trade. This will reduce the risk as the trade goes on and eventually lock in profit.

As the trade must first go into profit before the trailing stop loss is initialised, a fixed stop loss must first be used when you enter the market.

Trailing stop losses can also be adjusted manually using indicators, such as moving averages, or trend lines and channels. 
For example, if you have entered into a buy trade as the price found support at the moving average, you can adjust the stop loss under the moving average as the trade develops. The following chart shows how you can adjust your stop loss up in the direction of the trade using a moving average:

How and when you decide to move the stop loss using the moving average is up to the trader. For example you can move the stop loss up in stages, as in the example above, or you can move your stop loss up each time a new candle appears and the moving average develops.

Time-based stop losses

A non-technical tool that can be used for placing a stop loss is the time-based method. The concept of this stop loss depends on how much time a trader is willing to hold a trade. A pre-determined amount of time is set and after that time has elapsed, the position is closed.

The reason why traders use a time-based stop loss is that if the markets do not seem to be moving in either direction and neither your stop loss nor the profit target has been hit, after a set period of time you can close down that trade in order to seek a better one for your trading capital. If the market price does not move significantly in either way, there would seem to be no advantage in keeping it open.

It is important to note that with trailing stops and time-based stop losses, money management rules still apply and should be used in conjunction with a pre-determined stop loss and profit target.

Guaranteed stop losses

There are some instances where the market price can gap between time periods — that is the opening price is different from the closing price. This can be common when the market closes and then opens the next day or after the weekend.

If you left your position open in the market during these closed times, there is a possibility that the price can move due to an event and "jump" over your stop loss. This produces a considerable risk to traders that leave open positions in overnight or over the weekend.

Although rare, some brokers will offer a guaranteed stop loss, which can protect you in instances where the market gaps over your stop loss. You may need to pay a premium on the spread to keep the position open over the market close, as well as meet the higher margin levels your broker would introduce.

Preparing For Contradictions

An important fact about investing is that there are no indisputable laws, nor is there one correct way to go about it. Furthermore, within the vast array of different investing styles and strategies, two opposite approaches may both be successful at the same time. 

One explanation for the appearance of contradictions in investing is that economics and finance are social (or soft) sciences. In a hard science, like physics or chemistry, there are precise measurements and well-defined laws that can be replicated and demonstrated time and time again in experiments. In a social science, it's impossible to "prove" anything. People can develop theories and models of how the economy works, but they can't put an economy into a lab and perform experiments on it. 

In fact, humans, the main subject of the study of the social sciences are unreliable and unpredictable by nature. Just as it is difficult for a psychologist to predict with 100% certainty how a single human mind will react to a particular circumstance, it is difficult for a financial analyst to predict with 100% certainty how the market (a large group of humans) will react to certain news about a company. Humans are emotional, and as much as we'd like to think we are rational, much of the time our actions prove otherwise. 

Economists, academics, research analysts, fund managers and individual investors often have different and even conflicting theories about why the market works the way it does. Keep in mind that these theories are really nothing more than opinions. Some opinions might be better thought out than others, but at the end of the day, they are still just opinions. 

Take the following example of how contradictions play out in the markets: 

Sally believes that the key to investing is to buy small companies that are poised to growat extremely high rates. Sally is therefore always watching for the newest, most cutting-edge technology, and typically invests in technology and biotech firms, which sometimes aren't even making a profit. Sally doesn't mind because these companies have huge potential. 

John isn't ready to go spending his hard-earned dollars on what he sees as an unproven concept. He likes to see firms that have a solid track record and he believes that the key to investing is to buy good companies that are selling at "cheap" prices. The ideal investment for John is a mature company that pays out a large dividend, which he feels has high-quality management that will continue to deliver excellent returns to shareholders year after year. 

So, which investor is superior? 

The answer is neither. Sally and John have totally different investing strategies, but there is no reason why they can't both be successful. There are plenty of stable companies out there for John, just as there are always entrepreneurs creating new companies that would attract Sally. The approaches we described here are those of the two most common investing strategies. In investing lingo, Sally is a growth investor and John is a value investor. 

Although these theories appear to contradict one another, each strategy has its merits and may have aspects that are suitable for certain investors. Your goal is to be informed enough to understand and analyze what you hear. Then you can decide which theories fit with your investing personality. 

Technical Analysis

Introduction
Technical analysis is the study of past price and activity history from charts in order to predict future price movements. The art of technical analysis is to identify patterns in price movements that will then dictate where that market is moving to in the future.

It must be remembered and more importantly understood that the market is not just a number of shares of different companies moving in one direction or another. The market is a number of human beings moving the price of those shares in one direction or another. People make the market change, when they demand more of one share or less of another. This is what moves the price. One may feel that a share price in an individual company has gone up because it has posted a large gain in profits that year. It hasn’t. The price of the share has gone up because based on that profit news more people wanted to buy that share. The human beings demanding that share have forced the price up. This concept is crucial to your understanding of technical analysis.

Human nature remains more or less constant and tends to react to similar situations in consistent ways. By studying the nature of previous market turning points, it is possible to identify certain patterns to develop an understanding of where the market is going to move in the future. Technical analysis therefore is based on the assumption that people will continue to make the same mistakes that they made in the past. Human relationships are extremely complex and never repeat in identical combinations. The markets, which as explained are a reflection of people in action, never duplicate their performance exactly, but the recurrence of similar characteristics is sufficient to enable market watchers to identify major junction, or turning points.


Philosophy/Rational behind technical analysis
There are three premises on which technical analysis is based:
1)History Repeats Itself
2)Prices Move In Trends
3)Market Action Discounts Everything

History repeats itself
Much of the body of technical analysis and the study of market action has to do with the study of human psychology. Chart patterns, for example, which have been identified and categorised over the past 100 years, reflect certain standard pictures that appear on price charts. These pictures reveal the bullish or bearish psychology of the market. Since these patterns have worked well in the past, it is assumed that they will continue to work well in the future.
Another way of expressing this premise is that the key to understanding the future lies in the study of the past, or that future is just a repetition of the past.

Prices move in trends

The concept of a trend is absolutely essential to the technical approach. Here again, unless one accepts the premise that markets do in fact trend, there is no point in reading any further. The whole purpose of charting the price action of a market is to identify trends in the early stages of their development and ride on that trend.

Furthermore, it is important to realise that a trend in motion is more likely to continue than reverse. A trend will continue until it changes course. This sounds a very obvious concept, but then this is what we are trying to achieve. We are looking for the most probable movement of a market. If the market is going up, it will continue going up until it reverses. If we can identify that market is going up, then we will buy the product until this identification tells us otherwise.

Market action discounts everything
This statement forms what is probably the cornerstone of technical analysis. Unless this premise is understood and accepted then nothing else really makes sense. The technical analyst believes that everything that could affect the price fundamental, political, psychological or otherwise is already reflected in the price of that product. It follows therefore, that analysing company’s profit forecasts is useless, as the market has already priced that into the value of the share. All that is needed therefore, is a study of the price action. While this claim appears at first hand to be rather fantastical and unbelievable, it is hard to disagree with if one takes time to consider its true meaning.

As a rule, chartists do not concern themselves with the reasons why prices rise or fall. Very often, in the early stages of a price trend or at critical turning points, no one seems to know exactly why a market is performing in a certain way. This doesn’t matter to a chartist, as he will just look to follow this trend. He knows there are reasons why the market has gone up or down, but he just doesn’t believe that knowing what those reasons are is necessary to the forecasting of that price.
It follows then that if everything that affects the market price is ultimately reflected in the market place, then all that is necessary is the study of the price action, not why it moved. By studying price charts and a host of other technical indicators, the chartist in effect lets the market tell him which way it is most likely to go.

Another very important thing that must be borne in mind when discussing technical analysis is that the practice of it is self-fulfilling. There are many millions of traders that treat technical analysis as a religion. When the chart pattern indicates they should buy, they will buy. If it indicates that they should sell, they will sell. If many millions are following the same pattern, the price will do exactly what they thought it would because they are all doing it. If everyone looked at a chart and decided at some point the market would go up. They would all buy it at this point. As they are all buying it at this point, the market will go up, as demand factors on that product will be greater than supply. There are a million technical analysts all buying at this level. We may as well join them.