Foreign Exchange Market
KARISHMA SHARMA (2K12A27)
ANUJ GARG (2K12A13)
ANKIT SAPRA (2K12A55)
GUNJA KUMARI (2K12A22)
J PRATE...
WHAT IS FOREIGN EXCHANGE
Foreign exchange is the mechanism by which
the currency of one country gets converted
into the cu...
Cntd ….
It also refers to the stock of foreign currencies
and other foreign assets. The foreign exchange
management ACT 19...
Nature of foreign exchange
Volatile, affected by hedger, arbitrager, speculator.
Affected by demand and supply.
Affected b...
Operation of foreign exchange market:
Foreign exchange market operates either as:Spot Market: (Current Market)
Spot market...
Forward Market:
Forward Market for foreign exchange is that market which handles
such transaction of foreign exchange as a...
Exchange Rate
►Fixed

Exchange Rate System
Fixed rates provide greater certainty for
exporters and importers.
►Flexible Ex...
History of Foreign exchange
Foreign exchange history can be viewed as a
series of solutions that allowed countries to
issu...
Exchange rate fluctuations
A reliable forecast or future spot rate is called
study of empirical patterns of exchange rate
...
The Foreign Exchange Market for Beginners
►The

foreign exchange market or forex market as it is
often called is the marke...
Contd….
►Foreign

exchange Capital Markets (FXCM) is
an online currency trading firm that offers a
free demo account to tr...
Characteristics of foreign exchange
Its huge trading volume representing the
largest asset class in the world leading to h...
Retail Exchange Market
People

may need to exchange currencies in
a number of situations.for Eg…

Fluctuations in exchang...
Market Participants

Central banks participate in the foreign exchange
market to align currencies to their economic
needs....
Measures Initiated to Develop the Foreign
Exchange Market in India
Institutional Framework
 Foreign Exchange Regulation A...
FOREIGN EXCHANGE MARKET STRUCTURE
Market Segments
Foreign exchange market activity takes place
onshore with
Many countries...
Top 10 Currency Traders as on May 2012 are
CURRENCY TRADING RULES
PLAN YOUR TRADE AND TRADE YOUR PLAN.
► THE TREND IS YOUR FRIEND.
►FOCUS ON CAPITAL PRESERVATION.
►K...
Mistakes of Foreign exchange Traders
►Trading

Out of Boredom or Anger
►Having Unrealistic Expectations.
►Taking Highly Co...
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Foreignexchangemarket finalpptmy-121223123000-phpapp02

  1. 1. Foreign Exchange Market KARISHMA SHARMA (2K12A27) ANUJ GARG (2K12A13) ANKIT SAPRA (2K12A55) GUNJA KUMARI (2K12A22) J PRATEEK KUNDU (2K12A26) SHRUTIKA DHAWAN (2K12A53)
  2. 2. WHAT IS FOREIGN EXCHANGE Foreign exchange is the mechanism by which the currency of one country gets converted into the currency of another country. The conversion of currency is done by the banks who deal in foreign exchange. These banks maintain stocks of one currencies in the form of balances with banks
  3. 3. Cntd …. It also refers to the stock of foreign currencies and other foreign assets. The foreign exchange management ACT 1999 defines “Foreign exchange means foreign currency and includes… (a) Deposits credits and balances payable in any foreign currency. (b) Draft traveler’s cheques, letter or credit or bills of exchange expressed or drawn in Indian currency but payable in any foreign currency. (c) Drafts travelers cheques, letter of credit or bills of exchange drawn by banks, institution or persons outside India, but payable in Indian currency
  4. 4. Nature of foreign exchange Volatile, affected by hedger, arbitrager, speculator. Affected by demand and supply. Affected by rate of interest. Affected by balance of payment surplus and deficit. Affected inflation rate. Spot and forward rates are different. Affected by the economic stability of the country. Affected by the fiscal policy of the government. Affected by the political condition of the country. It can be quoted directly or indirectly
  5. 5. Operation of foreign exchange market: Foreign exchange market operates either as:Spot Market: (Current Market) Spot market for foreign exchange is that market which handles only spot transaction or current transactions. Principle characteristics: Spot Market is of daily nature. It does not trade in future deliveries.  Spot rate of exchange is that rate which happens to prevail at the time when transactions are incurred.
  6. 6. Forward Market: Forward Market for foreign exchange is that market which handles such transaction of foreign exchange as are meant for future delivery. Principles Characteristics: It only caters to forward transaction.  It determines forward exchange rate at which forward transaction are to be honored.
  7. 7. Exchange Rate ►Fixed Exchange Rate System Fixed rates provide greater certainty for exporters and importers. ►Flexible Exchange Rate System Flexible exchange rate or floating exchange rates change freely and are determined by trading in the forex market.
  8. 8. History of Foreign exchange Foreign exchange history can be viewed as a series of solutions that allowed countries to issue their own currency and to conduct their own monetary policy while also allowing international trade to be conducted by providing a means of exchanging one currency for another according to the exchange rate between them, which was either agreed-upon or set by the market.
  9. 9. Exchange rate fluctuations A reliable forecast or future spot rate is called study of empirical patterns of exchange rate fluctuation. It provides essential information for an exchange rate exposure.
  10. 10. The Foreign Exchange Market for Beginners ►The foreign exchange market or forex market as it is often called is the market in which currencies are traded. ►Currency Trading is the world’s largest market consisting of almost trillion in daily volumes and as investors learn more and become more interested, market continues to rapidly grow. ►All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency. ►The first currency of a currency pair is called the “base currency,” while the second currency is called the counter currency.
  11. 11. Contd…. ►Foreign exchange Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market. ►Registering for a demo account allows a new trader to download the online trading platform that is used by the company’s clients trading live accounts and make trades as if they were doing it with real money.
  12. 12. Characteristics of foreign exchange Its huge trading volume representing the largest asset class in the world leading to high liquidity. ☻ Its geographical dispersion; ☻ Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday. ☻The use of leverage to enhance profit and loss margins and with respect to account size. ☻
  13. 13. Retail Exchange Market People may need to exchange currencies in a number of situations.for Eg… Fluctuations in exchange rates A market based exchange rate will change whenever the values of either of the two component currencies change.  The higher a country's interest rates, the greater will be the demand for that currency.
  14. 14. Market Participants Central banks participate in the foreign exchange market to align currencies to their economic needs. Commercial companies . Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rate. Central bank National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies.
  15. 15. Measures Initiated to Develop the Foreign Exchange Market in India Institutional Framework  Foreign Exchange Regulation Act (FERA), 1973 was replaced by the market friendly Foreign Exchange Management Act (FEMA), 1999.  Money and Securities Markets set up by the Reserve Bank in 1999 was expanded in 2004 to include foreign exchange markets
  16. 16. FOREIGN EXCHANGE MARKET STRUCTURE Market Segments Foreign exchange market activity takes place onshore with Many countries prohibiting onshore entities from undertaking the operations in offshore markets for their currencies. It is the central bank, or professional dealers association, which normally issues the code of conduct (Canales-Kriljenko, 2004).In auction markets, an auctioneer or auction mechanism allocates foreign exchange by matching supply and demand orders.
  17. 17. Top 10 Currency Traders as on May 2012 are
  18. 18. CURRENCY TRADING RULES PLAN YOUR TRADE AND TRADE YOUR PLAN. ► THE TREND IS YOUR FRIEND. ►FOCUS ON CAPITAL PRESERVATION. ►KNOW WHEN TO CUT LOSS. ►TAKE PROFIT WHEN THE TRADE IS GOOD ►BE EMOTIONLESS. ►NOT TRADE BASED ON A TIP FROM A FRIEND OR BROKER. ►
  19. 19. Mistakes of Foreign exchange Traders ►Trading Out of Boredom or Anger ►Having Unrealistic Expectations. ►Taking Highly Correlated Trades. ►Failing to Use a Stop. ►Taking Unnecessary Risks. ►Being Too Patient With Losers and Not Patient Enough With Winners. ►Being a “Possum Trader”.
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