11/10/2020
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`http://www.matchbookfx.com/index/aboutforex.html
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`About ForexMatchbook FX - FXDirect-Access Forex (FX) currency trading is here, now with Matchbook FX. Get Real-Time, LIVE self-d…
`👤 ⍰ ❎
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`1999 2000 2001
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`About Forex
`
`What is Forex?
`Foreign Exchange (Forex) trading is simply the exchanging of one currency
`for another - Each Forex trade can theoretically be viewed as a 'spread ' trade
`where to buy one currency you must sell another.
`
`Convention dictates that currencies are measured in units per 1 USD. For
`example, 1 USD is worth approximately 125 JPY (Japanese Yen) or 1 USD is
`worth approximately 1.5000 CHF (Swiss Francs). As a result, when USDJPY
`appreciates in value, it is the USD which has appreciated in value relative to
`the JPY and not vice-versa. Position-wise, to own or be 'Long' USDJPY
`means that you are long the USD and concurrently short the JPY. USD,
`therefore, is the default 'lead' currency.
`
`There are, however, 4 exceptions to the USD based currency pairs. They are
`EUR (Euro), GBP (British Pound), AUD (Australian Dollar), and NZD (New
`Zealand dollar or 'Kiwi'). In these cases, the market is measured in terms of
`amount of USD per 1 EUR, GBP, AUD and NZD and they are the 'lead'
`currencies.
`
`America-iNvest.com
`GlobalNetFinancial
`UK-iNvest.com
`Danmark-iNvest.com
`Neder-iNvest.com
`France-iNvest.com
`Italia-iNvest.com
`UK-Wire.com
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`USDJPY Daily Bar
`
`About the FX Market
`The foreign exchange market is not a "market" in the traditional sense. There
`is no centralized location for trading as there is in futures or stocks. Trading
`occurs over the telephone and on computer terminals at thousands of
`locations worldwide. Foreign Exchange is also the world's largest and
`deepest market. Daily market turnover has skyrocketed from approximately 5
`billion USD in 1977 to a staggering 1.5 trillion US dollars today; even more on
`an active day. Most foreign exchange activity consists of the spot business
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`About ForexMatchbook FX - FXDirect-Access Forex (FX) currency trading is here, now with Matchbook FX. Get Real-Time, LIVE self-d…
`between the US dollar and the six major currencies (Japanese Yen, Euro,
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`British Pound, Swiss Franc, Canadian Dollar and Australian Dollar)
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`The FOREX market is so large and is controlled by so many participants that
`▾ About this capture
`no one player, governments included, can directly control the direction of the
`market, which is why the FOREX market is the most exciting market in the
`world. Central banks, private banks, international corporations, money
`managers and speculators all deal in FOREX trading.
`
`FOREX WORKSHOP
`Topics Covered
`
`A - Market Conventions
`B - Profit and Loss Calculations
`C - Executive Summary
`
`A. Market Conventions
`
`FX trading involves buying one currency while selling another with the hopes
`of benefiting from exchange rate fluctuations. An FX trade involves trading a
`base currency in exchange for an exchanged currency.
`
`Example A1 Buying 100,000 USDJPY at a rate of 105.00
`
`In this example the base currency is US dollars (USD) and the exchanged
`currency is Japanese Yen (JPY). The exchange rate of 105 represents the
`number of JPY that can be exchanged for 1 USD. Therefore buying 100,000
`USDJPY at 105 translates into buying 100,000 USD in exchange for
`10,500,000 JPY.
`
`It is important to note that the base currency is always the first currency
`represented in a currency pair and the exchanged is always the second.
`Convention dictates which currency in a given pair will be the "base" and
`which will be the "exchanged". The next example will show how the previously
`discussed definitions are applied to a different currency pair.
`
`Example A2 Selling 100,000 GBPUSD at a rate of 1.6400
`
`In this example the British Pound (GBP) is the base currency and USD is the
`exchanged. An exchange rate of 1.6400 implies that each 1 GBP can be
`exchanged for 1.6400 USD. Therefore selling 100,000 GBPUSD at 1.6400
`translates into selling 100,000 GBP in exchange for 164,000 USD.
`
`Market convention has created the following hierarchy to determine which will
`be the base currency in any given pair.
`
`1-EUR (Euro) for EUR vs. USD or EURUSD
`2-GBP (British Pound) for GBP vs. USD or GBPUSD
`3-USD (US Dollar) for both USDCHF and USDJPY
`
`Therefore, based on this convention, the major pairs traded in the spot FX
`market are EURUSD, GBPUSD, USDJPY, and USDCHF.
`
`B. PROFIT AND LOSS CALCULATIONS
`
`This section will show how movements in exchange rates can generate profits
`and losses. This concept is most easily understood through examples.
`
`Example B1:
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`About ForexMatchbook FX - FXDirect-Access Forex (FX) currency trading is here, now with Matchbook FX. Get Real-Time, LIVE self-d…
`Selling 100,000 EURUSD at 1.0150 and then buying back the 100,000
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`EURUSD at 1.0100 (In other words … Going short 100,000 EUR against USD
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`at 1.0150 and covering for a 50 pip profit)
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`▾ About this capture
`By selling EURUSD a trader is speculating that the EUR will depreciate
`relative to the USD. As discussed in the previous section Selling 100,000
`EURUSD at 1.0150 translates in to selling 100,000 EUR in exchange for
`101,500 USD. In this example the EURUSD exchange rate moves lower from
`1.0150 to 1.0100 before the position is covered. At an exchange rate of
`1.0100 the 100,000 EUR sold earlier can be bought back for only 101,000
`USD resulting in a profit of 500 USD (101,500 - 101,000). It may be useful to
`note that based on this example that each "pip" movement in exchange rate
`on a 100,000 EURUSD position is equal to $ 10 USD in profit or loss.
`
`It may also be helpful to note that profits and losses are initially generated in
`the "exchanged" currency. In the case of EURUSD the exchanged currency is
`USD and the profit is in USD. As you will see in the following example when
`the exchanged currency is not USD another step must be taken to convert
`profits back in to USD terms.
`
`Example B2 Buying 100,000 USDJPY at 105.00 and selling it back at 105.30
`
`In this example the trader is speculating the USD will appreciate relative the
`JPY. When the position is opened, 100,000 USD is purchased in exchange for
`10,500,000 JPY. As the exchange rate moves higher the amount of JPY that
`can be exchanged for 100,000 USD increases. At a rate of 105.30 the
`100,000 USD can be sold back (covered) for 10,530,000 JPY resulting in a
`profit of 30,000 JPY (10,530,000-10,500,000). This 30,000 JPY profit is then
`converted back in to USD by dividing by the applicable prevailing USDJPY
`exchange rate. For MBFX customers the applicable rate will be end of day
`"re-Val" or NY closing rate. In this example we will use 105.30 as the
`applicable rate since that is where the position was closed. So 30,000 JPY/
`105.30= $284.90 USD in profits.
`
`C. EXECUTIVE SUMMARY
`
`On a 100,000 EURUSD position each "pip" is equal to 10 USD
`On a 100,000 GBPUSD position each "pip" is equal to 10 USD
`On a 100,000 USDJPY position each "pip" is equal to 1000 JPY or
`approximately $9.52 USD
`On a 100,000 USDCHF position each "pip" is equal to 10 CHF or
`approximately $6.41 USD
`
`GENERALIZED P+L CALCULATION FORMULA:
`
`POSITION SIZE (In base currency terms) x ( EXCHANGE RATE WHEN
`POSITION IS CLOSED - EXCHANGE RATE WHEN POSITION WAS
`OPENED) = PROFITS/LOSSES (In exchanged currency terms)
`
`To convert P+L in to USD terms divide PROFITS/LOSSES by applicable
`USD[EXCHANGED CURRENCY] rate
`
`i.e. 500 CHF divided by applicable USDCHF rate of 1.5600 =$ 320.51 USD
`
`If you have any further questions please call the Matchbook FX help desk, 24
`hrs, at (800)355-5255
`
`Benefits of Trading Spot FX
`1. Liquidity
`2. Leverage
`3. 24 hours
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`About ForexMatchbook FX - FXDirect-Access Forex (FX) currency trading is here, now with Matchbook FX. Get Real-Time, LIVE self-d…
`4. Quantity-traded flexibility
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`5. Settlement flexibility
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`6. Never a 'bear' market
`1999 2000 2001
`▾ About this capture
`7. Free, fair, more open information
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`1. LIQUIDITY: FOREX investors never have to worry about being "stuck" in a
`position due to a lack of market interest. In this US$1.5 trillion dollar per day
`market, major international banks are always willing to provide both a bid
`(buying) and ask (selling) price. Liquidity is a powerful attraction to any
`investor as it suggests the freedom to open or close a position at will.
`Because the market is highly liquid, most trades can be executed at a single
`market price. This avoids the problem of slippage found in futures and other
`exchange-traded instruments where only limited quantities can be traded at
`one time at a given price. The six major currencies (JPY, EUR, CHF, GBP,
`CAD & AUD) are generally considered to be the most liquid
`
`2. LEVERAGE: FOREX investors are permitted to trade foreign currencies on
`a highly leveraged basis - up to 25 times their investment in the case of
`MatchbookFX. An investment of US $10,000 would permit one to trade up to
`US $400,000 worth of any particular currency.
`
`3. 24 HOURS: A substantial attraction for participants in the FOREX market is
`that it is open 24 hours per day. An individual can react to news when it
`breaks, rather than waiting for the opening bell when everyone else has the
`same information, as is the case in many markets. This may enable market
`participants to take positions before an important piece of information is fully
`factored into the exchange rate. High liquidity and 24 hour trading allow
`market participants to exit or open a new position regardless of the hour.
`
`4. SIZE FLEXIBILITY: MatchbookFX allows greater flexibility with respect to
`your desired trade quantity. On MatchbookFX, you can trade ANY DESIRED
`AMOUNT over $100,000 USD, specifically tailored to your needs or risk
`tolerance. Size or quantity flexibility can be especially useful to corporate
`treasurers who need to hedge a future cash flow or portfolio managers who
`need to hedge foreign equity exposure.
`
`5. SETTLEMENT FLEXIBILITY - This concept, a corollary to point # 4, allows
`you to trade for various settlement dates or 'maturities' out to 1 year further
`allowing you to tailor your trades or hedges to your specific needs. This
`feature of trading forex on MatchbookFX differs from futures where settle
`dates are relegated to 4 'expirations' per year, and can also be quite useful to
`corporate treasurers and portfolio managers.
`
`6. NEVER A 'BEAR' MARKET: Another advantage of the FOREX market is
`that there is no 'bear' market, per se. Currencies are traded in pairs, for
`example US dollar vs. yen or US dollar vs. Swiss franc. Every position
`involves the selling of one currency and the buying of another. If one believes
`the Swiss franc will appreciate against the dollar, one can sell dollars and buy
`Swiss francs. Or if one holds the opposite belief, one can buy dollars for
`Swiss francs. The potential for profit exists as long as there is movement in
`the exchange rate or price. One side of the pair is always gaining, and
`provided the investor picks the right side, a potential for profit ALWAYS exists.
`
`7. FREE AND FAIR FLOW OF INFORMATION: Ever notice in the stock
`market that a certain stock is suddenly down 5% or more but you have
`absolutely no idea what caused such a quick spike? Usually, it's not until the
`next morning when you read it in the newspaper that you find out that
`earnings forecasts have been revised downward; or that an insider at a
`particular company has resigned; or that some other influential piece of
`information was released that you were not privy to. Imagine how much
`money you could have saved had you known this vital information at the
`same time as all other market 'insiders.' - Or how much you could even have
`earned in profit by acting in a timely manner… Imagine a market where there
`is little or no 'inside information' and all pertinent, market-moving news is
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`About ForexMatchbook FX - FXDirect-Access Forex (FX) currency trading is here, now with Matchbook FX. Get Real-Time, LIVE self-d…
`released publicly to everybody in the world at the same time… Welcome to
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`the foreign exchange market. You may easily access it with MatchbookFX.
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`Cash FX vs. Currency Futures
`As an investor it is important for you to understand the differences between
`cash FOREX and currency futures.
`
`In currency futures, the contract size is predetermined. With
`MatchbookFX (SPOT FX), you may trade any desired amount above
`$100,000 USD
`The futures market closes at the end of the business day (similar to the
`stock market) If important data is released overseas while the U.S.
`futures markets is closed, the next day's opening might sustain large
`gaps with potential for large losses if the direction of the move is
`against your position. (Note: Recently, Globex ™ introduced overnight
`currency trading but liquidity is poor and bid/ask spreads are unduly
`wide) The Spot forex (MATCHBOOK FX) market runs continuously on
`a 24-hour basis from 7:00 am New Zealand time Monday morning to
`5:00 pm New York Time Friday evening. Dealers in every major FX
`trading center (Sydney, Tokyo, Hong Kong/Singapore, London,
`Geneva and New York/Toronto) ensure a smooth transition as liquidity
`migrates from one time-zone to the next.
`Furthermore, currency futures trade in non-USD denominated currency
`amounts only whereas in spot forex, an investor can trade either in
`currency denominations, or in the more conventionally-quoted USD
`amounts.
`The currency futures pit, even during Regular IMM (International
`Money Market) hours suffers from sporadic lulls in liquidity and
`constant price gaps. The spot forex market offers constant liquidity and
`market depth much more consistently than Futures.
`With IMM futures one is limited in the currency pairs he can trade -
`Most currency futures are traded only versus the USD - With spotforex,
`(as with MatchbookFX) one may trade foreign currencies vs. USD or
`vs. each other on a 'cross' basis as well - ex: EURJPY, GBPJPY,
`CHFJPY, EURGBP and AUDNZD.
`
`USDCAD Weekly Candlestick
`
`What Influences the Market?
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`The primary factors that influence exchange rates are the balance of
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`international payments for goods and services, the state of the economy,
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`political developments as well as various other psychological factors. In
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`addition, fundamental economic forces such as inflation and interest rates will
`1999 2000 2001
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`constantly influence currency prices.
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`8 captures
`18 Jan 2000 - 20 Mar 2002
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`In addition Central banks sometimes participate in the forex market by buying
`extremely large sums of one currency for another - this is referred to as
`Central Bank intervention. Central banks can also influence currency prices
`by changing their country's short-term interest rate to make it relatively more
`or less attractive to foreigners.
`
`Any of these broad-based economic conditions can cause sudden and
`dramatic currency price swings. The fastest moves, however, occur usually
`when information is released that is unexpected by the market at large. This is
`a key concept because what drives the currency market in many cases is the
`anticipation of an economic condition rather than the condition itself.
`
`Activities by professional currency managers, generally on behalf of a pool of
`funds, have also become a factor moving the market. While professional
`managers may behave independently and view the market from a unique
`perspective, most, if not all, are at least aware of important technical chart
`points in each major currency. As the market approaches major 'support' or
`'resistance' levels, price-action becomes more technically oriented and the
`reactions of many managers are often predictable and similar. These market
`periods may also result in sudden and dramatic price swings. Traders make
`decisions on both technical factors and economic fundamentals. Technical
`traders use charts to identify trading opportunities whereas fundamentalists
`predict movements in exchange rates by interpreting a wide variety of data,
`which range from breaking news to economic reports.
`
`Internet Trading
`Recently, there has been an explosion of online investment accounts as
`sophisticated investors realize the advantages of trading over the Internet.
`Business Week reports that there are three million online investment
`accounts, up from 1.5 million in 1997. Forrester Research Group estimates
`there will be 14 million online investment accounts by 2002. The Internet,
`however, is only a modern medium used to facilitate trading. With
`MatchbookFX as with many respectable financial institutions, there is always
`more than one method available to execute trades: Over the Internet, or by
`phone. One is never dependent solely on the Internet for trade execution.
`
`To open a LIVE trading account with MatchBook FX: CLICK HERE!
`MatchBook FX has secured fidelity bond insurance coverage: CLICK HERE!
`
`Note : Matchbook FX is not intended for use by UK retail investors, under the
`SFA Act of 1986. UK Institutions welcome.
`
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