FOREX Trading

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FOREX trading has steadily turned out to be one of the most popular forms of trading.This trading method has a plethora of advantages for novice as well as expert traders. However, the trading platform has its share of pros and cons. View the presentation to know more about Forex trading and its features.

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FOREX Trading

  1. 1. FOREX Trading
  2. 2. What is the Forex Market?The FOREX (Foreign Exchange) market is the market in which differentcurrencies are traded. It is the largest, most liquid financial market in theworld with an average traded value that exceeds € 3.18 trillion per day.
  3. 3. How does the Forex Market work? Financial centers around the world function as anchors of trading between different types of buyers and sellers everyday except weekends.The Foreign exchange marketdetermines the relative values ofdifferent currenciesThere are huge speculative returns that can be made by predicting thevalue of international currencies.
  4. 4. Who trades in the Forex Market?Traders in foreign exchange include large banks, central banks, institutionalinvestors, currency speculators, corporations, governments, other financialinstitutions, and retail investors. Commercial companies Central banks Foreign exchange fixing Speculators Investment management firms Retail investors
  5. 5. How does the Forex Market work?In a typical foreign exchange transaction, a party purchases a quantity of onecurrency by paying a quantity of another currency Top Forex Traders (Global) 5% Deutsche Bank 5% Barclays Capital 20% 6% UBS AG Citi 8% JP Morgan 14% HSBC 8% RBS Credit Suisse 8% 14% Goldman Sachs 12% Morgan Stanley
  6. 6. Functioning of the Forex Market• Transactions in foreign currencies are not centralized on an exchange, they take place all over the world.• Dealers quote all major currencies.• After the currency is decided, the investor purchases through a dealer.• Investors speculate on currency prices by getting a credit line and vastly increase their potential gains and losses known as marginal trading. Did you know? The exchange market originated centuries ago in the form of the Barter system, whereby the value of goods was expressed in terms of other goods. Right: A “labour for labour” note used in the barter system
  7. 7. Trading Characteristics• There is no unified or centrally cleared market for the majority of trades.• There are many inter-connected markets where different currency instruments are traded.• A particular currencys quoted price is usually the London market price.• Major trading exchanges: EBS, Reuters and some major banks
  8. 8. The Indian Forex Market• Foreign Exchange Market in India works under the central government in India.• The Indian foreign exchange market is made up of the buyers, sellers, market mediators and the monetary authority of India.• The Foreign Exchange Management Act, 1999 or FEMA regulates the whole foreign exchange market• The foreign exchange market India is growing very rapidly and the annual turnover of the market is more than $400 billion.
  9. 9. Factors Predicting Forex Market Movements• Interest Rates• Economic Growth• Geo-Politics• Trade and Capital Flows,• Merger and Acquisition Activity
  10. 10. Interest Rates• Always buy currencies from countries with high-interest rates and finance these purchases with currency from countries with low-interest rates.• As a countrys interest rate rises, the value of the countrys currency also tends to rise
  11. 11. Economic Growth• The greater the possibility that the central bank will raise its interest rates to tame the growth of inflation• The higher a countrys interest rates, the bigger the likelihood that foreign investors will invest in a countrys financial markets. Geopolitical Factors• Currencies represent countries rather than companies, they are political as well as economic assets.• The key to understanding speculative behavior with respect to any geopolitical unrest is that speculators run first and ask questions later.• The general rule of thumb in the currency market is that politics almost always trumps economics.
  12. 12. Trade and Capital Flows• Trade flow refers to how much income a country earns through trade.• Some countries are sensitive to trade flows, while others are far more dependent on capital flows.• Before you decide on a currency, categorize the country as dependent on either trade flow or capital flow.
  13. 13. Mergers and Acquisitions• Mergers and acquisitions do not affect FOREX trading extensively.• However, it can be the most powerful force in staging near-term currency moves.• This activity occurs when a company from one economic region wants to make a transnational transaction and buy a corporation from another country.
  14. 14.  Market never sleeps, 24 Hr market  Cant always rely on past results to system predict future trends Best option for those seeking  Fluctuations and other factors make consistent investment moves trading foreign exchanges on margin very risky. Simply make trades whenever you see fit  High degree of leverage involved Whether its Bull or Bear, FOREX is always stable Controlled by a huge market and not any corporation.
  15. 15. ConclusionThe basics of FOREX are very easy to understand. However, actual currencytrading can be relatively tricky.To analyze the foreign exchange market you must be acquainted with theinterplay of the various factors affecting the trade.There are no specific trading style that will offer an unblocked path to profitsand success. A smart trader will always pick a method he feels comfortablewith. Although, it is important to adhere to the basic principles combining itknowledge of the market and experience for a successful career in the FOREXmarket.
  16. 16. Thank You! • READ MORETwitter Website Facebook
  17. 17. • Registered office: Kotak Securities Limited, 1st Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400021. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230/INE 011207251, OTC INB 200808136, MCXSX INE 260808130.• Disclaimer: Investments in securities are subject to market risks, please read the SEBI prescribed Combined RDD prior to investing.• * Awarded Best Brokerage Firm in India by AsiaMoney in 2006, 2007, 2008 and 2009

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