Your Questions About Currency Trading Basics
George asks…
Can someone explain the basics of currency trading-what causes the increase in dollars?
AbleForex answers:
The value of one currency against another is usually caused by one of four factors. Economic Data, Political Data, Natural Disasters and Acts of war.
For example, THe Fed last week announced theyr’e pumping $1.2 trillion into the economy. This caused investors to worry about devaluation, and they then sold their dollars for Euros. Net result? Big sell off of dollars, which weakened the currency – big demand for Euros so a strenghtening of that currency.
Its like anything. If everyone is selling eggs, and there are more eggs than buyers, prices will drop and vice versa. Its no different for anything else – currency, cars, plastic boxes etc etc etc
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Your Questions About Margin Fx Leverage
Margin Fx Leverage
Thomas asks…
FX Margin Call Calculation?
I am a real beginner for FX, and started to read some materials in my own language first (japnese). So my wording is still on a novice level. Now, I studied some FXCM free online seminar, and have still one immediate question, but I could find a place within the seminar, where it seems be explaining for my question.
This is about a formula/calculation for how much of movement (like minus 0.1 cent fall of market) makes a margin call when you have margin call rule of let’s say 50%. In my japanese reading,
it says:
FOR EXAMPLE:
USD/JPN
USD=100 YEN
Margin call rule = 50%
Leverage = 10
THEN the formula to calucurate the amount of money (fall) to make a margin call with the above example, will be:
100 * (1 – 0.5) / 10
so, it would be 5
(this calculation is nothing to do with how much money US dollar you bought)
This “5″ means, when the price falls by “5 yen” from your original purchase price, you get a margin call.
I would like to see how you do this here (USA), when the base money is USD. I have seen people talking about placing a stop loss at a certain number, but I have not read this sort of calculation yet.
I know you guys cannot give me a whole lecture here, but if you know any good books to talk about those things (like math and formulas) ?
Thank you very much in advance.
(from my japanese book) when margin call happens when you lose all the money , due to the market fall of the currency that you bought.
If you deposit 50,000YEN with 20 leverage, your purchase power is 100,000Yen. Then, you bought xxx amount of USD with it. Due to the USD fall, your total value falls certain amount (this particular broker sets it as 50%), then you lose everthing including your initial depost (50,000Yen). Isnt it called Margin call?
I read your input. Thank you. It seems that we are talking about the same thing. How do you “calculate” for the X amount of fall in USD, will lead to Magin Call , when you have the Y amount of Leverage. How do you calculate the X ?? (instead of the total amount of loss you want to prevent, etc) Thank you ! Yes, “calculate” 
AbleForex answers:
Hello. First you write very well in English (it’s “calculate” not calcurate by the way).
Your example is very good and everything, but it is very hard for me to figure out what question you are asking.
Here is how a “margin call” was simply explained on investopediadotcom:
“Here’s how it works. Let’s say you purchase $20,000 worth of securities by borrowing $10,000 from your brokerage and paying $10,000 yourself. If the market value of the securities drops to $15,000, the equity in your account falls to $5,000 ($15,000 – $10,000 = $5,000). Assuming a maintenance requirement of 25%, you must have $3,750 in equity in your account (25% of $15,000 = $3,750). Thus, you’re fine in this situation as the $5,000 worth of equity in your account is greater than the maintenance margin of $3,750. But let’s assume the maintenance requirement of your brokerage is 40% instead of 25%. In this case, your equity of $5,000 is less than the maintenance margin of $6,000 (40% of $15,000 = $6,000). As a result, the brokerage may issue you a margin call. ”
Is that what you are asking about?
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Margin Fx Leverage
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Your Questions About Currency Delivery Risk
Steven asks…
finance questions on black scholes and hedging?
Problem 1
Omar is considering purchasing a call option on Pandulum shares which are currently trading at $30 per share. The option expires in 50 days. Omar can invest his money at the risk free rate of 5%. The call’s exercise price is $29. The variance on Pendulum shares is .09.
Required
(a)Determine the current market price of the call using the Black-Scholes formula and the time value of the call option.
Problem 3
It is October 15th today. XYZ Corporation, a US based company must pay in May of next year, $2 million Canadian to HFX Inc. a Canadian company located north of Regina.
Currency future contracts with a size of C$100,000 have delivery dates in February, May and November. Currency options with a size of C$50,000 have expiration dates in February, May, August and November.
Price quotes for futures contracts on Canadian dollars on October 15 are:
Expiration Settlement
November0.6436
February0.6423
May0.6402
Price quotes for call options on the Canadian dollar are:
Series November February May
US$0.6500/C$0.030.050.07
US$0.6800/C$0.020.040.05
Required
(a)What risk does XYZ Corporation face and how can the company hedge its risk using options and futures? Be specific in identifying the various hedging strategies this company may use
(b)If the value of the Canadian dollar goes up to US$0.67/C$, determine the cost in US$ and the effective rate paid if XYZ Corporation hedges with futures.
(c)If the value of the Canadian dollar goes down to US$0.61/C$, determine the cost in US$ and the effective rate paid if Little Corporation hedges with call options
please show calculations. ANY help is appreciated. thanks
AbleForex answers:
Purchased at 30$
excise value = 29$
deviation
1$
varance …0.09
% .09 x 100 …= 9
from 30 to 21$
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The Popular And Best Forex Trading Software
The Popular And Best Forex Trading Software
Nowadays Forex free software trading is getable in a visual Forex strategy format. It utilizes the combinings of logic rules and technical indicators in order to imitate a trading process that has the historical Forex rates. There are self acting strategies that are rendered to help investors to frame a profitable scheme on the Market. The software as well includes a scanner, bar explorer, optimizer and interpolation methods, that are used to help amend the quality of an Investor’s development strategy.
Several other benefits from the Forex Free Software Trading System include the capability to acknowledge the potential problems that would subsist in the Trading systems. It is capable to distinguish the bars in the back tests that determine the average balance line. It as well permits novice traders to get the experience ahead that they require and to learn how to utilize the various logic rules without placing their investments at risk.
The main aim of this free software trading system is to offer users with a reliable and free tool that can examine trading strategies. The software comprises the most commonly used methods in technical analysis and as well has a kind of indicators that are available in one program. Forex trading software’s are very easily available on Internet. You can get paid or free Forex software from several Websites, trader forums and trader blogs.
Most of the Forex trading brokers offer Forex Software for their customers. It is one of the parts of their services. Many of the brokerages develop their own Software, but many others buy it from some other company like MetaTrader charting software. Some years ago, Forex trading would be only done through facsimile and telephone. It was that age, when the access to web or the Internet was only determined for several other purposes such as military.
Just after the Internet was broadly utilized and became more and more popular, the growth of Forex market was really very fast as it is as well endorsed by the evolution of Online trading. Thus, Software developers and forex brokers had shared cooperation and there the evolution of Forex software. Now, various Forex Trading Software’s are available. Many of Forex brokers have succeeded in winning International awards for their best trading applications. Those Forex brokers are mainly from USA and Europe.
The Forex Free Software Trading System is really very easy to use, and adds up with many effective tools for users to utilize. The great thing about this software trading system is that it is totally free. It is a great combination of useful information and tools that anybody who is new to the trading Market can utilize it easily and place to work for their investments.
This Forex Trading Strategy is really very simple and you only require utilizing its resistance levels and you all are very well set to make great Forex profits.
Forex Trading
is trading currencies from different countries against each other. This site is full of Forex Trading Strategies.For more information please visit:
forex trading software
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Taking advantage of forex volatility to make money.
Taking advantage of forex volatility to make money.
The economy is in a constant state of flux. This changing temperament is what provides traders and market businessmen with opportunities to make money. As the economy moves into higher inflation and rising prices, people are looking for new modes to balance their revenue and create new openings for earning money. This is one of the reasons why many people are opting for forex trading in order to make their money on the market. Foreign Exchange Trading or FX trading as it is commonly known, refers to the trade based on the market movements of foreign currencies. Forex trading often involves the traders’ ability to predict the strength of a currency in comparison with other foreign economies in the market.
Unlike the share market, forex trading is an all day task. The open market functions on the time line of 24 hours offering traders a chance to take advantage of the movement of currencies throughout the day. As a liquid and rapidly changing market, it offers the trader a chance to speculate and judge market movements to make a decent profit. Forex trading remains the largest trading market in the world. But regardless of the profitability of these markets, their volatile nature also makes them a very difficult task to master. This is why it is essential for traders to understand the nuances of the market and its movements thoroughly before choosing to invest in them.
The volatility of the foreign exchange forms the crux of the entire trading process. During the process of the trade, traders are expected to estimate the market movement and the prospective position of the currency against other major currencies. Most traders conduct their trades on the basis of combined currencies like the US and Australian Dollars and other major liquid currencies. This helps them in making a profitable return from the market at ease. With the arrival of the internet, it has become easier for people to trade in currency trading and make money according to their convenience.
One of the main advantages of forex trading remains its lengthened timeline. Traders can choose to trade on a permanent basis in the market, as well as avail of the option of part time trading at their own convenience. However, forex trading is a complex science and requires sufficient knowledge of market movements and variables to master. This is one of the reasons why people are increasingly turning towards the online domain to avail of these facilities for forex information and trading.
There are many websites on the internet which offer plenty of information and act as a platform for investors looking to indulge in currency trading. However, considering the volatile nature of the forex markets, it is important for the trader to choose a reliable and trusted website in order to ply their trade. The availability of tools and updated news on a regular basis is also a huge advantage. This helps the trader to stay on top of the market changes and help in making more exact estimates on the movement of the currency.
Howard Daw is the author of this article on Forex. Find more information on Forex Trading here.
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