3. Investment Features of Forex Market
• Trade worldwide
• The largest financial market with the
average daily trading of more than 5.5
trillion US dollars
• Strong market liquidity
• Gain profit in both bull and bear markets
• Fully utilized leverage
• Quotes and trading online, easier for
investors to enter the market
4. Currency Symbol
• Major Currency
USD EUR JPY GBP CHF
• Minor Currency
CAD AUD NZD SGD SEK NOK CNY
• Exotic Currency
RUB INR ZAR BRL THB MYR HUF CZK TRY
• Commodities
XAU XAG
6. Exchange Quotations
• Indirect Quotation
An exchange rate quoted as the foreign currency per unit of domestic
currency. The domestic currency is always denoted as 1 while the
foreign currency is variable.
• Direct Quotation
Quotes in fixed units of foreign currency against domestic currency.
7. Classification of Foreign Exchange Rate
1. In terms of Specified Exchange Rate
• Base Rate
• Cross Rate
2. In terms of Exchange Rate Regime
• Buying Rate
• Selling Rate
• Middle Rate
3. In terms of Bank Trading Forex
• Fixed Rate
• Floating Rate
8. Classification of Foreign Exchange Rate
4. In terms of Payment Notification Forms
• Wire Transfer Rate
• Mail Transfer Rate
• Standard Rate
5. In terms of The Settlement of Transaction
• Spot Rate
• Forward Rate
12. Major Trading Sessions
• New Zealand Session
• Australia Session
• Tokyo Session
• Singapore Session
• Zurich Session
• London Session
• New York Session
• London session
14. Characteristics of Forex Margin
• Market quotes incessantly 24/5
• Effectively select investment objectives
• The largest financial market trading volume in the world
• High market transparency
• Flexible leverage
• Two-way Trading Opportunities
15. Two-way Trading Opportunities
Forex Margin Trading: gain profit in both bull and bear markets
The difference between Forex Margin Trading
and traditional Stock Trading
Forex Margin Trading Stock Trading
Buy when the price is low
Sell when the price is high
Buy when the price is low
Sell when the price is high
Short sell when the price is high
and then take profit when price is low
Hold the stocks and wait
16. Forex Basic Concept - Principle
o Margin Trading provides you an option for investment, and it is now very
popular among investors.
o Due to high spreads and commissions and hedging trading, profits gained
from ordinary foreign exchange trading are quite limited.
o Forex Margin Trading operates via depositing margin and using leverage to
increase operational amounts (The maximum operational amounts can be
400 times the margin!)
o Low spreads and commissions for Forex Margin Trading.
17. Forex Basic Concept - Terms
Major Currency Pairs
EUR/USD GBP/USD USD/JPY USD/CHF
Commodity Currency Pairs
AUD/USD NZD/USD USD/CAD etc.
Trading Rates
Major currencies are presented with four decimal places.
Exception: JPY and Silver are presented with two decimal places; Gold is
presented with one decimal place.
Cross Rates
18. • Position: a market commitment, or exposure, held by a trader.
• Long: A position that becomes as market price rises. A pair in which the base currency is
bought is said to be long. (Buy first, then sell.)
• Short: A position in which the base currency is sold. It is beneficial when a price declines.
(Sell first, then buy.)
• Lot: 1 lot = 100,000 base currency
• Liquidation: Closing one position by opening a new transaction to offset it.
• Margin: The necessary money needed to maintain a position. The required initial
deposit of collateral to enter into a position or foreign exchange trade. Equals to 0.25%
(leverage 1:400) ~ 5% (leverage 1:20) of transaction volume.
Forex Basic Concept - Terms
19. • Spread: The difference between the bid and ask price.
• Pip
• Fractional Pip (Point)
• Tick Size
• Overnight Swap / Storage Fee
Forex Basic Concept - Terms
20. Characteristics of Currency: EUR
• Second largest trading volume in the market. Viewed as the opposite side of USD.
Accounts for a large proportion of U.S. Dollar Index.
• Active trading volume: European session and U.S. session.
• Properties are stable. The technical trend is relatively normative.
• It is easy to be affected when U.S. or Europe releases important economic data.
• Cross currency pairs: EUR/JPY EUR/GBP EUR/AUD
21. Characteristics of Currency: GBP
• Same as EUR, is one of European currencies. The overall tendencies are
pretty much the same, but sometimes it becomes strong or weak
regardless of European and U.S. market conditions.
• Historically. interest rate of GBP is relatively high. Sometimes it will have a
strong performance due to its strong feature of high interest rate.
• Volatility is relatively high, but in terms of percentage, is similar to those of
EUR and CHF.
• Cross currency pairs: GBP/JPY EUR/GBP GBP/CHF
22. Characteristics of Currency: CHF
• Similar trend as EUR does in the short term as EUR/CHF usually
keeps stable in the short run. However, if EUR/CHF fluctuates
dramatically, one of the currencies will become relatively strong in
the short term.
• One of the save-haven currencies.
• The trend is relatively unstable compared to that of EUR. Therefore,
should be careful about the fake breakouts when doing technical
analysis.
• Cross currency pairs: EUR/CHF GBP/CHF
23. Characteristics of Currency: JPY
• Trend is relatively independent.
• Easy to be affected by cross rates.
• In Japan, the settlement period for the financial year is March. According to
historical records, JPY usually becomes strong in this month.
• As September is the settlement month for half of the financial year, JPY
usually becomes strong in this month as well.
• Japanese Government often intervenes market to weaken JPY.
• The oil price and JPY move in opposite directions.
• Cross currency pairs: EUR/JPY GBP/JPY CAD/JPY
24. Characteristics of Currency: CAD
• Trend is very directional. Once there is a medium-term trend, the market for
CAD is very easy to be significantly unilateral.
• The main active hours are the trading period of U.S. session.
• When it moves unilaterally, the market sometimes stays relatively stable for a
long period.
• Commodity currency. In G7, Canada is the one which relies on exports the
most and the only one which exports oil. Therefore, the increase of oil price
causes CAD up.
25. Characteristics of Currency: AUD
• Trend of AUD is linked with some commodities such as iron ore, precious
metals and gold.
• China’s dependence on Australia’s energy and China’s macroeconomic
situation have a huge impact on AUD movement.
• Influence on the trend of NZD.
• Cross currency pairs: AUD/JPY NZD/AUD
26. U.S. Dollar Index
• The U.S. Dollar Index is a leading benchmark of the international value of
the US dollar, it measures the value of the US dollar relative to a basket
of foreign currencies.
• The change rate of the value of the US dollar relative to a basket of
selected currencies can reflect the strength of the US dollar. It can also
imply America’s export competitiveness and the changes in import costs.
• If the U.S. Dollar Index falls, it means the depreciation of US dollar
against other major currencies.
• Calculate the overall strength of US dollar on a weighted basis
