FOREX BROKERS

Until recently, foreign exchange brokers did large amounts of business,facilitating interbank trading and matching anonymous counterparts forsmall fees. Today, however, much of this business has moved on to more efficient electronic systems, such as EBS (now owned by ICAP), Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Bloomberg,and TradeBook(R). The broker squawk box lets traders listen in on ongoing interbank trading and is heard in most trading rooms, but turnover is noticeablysmaller than just a few years ago

PROFIT TRADING

Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high — that is, to trade for profitbased on their more precise information. Nevertheless, the effectiveness of central bank "stabilizing speculation" is doubtful because central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.

PIPS AND ITS VALUE

What we are earning here?
While during trading stocks traders are earning cents or its fractions, when trading futures points are being earned or lost during forex trading we are earning or losing pips. Depending on currency pair pips are second or fourth place after coma. For example exchange rate (or currency pair price) for EUR/USD is as for now 1.2068. If it raise to 1.2075 it will be 7 pips up. USD/JPY price is 118.51, pips here are describing second place after coma. Pips can have different values depending in which currency account is denominated. If account is denominated in USD each pip earned in different currency than USD need to be exchanged to USD. In example when we trade USD/JPY we are earning or losing JPY pips. To add then to our USD denominated trading account we need to exchange them to USD. We will look then for JPY/USD exchange rate and we will see how much JPY pip is worth. Every trading platform does such calculations automatically but its good to know why on some pairs we are earning more dollars per pip when on others we earn less. On major currency pairs pips value vary from as low as $0.7 to as high as $1.6. These values are of course approximations as they depend on exchange rates which are changing every minute.

ISO CURRENCY SYMBOLS

All currencies are assigned an ISO (International Standards Organization) code abbreviation. US dollar is as you probably noticed referred as USD, GBP is United Kingdom Pound etc. These abbreviations are commonly used to describe currencies in financial world. List of currency codes is placed

CURRENCY PAIRS

our trading vehicles
Instruments traded on most popular forex spot market are currency pairs. EUR/USD, USD/JPY, GBP/CHF these are our trading vehicles. Currency pair price equals the ratio of one currency valued against another. The first currency in pair is called base currency, the second one is referred as the quote currency. When you want to buy, an currency pair price specifies how much quote currency you have to pay to obtain one lot of the base currency. When you want to sell, the currency pair price specifies how much quote currency you get when selling one lot of the base currency

FX PULSE RATE PICKS UP

Gauging the health of the world’s foreign exchange market is an awkward business, but every three years the Bank for International Settlements takes its pulse as best it can. Edward Russell-Walling reports.The last time the Bank for International Settlements (BIS) brought out its stethoscope, in 2001, the FX heart was found to be beating rather feebly. But the bank’s latest survey shows it to be pounding. Daily turnover shot up from an average of $1200bn in 2001 to nearly $1900bn this year, according to BIS.That represented a rise of 57% (36% at constant exchange rates), which was rather more than most anticipated. The consensus had been for closer to $1500bn. “We were all surprised,” admits Mansoor Mohi-uddin, UBS chief currency strategist. “No-one expected the jump to be this much.”