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The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.

Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.

In case you have a forecast that one currency would get higher to another you can exchange the second one for the first one and wait for the profit. If you are lucky to see the trades following your forecast you can make an opposite transaction and to exchange currencies back gaining the profit.

Forex transactions are carried out by Forex brokerage companies, also known as major banks dealers. Forex market is worldwide and your European colleagues may make a transaction with Japanese traders when it's time for you to sleep in the North America. There are 3 shifts for the major institutions to work in due to 24-hours a day activity of the Forex market. It's possible to ask for overnight execution for take-profit and stop-loss orders of the client.

Prices in the Forex market fluctuate without any dramatic changes unlike stock market where considerable gaps are likely to be seen. There isn't any problems entering and exit the market due to its daily turnover of about $1.2 trillion. Forex market can not ever be forced to stop. The transactions were carried out even in 2001, on September, 11th.

Foreign exchange market (also called Forex of FX to shorten the name) is the oldest market in the world. It is also seen to be the largest one. Being currencies' primary market working 24-hours a day, Forex is also the largest market with highest liquidity. This is an interbank market carrying out spot (or cash) transactions. The currency futures market, to be compared with Forex is traded only 1% as much.

Forex market doesn't have any exchange center unlike the stock market. Forex trading seem to go after the sun around the world, from banks of the United States to other parts of the world like Australia, New Zealand, the Far East or Europe and back to the US some time later.

High minimum amount of transaction and strict financial requirements used to make this interbank market unavailable for small speculators. The only dealers of currency markets were banks, huge-amount speculators and largest currency dealers. They had an ultimate access to this market dealing with lots of primary exchange rates of the world currencies, the market with an extremely high liquidity along with an unusually strong nature of trends.

Nowadays small traders have an opportunity to purchase the small lots (units), as a result of the large inter-bank units being split by market maker brokers like FX Solutions, at the amount they like.

The traders of any size like small companies and individual speculators have an access to the market at the same price fluctuations and exchange rates which only large players used to enjoy recently. Market makers monitor the rates so that produce their profit on the difference of rates at which the currency was bought and sold.

Foreign Exchange Market has an acronymic name Forex. It has the largest size and the liquidity throughout the world nowadays. Forex daily transactions are carried out at the common amount from 1 to 3 trillion dollars. There is no stock market that is able to deal with a comparable amount of money.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Still, lots of experienced traders consider such leverage dangerous and won't get started with it. Though, if you know how ho use such high leverage it will do you only good. But this is the place to stop speaking about the basic things. Keep reading these articles if you want to be aware of how this market has occurred and some of its historical matters.

Now it is time to speak about the strategies and the way of making money at Forex some traders use. First we should say that the things that work in one case do not certainly work in another. The fact is that currency trading surely means risk. Still, there are a number of strategies for the newbie to use to be the winner.

Forex trading may seem very easy but it is not. Your high today earnings may turn into considerable losses even of your starting capital tomorrow. Newbie traders are likely to make the same mistakes several times. Here is a list of such typical mistakes.

1. There is no use of searching the "Holy Grail"

This phrase is to think for those who are scared of losses or being too greedy does his best to get rich in no time. You can surely make lots of money during some time and there isn't a necessity of producing and advertising anything but a huge homework is required to learn first. You have to know how this market works and which factors can take the exchange rate up or down. You should also be aware of the effective management for your money not to lose everything.

The majority of traders starting at Forex, look for their ultimate strategy that will cause no losses and will bring only profit. The desire of such people is to make a strategy that guarantees stable profit and millions of earnings in a short time without any losses for them to quit and enjoy their fortune and the new huge house. This will never bring any success.

There is no strategy that will give you only profit and such research is only waste of time. High profits of trading are caused by high risk, and you won't earn a fortune without being on the knife edge. Don't be sure that every trade will close in advantage to you. You will always feel uncertain and there is no way to vanish it. It means that you should always be ready to the possibility of your strategy failing even if it is thought as perfect.

You'll save a plenty of time and nerves by avoiding the search for the perfect strategy of earning millions. Even if you find this strategy you won't ever need it. You'll see why later.

2. Apply fundamental and technical analysis.

At the beginning of my trading I relied only on the money management on which I wanted to base my strategy and saw no sense of these analyses. But money management which is still very important doesn't worth omitting them. You can forecast the direction of the market basing on your technical and fundamental strategies to see their effectiveness.

You'll be able to make forecasts of price movements by applying the past data of the prices and graphs to the technical analysis methods. You can predict future prices with the level of accuracy dependent on your technical analysis skills using the graphs of the rates you observe.

Trading with some brokers you can see technical indicators along with the graphs. You can apply it to your demo account and estimate your prediction skills necessary for planning trading decisions.

It is impossible to choose the most effective indicator among lots of various ones. Each trader has to decide for himself which indicator is best for him. You can't find any magic formula; you just see the graphs, make your forecasts and find out whether they come true seeing the values in the news later.

Your decisions form this formula along with your knowledge that occurs out of the practical experience. Starting trading with an online broker it's best for you to trade with yourself on the sheet of paper rather than invest real money at once.

There are a lot of technical analysis indicators available but here are the ones which are the most wide-spread: the Moving Average Convergence Divergence (MACD), the Bollinger Bands, Pivot Points, RSI, Stochastic, Fibonacci, EMA, Elliot Waves.

The broker's software will automatically make all the necessary calculations when you add the technical analysis indicator to the graph so that you'll see some facts which are unavailable without using these indicators. It is even possible for you to build your own technical systems basing on these indicators.

Fundamental analysis is another tool that maximizes your profit and minimizes your losses on the trades. There are some traders who prefer only one kind but the majority prefers both.

Fundamental analysis means trading following the news, e.g. telling about the economies or unemployment rate in the countries of the currencies you trade. They can also tell about the events that can have a strong influence on the currencies' exchange rate.

You can make forecasts on the market direction by following the news as well. That's why various trading software of the brokers like www.oanda.com offer a link to the page containing important news.

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Interbank forex

Interbank forex - Forex is one of the largest markets for trading, where interbank forex is decentralized market. In decentralized market, no records are kept like centralized market. An individual and company keep their privacy with them self. Broker and dealer are the pillars of market; they do their trading like buying and selling securities and currency with privacy.

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Free forex

Free Forex - refers to initiating trading with no money, typically with the help of a dummy account. These dummy accounts are available from various Forex brokers on the Internet. As you register for the account, you get $5.00 bonus in real money. Use your pertinent understanding about the trade to make a constant profit with that money. Then you start trading with your real $5.00 money and watch it grow to a sizeable amount.

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Forex made easy

FOREX MADE EASY- is a simple trading mechanism that anyone can implement. Available in the form of books and software, it is a trend recognition method for the (spot) Forex market helping everyone from seasoned traders to amateurs in spotting the everyday buying and selling pressure. The software uses the red light/green light trend to analyze the market drifts and helps in finding the entry and exit points for the currency pairs.

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Forex interest

Forex interest - crediting and debiting is done on a daily basis at 4 pm EST with interest being paid on the account balance held at that time. If the countries currency that a trader buys has a greater interest than that of the pair then Forex rollover interest is credited to the traders account, and vice versa. Rollover fee is deducted from the traders account, if the trader sells the currency having a higher interest rate and vice versa. The effect of rollover interest is magnified with marginal trading since the ineterst is calculated with respect to the trader's full position, not to his traded amount.

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Forex how to

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Forex stock global market

Stock market - stock market is the market, where buyer and seller of any company assemble stocks from the market and they trade their stocks in the premises of company. It means, exchanging the securities among the seller or buyer. AMEX (American Stock Exchange) is the place where sellers or buyers do stock trading.

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Forex factory

Forex Factory is used to prepare your trading session. An individual or organization can do preparation of next day for trading. It provides the message board and news release for other members. You can also get technical analysis of the market from forex factory. There are three major services are provided by forex factory. 1. Calander, 2. News, 3. Forum.

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Forex foreign currency capital markets

Forex capital markets - FXCM stands for Forex Capital Market, which is a financial service providing company and their specialization is in retail forex. Forex Capital Market is also one of the largest Forex Dealer Members holding companies. It provides online trading facility for retail and organizational entrepreneurs in the foreign exchange market.

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Forex advice and advisory services

Forex market trading is a difficult task and therefore, the beginners need proper advice and helps for reliable sources. The Forex advice and the advisory services are the basic advice providers who help the beginners in the forex field. The forex advisory services are also referred as the signal providers as they offer valuable data to the trader consumers.

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Forex participants

Forex participants according to the BIS study Triennial Central Bank Survey 2004

53% of the transactions were interbank or interdealer strictly

33% of the transactions dealt with a fund manager or an kind of financial institution not associated with banks and a dealer (like bank for instance).

14% were held between non financial organizations and dealers.

Commercial banks take the majority of currency deals. Accumulating the markets exchange conversion cumulative needs due to clients' operations as well as means accommodation or attraction and their movement to other banks are the main bank activities. Banks can carry out their independent deals for their own purpose aside from customers. Large international banks such as Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank affect the exchange markets in the world considerably by the daily operations at the amount of billions dollars. Such dramatic volumes can have an influence on the currency price or the quotation. Such large players usually contain the groups of bulls and bears.

The interbank market deals with the commercial turnover majority as well as speculative trading considerable amounts carried out daily. Billions of dollars is possible turnover for a large bank. Besides the customers' transactions, the majority of the operations are made for the bank's own account and by proprietary desks.

The exchange brokers from abroad led the major part of their business by creating low-paid anonymous counterparts and facilitating interbank transactions some time ago. Recently the majority of this business got down to using such electronic systems as EBS, Reuters Dealing 3000 Matching (D2), the Chicago Mercantile Exchange, Bloomberg and TradeBook(R). The traders are still listening in on ongoing interbank trading through the brokers squawk box but the trading amount got much smaller lately.

"Bulls" is the name for the participants of the Forex market who try to make the currency price higher.

Bears are supposed to be concerned with the currency price reduction in the Forex market. The common market process is a balance between bulls and bears market and in case of a currency price change it is mostly not very significant. Though when either bulls or bears take the lead the exchange prices may change dramatically.

Commercial companies are one of the key financial players as far as they are interested in foreign exchange in order to pay for goods produced or services provided. These companies usually deal with small trading amount comparable with the banks or speculators but can have a brief effect on the market rates. Still, the streams of foreign trade are the important factors affecting the permanent currency rates. The exposures of some multinational companies happened due to covering very large positions can have a strong effect of the market in case the players are not aware of these processes.

Investment Management Firms. They usually deal with considerable accounts being the assets of such customers as pension funds and endowments. are quite important players for the exchange market as far as they use it to make the transactions of their foreign securities easier. For instance in order to pay for and redeem foreign equities purchases and sales the manager of an investment company having an international equity portfolio will have to deal with the certain market that will force him to sell or buy foreign currencies. The purpose of such transactions is profit increase and they are not considered as speculative, being secondary for the investment decisions. There are special Currency Overlay units included in the investment management firms that try to make profit of customers' assets with a minimum risk using currency operations. These transactions may have an affection on large trades as far as the number of the dedicated currency managers in not high whether amount of their AUM (assets under management) is considerable.

Companies with foreign investments: These companies use Forex market for their foreign trading operations. The companies being the participants of international Forex market such as regarding importers have a stable foreign currency demand whether the exporters have large amounts of the currency on offer. Both these kinds of the companies have short-term deposits to hold their currency. That's why these companies don't use the Forex market directly due to using commercial banks for conversion and depositary operations.

The companies carrying out foreign investments of assets, such as Investment Funds, International Corporations, Money Market Funds. These kinds of companies contain a number of international investment funds that are following the policy of their investments diversification by placing the assets in various governmental and company securities. Georges Soros's "Quantum", and " Dean Witter" fund are well-known funds of this kind. Xerox, Nestle, General Motors, British Petroleum and others are the kind of companies that deal with the international industrial investments for purposes of joint ventures, creating branches and others.

Hedge Funds: These funds, known due to George Soros's Quantum fund, have raised their importance during the 1990s currency speculation in an aggressive form. Billions of dollars at the disposal of these funds along with the billions that can be borrowed make Hedge Funds the possible better support for the currencies of the countries welcoming Hedge Funds than central banks are.

The reputation of the Hedge Funds has raised due to their recent aggressive currency speculations. As far as the amounts of money in such funds are increasing they are very attractive for foreign exchange markets. These markets can speculate with tens billions of dollars due to their leverage so consolidation of the players known as the "herd instinct" of these funds can be very unpleasant. Though, these funds are not thought to be successful without the strategy that sounds. It is also thought that the actual functioning of these funds is instable financial weakness using and uncovering for the purpose of returning the normal values to realignment.

Speculation: Currency speculators and the influence they cause to the currencies depreciations are widely and regularly disputed. Thought the speculators are considered to carry out such important functions as supporting hedgers for the market and entrusting the risks with suitable people from the point of view of some economists like Milton Friedman. Others (for instance Joseph Stiglitz) consider this not an economical approach, but mostly a political or dedicated to the free market one.

The key speculators provided by professionals are the well-capitalized "position traders" as well as the major hedge funds.

Many countries are quite suspicious to such operations as currency speculations. From this point of view, the traditional forms of investment including stocks and bonds bring more effective economic rise by supplying the capital unlike currency speculations. This is considered just as gambling that often doesn't go along with the economic policy. The currency speculations obliged the Central Bank of Sweden make a short-term rise of the interest rates up to the value of 150% a year that has been followed by krona devaluation. One of the most determined advocates of this point of view, Mahathir Mohamad who used to be the Prime Minister of Malaysia, called George Soros and other speculators the main culprits of the Malaysian ringgit devaluation in 1997.

The follower of the opposite opinion, Gregory Millman, argues that speculators make the international agreements to be "enforced" as well as forecast the consequences of the main economic "law" for the purpose of making profit being compared to "vigilantes".

Simply speaking, the speculators of the forex market just accelerate the economical process bringing the economy to an unavoidable collapse in case the instable financial masses occur or the economy is carried out badly. A soon collapse is supposed to be better way out than a prolonged depression. Thus, it is supposed that in order to distract the public attention from putting the economy into decline Mahathir Mohamad along with the other critics blame the speculators.

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Forex currencies

Most Forex exchanges invariably involve the U.S. dollar against a different currency, as the American economy remains the biggest. Other currencies serve as the base for trade as well, such as the Japanese Yen, the British Sterling, the Swiss Franc, and the German mark. Each country's market has its own particular properties.

Euro came up to take the place of the German mark. The latter was the foundation. The European central bank has replaced the Bundesbank that has lost its past significance after the former East Germany came to reconsolidation.

The feature of the Japanese yen is its instability in some previous years. The greatest rise of this currency has happened in October 1998 when the dollar has suffered 15% reduction against the Japanese yen within a number of days.

The Swiss franc is sometimes called "a safe heaven" fulfilling the same function as the dollar does. It is called like this because of the neutrality and independent policy pursued by Switzerland, its economy isolation and banking system privacy.

The British pound has always had significance for the international exchange markets but it mostly hasn't been stronger than other currencies. This trend has changed vice-versa lately and the British pound has become one of the most important and attractive currencies in Europe. It was the first currency that Forex market dealt with through cables crossing the Atlantic, that's why the term "cable" has appeared.

European currencies had a number of crises because of the attempts to adjust their rates towards one another artificially. French frank and German mark used to create the basis for the Continental European currencies and formed the European currency stem. The stability was useful for the Benelux countries. Considerable fluctuations around this stem were seen in the currencies of rest of the Europe, Mediterranean and Scandinavian countries in particular. Great alterations have come to foreign exchange trading after the European common currency has appeared in 2001. A number of European banks were forced to make their trading assets reconsideration after the currencies of the countries taking part in the unification were fixed relative one another at the beginning of 1998. Still the Euro appearance is not thought to be harmful for the foreign exchange markets health. The Euro being weak has turned into mark and made non-participating European currencies less stable and more affective to speculative forces. It gives prospects for sterling along with the Swiss franc to turn into the most important European currency market.

Exotic currencies have a severe risk together with an ability to gain very high possible profits. The weak but fixed currencies can be sought much in order to carry out speculative attacks on them that may lead the countries involved to wide depreciation and economical difficulties. A number of developing currencies try to peg their currencies to the US dollar exchange rates to bring the monetary officials to order and force currency holders not to resort to devaluations. In most of the cases it's impossible to fix the exchange rates due to indiscipline and it mostly leads to considerable depreciation. These devaluations often cause high possible profit but within the stable periods investors mostly hold the currencies due to high interest rates.

Forex market shouldn't have solid technical aspects grasp while dealing with foreign exchange market especially at emerging markets due to their riskiness. Inability to gain a protection against the risks of these markets can be very harmful at the outlook of the commercial companies. South East Asian and South American markets seem to be the most interesting but it doesn't exclude African Continent and Eastern Europe possibility to become important markets in future.

Forex carries out its trading through Lots which is the equivalent of the dollar. The "margin" means that while the value of one lot is $1,000 you can accordingly have a control of $100,000 within the currency.

Currency trading in the Forex market is usually carried out in pairs. The notation of each pair shows the rates at which its currencies are being traded. The ABC/XYZ format is always used to show the notation. Here ABC/XYZ doesn't correspond any currency pair but it shows the possible notation. ABC symbolizes the currency of one country whether XYZ shows the currency of another one.

It's impossible for the currency to be traded by itself. For instance to make sense of the trade with JPY it must be compared to any other currency but never traded by itself. This process forms the core of the Forex market.

Here are some of the creal and common symbols used in the Forex market:

  • USD - The US Dollar
  • EUR - The currency of the European Union "EURO"
  • GBP - The British Pound
  • JPN - The Japanese Yen
  • CHF - The Swiss Franc
  • AUD - The Australian Dollar
  • CAD - The Canadian Dollar
  • NZD - The New Zealand Dollar

The most commonly traded currencies are referred to as the 'Majors':

  • US Dollar (USD)
  • Japanese Yen (JPY)
  • Euro (EUR)
  • British Pound (GBP)
  • Canadian Dollar (CAD)
  • Australian Dollar (AUD)
  • Swiss Franc (CHF)

Most commonly traded currency pairs are:

  • EUR/USD which stands for Euro / US Dollar
  • USD/JPY which stand for US Dollar / Japanese Yen
  • GBP/USD which stands for British Pound / US Dollar
  • USD/CAD which stands for US Dollar / Canadian Dollar
  • AUD/USD which stands for Australian Dollar/US Dollar
  • USD/CHF which stands for US Dollar / Swiss Franc
  • EUR/JPY which stands for Euro / Japanese Yen

Numerator and Denominator

The higher fraction is supposed to be the Numerator while the Denominator corresponds its lower part. For example, in the EUR/USD pair EUR would act as a Numerator being the first or the top, whether USD being after or below is known as Denominator.

The basic currency is usually the Numerator whether Denominator is a counter currency.

Thus, when you would like to buy a currency and you'll place the corresponding "BUY" order dealing with the EUR/USD on the Forex platform you are considered to be selling the USD and buying EUR. "LONG" is the name for buying process.

On the contrary, if you would like to sell the pair you mean that you are buying the USD and selling the EUR. This is called "SHORT" along with the same stock market process when you first sell any stock, currency or commodity trying to buy it later at a lower brice, that means you use short-selling.

In case you would like to sell or buy a currency pair you're going to sell or buy its Numerator (base currency or the top one), so that the base currency should be dealt vise-versa when you're selling a currency pair.

While trading, the base currently is always bought and the counter one is sold. Selling any pair you just specify the currency for sale and the one to buy. Finally the transaction is equal. The absence of any restrictions while short selling is an advantage of the Forex market. Another plus is that both market rise and fall bring profit. You can earn in Forex at any trends directions whether the stock marked should rise in order to give profit.

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Forex trading examples

Example 1

Many beginning traders don’t fully understand the concept of leverage. Basically, if you have a start up capital of $5,000 and if you trade on a 1:50 margin you can effectively control a capital of $250,000. However, a two percent move against you and your capital is completely wiped out. If you are a beginning trader you should not use more than 1:20 margin until you get comfortable and profitable and then and only then you can attempt to use higher margins.

What does 1:20 margin mean? It means that with your $5,000 you will control a capital of $100,000. Let’s say you are trading EUR/USD and by using our entry strategy you have decided to enter the trade on a long side. That means that you are betting that USD will depreciate against Euro.

Let’s say current EUR/USD rate is 1.305. Again, if your trading capital is $5,000 and you are using 1:20 leverage you will effectively be exchanging $100,000 to Euros. If the current rate is 1.305 you will receive 100,000/1.305 = 76,628 Euros.

If the trade goes in your direction margin will work in your favour and 1% decline in USD will mean 20% increase in your start up capital. So if EUR/USD rate moves from 1.305 to 1.318 you will be able to exchange your 76, 628 Euros back to $101,000 for a profit of $1,000. Since your start up capital was $5,000 it is effectively a 20% increase in your account. However, if the trade went against you and USD appreciated 1% vs. Euro your account would be reduced to $4,000. That would not have happened as our strategy has built in hard stops to prevent such outcome.

Example 2

The most frequently asked question of aspiring traders is "How much money can I make?" Unfortunately there's no easy answer, because it depends how much you are willing to risk.

Trading is a function of risk and reward: The more you risk, the more you can make. Here's an easy example: Let's say you start with a $5,000 account and you're willing to risk $1,000. Now you could place a trade to go long at the opening, set a profit goal of $1,000 and a stop loss of $1,000. Let's say you investigated the market behavior in the past couple of months and realized that your chances of achieving your profit goal are 60%.

Unfortunately the trade you just placed is a loser, and you lose the whole $1,000. Since this was the amount you were wiling to risk, you close your account, transfer the remaining $4,000 back in to your checking account and that's it for you.

Now let's assume you wanted to risk only $100 per trade and you adjusted your profit goal to $100, too. Now you can make at least 10 trades, because only if all 10 trades are losers you'll lose the $1,000 you are willing to risk. I don't want to become too mathematical, but statistics says that the probability of having 10 losing trades in a row is less than 1%. Therefore it's highly likely that you will have a couple of winners within the 10 trades. If your trading system shows the same performance as it did in the past (60% winning percentage), you should make $200: 4 losing trades * $100 = -$400 + 6 winning trades * $100 = $600. Make sense?

Compare these two options:

The risk of losing your money in scenario 1 is 40%. But if you won, you would have made $1,000.

In scenario 2 the risk of losing your money after 10 trades is less than 1%, but you have a fair chance of making $200. Therefore you need to define first how much you are willing to risk, since the amount you can make is a function of that risk. Make sense? I'll give you more specific examples later in this chapter.

Keep in mind that there's a difference between the amount you need to trade and the amount you're willing to risk. Your broker is always asking your for a "margin", and you need to fund your account with that margin requirement + your risk. In our previous example you funded your account with $5,000, but you only risked $1,000. More on that later.

Example 3

50:1 Leverage: what does it mean?

With a minimum account of USD 10,000, for example, you can trade up to USD 500,000. The USD 10,000 is posted on margin as a guarantee for the future performance of your position.

Example 4

The AUD/USD rate is quoted at '0.7500/04'. This quote represents the bid/offer spread for AUD vs USD. The offer rate of 0.7504 is the rate at which you can purchase AUD (or BUY AUD and SELL USD). The bid rate of 0.7500 is the rate at which you can Sell AUD to buy USD.

You believe that the Australian Dollar will strengthen against the US Dollar, and decide to BUY or 'go long' A$100,000 @ 0.7504 (the offer price).
Quote (bid/offer) 0.7500/04
Buy Price 0.7504
Volume A$100,000
Initial Outlay (1% margin) A$1,000

In the example above you have purchased A$100,000. But because FX is traded on margin with CMC Markets you will only need A$1,000 (1%) to maintain the same market exposure.

The risk on this AUD/USD trade is equivalent to US$10 per each point movement. Each point is valued at 0.0001. For example if the AUD/USD rate moves from 0.7504 to 0.7505 you will receive a profit of US$10.

Your prediction is correct and the Australian Dollar appreciates against the US Dollar. The quote on AUD/USD is now 0.7590/94. To close your position, you decide to SELL A$100,000 @ 0.7590 (the bid price).
Quote (bid/offer) 0.7590/94
Sell Price 0.7590
Volume A$100,000
Profit/Loss US$860 Profit

Your profit and loss is usually calculated in the secondary currency. Therefore the above AUD/USD trade profit/loss is calculated in US Dollars. With CMC Markets no brokerage or commission charges will be subtracted from your gross profit. You will only be charged a financing cost if you hold your position overnight.
Profit/loss Calculation:
Size of trade x (sell price - buy price) = profit & loss USD
100,000 x (0.7590 - 0.7504) = US$860 profit
Or, converting the US$860 back to A$ at a rate of 0.7590

(Profit/loss ? AUD rate) = profit & loss AUD
(860 ? 0.7590) = A$1,133.07 profit

By closing your position you realise a gross profit of A$1,133.07

If you anticipated incorrectly and sold AUD at 0.7500 and later bought AUD at 0.7594, a loss of US$940 would have been experienced.

Example 5

If you want to buy/sell a specific amount of GBP, first enter the symbol GBP as the transaction currency. Then choose USD as the settlement currency from the drop down menu. You will then receive the quote USD/GBP, e.g. Bid: 1.5300 Ask: 1.5310
This means that GBP 1 = US$1.53XX

If you want to buy GBP 10,000, click on the ask and enter 10,000 as the quantity of GBP that you wish to buy. You will pay $1.5300 for each GBP. Thus, you will pay $15,310.

If you want to sell GBP 10,000, click on the bid and enter 10,000 as the quantity of GBP that you wish to sell. You will receive $1.5300 for each GBP. Thus, you will receive $15,300.

Example 6

If you want to buy/sell a specific amount of USD. First enter the symbol USD as the transaction currency. Then choose GBP as the settlement currency from the drop down menu. You will then receive the quote GBP/USD, e.g. Bid: 0.6530 Ask: 0.6536

This means that USD 1 = GBP 0.653XX

If you want to buy USD 10,000, click on the ask and enter 10,000 as the quantity of USD that you wish to buy. You will pay GBP0.6536 for each USD. Thus, you will pay GBP 6,536.

If you want to sell USD 10,000, click on the bid and enter 10,000 as the quantity of USD that you wish to sell. You will receive GBP0.6530 for each USD. Thus, you will receive GBP 6,530.

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Forex market

Forex exchange market is the largest market that sells and exchanges the currency. The concept for the Forex and Forex trading is changed and kept on changing for its improvements. It is the work of the bank, but now it is given to the private owners. The bank has given it to them because technology is very advanced and they pay them the necessary infrastructure. The banks sell and purchase the Forex trader at higher prices and sell them at lower prices because you cannot sell vice versa in this market. Spread is only pay to the market and that is the main earning. This currency Forex exchange is categories in two currencies. First is base currency and other is quote currency. The spread is the difference of the bid and ask price of given currency. The brokers apply the altered quotes on the transaction fees and earn lot of money. Forex do not know any rules and regulation because SEC cannot apply any type of regulation on it. SEC is regulates the orderly market, so it is the non regulated market. The innermost privates are the commercial banks that are now in the top most banks. Pips are the large digit of quotes. The currency trade with spread available is usually within 1 to 5 pips. EUR or USD bid and ask quote may vary among 1.3000 to 1.3001. It is having the spread of 0.01%.

Most of the currency quotes are purely driven by the supply and demand. Usually the USD hit divert from its direction for a second or minute. When the spread widens or worse you will not let you in at all. This is market, where the market maker has the compulsion to the honor trading to supply the quotes. He will let your order hand until the price slows down. The brokers also make threat, when the market price slower downs. They will shift the quotes in the direction of the trend and make their markup and delay the execution. After waiting for some time it will gives lower price that occurred meantime. Some of the broker just shut down their server and do not distribute the information and say that there is some technical problem there. Broker does not want to give the news to the customers. The broker does these types of manipulation and called a big market player. The customer should be bewaring of those brokers. They can trap your money from the lines of resistance and create the technical signals for breakouts. The bank must get some other sort of advantages but the customer might get the inevitable loss.

It is very less that Forex market exists for longer, if you are having handful of currency. These currencies have different interest rates. If you are dealing with interest than accounts is reduced or increased with the interest rates. For the slower trend the betting option is good for a price change. The weak currency comes with the high interest rates. There must be a comparison between Forex and stock market but there are many more good options in the stock market better than Forex. You can be exploited in some medium sized trends and technical analysis. In short Forex is just having no motors. Everything is having its pros and cons so Forex is also having the demerits. You are left with the risky entry and you will get your money, after very long settlement. It is the easy cash cow for the banks so the Forex is running just for their benefit. The new traders should keep in mind that you should focus more on currency pair.

Market size and liquidity

The foreign exchange market is unique because of the following featuries:

- trading volume,

- the extreme liquidity,

- the large number of, and variety of, traders,

- geographical dispersion,

- long trading hours - 24 hours a day (except on weekends).

- the variety of factors that affect exchange rates,

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004

- $600 billion spot

- $1,300 billion in derivatives, ie

- $200 billion in outright forwards

- $1,000 billion in Forex swaps

- $100 billion in FX options.

On the spot market, according to the BIS study, the most heavily traded products were:

- EUR/USD - 28 %

- USD/JPY - 17 %

- GBP/USD (also called cable) - 14 %

and the US currency was involved in 89% of transactions, followed by the euro (37%), the yen (20%) and sterling (17%). 

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What is FOREX (Foreign Exchange)?

The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.

Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.

In case you have a forecast that one currency would get higher to another you can exchange the second one for the first one and wait for the profit. If you are lucky to see the trades following your forecast you can make an opposite transaction and to exchange currencies back gaining the profit.

Forex transactions are carried out by Forex brokerage companies, also known as major banks dealers. Forex market is worldwide and your European colleagues may make a transaction with Japanese traders when it's time for you to sleep in the North America. There are 3 shifts for the major institutions to work in due to 24-hours a day activity of the Forex market. It's possible to ask for overnight execution for take-profit and stop-loss orders of the client.

Prices in the Forex market fluctuate without any dramatic changes unlike stock market where considerable gaps are likely to be seen. There isn't any problems entering and exit the market due to its daily turnover of about $1.2 trillion. Forex market can not ever be forced to stop. The transactions were carried out even in 2001, on September, 11th.

Foreign exchange market (also called Forex of FX to shorten the name) is the oldest market in the world. It is also seen to be the largest one. Being currencies' primary market working 24-hours a day, Forex is also the largest market with highest liquidity. This is an interbank market carrying out spot (or cash) transactions. The currency futures market, to be compared with Forex is traded only 1% as much.

Forex market doesn't have any exchange center unlike the stock market. Forex trading seem to go after the sun around the world, from banks of the United States to other parts of the world like Australia, New Zealand, the Far East or Europe and back to the US some time later.

High minimum amount of transaction and strict financial requirements used to make this interbank market unavailable for small speculators. The only dealers of currency markets were banks, huge-amount speculators and largest currency dealers. They had an ultimate access to this market dealing with lots of primary exchange rates of the world currencies, the market with an extremely high liquidity along with an unusually strong nature of trends.

Nowadays small traders have an opportunity to purchase the small lots (units), as a result of the large inter-bank units being split by market maker brokers like FX Solutions, at the amount they like.

The traders of any size like small companies and individual speculators have an access to the market at the same price fluctuations and exchange rates which only large players used to enjoy recently. Market makers monitor the rates so that produce their profit on the difference of rates at which the currency was bought and sold.

Foreign Exchange Market has an acronymic name Forex. It has the largest size and the liquidity throughout the world nowadays. Forex daily transactions are carried out at the common amount from 1 to 3 trillion dollars. There is no stock market that is able to deal with a comparable amount of money.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Still, lots of experienced traders consider such leverage dangerous and won't get started with it. Though, if you know how ho use such high leverage it will do you only good. But this is the place to stop speaking about the basic things. Keep reading these articles if you want to be aware of how this market has occurred and some of its historical matters.

Now it is time to speak about the strategies and the way of making money at Forex some traders use. First we should say that the things that work in one case do not certainly work in another. The fact is that currency trading surely means risk. Still, there are a number of strategies for the newbie to use to be the winner.

Forex trading may seem very easy but it is not. Your high today earnings may turn into considerable losses even of your starting capital tomorrow. Newbie traders are likely to make the same mistakes several times. Here is a list of such typical mistakes.

1. There is no use of searching the "Holy Grail"

This phrase is to think for those who are scared of losses or being too greedy does his best to get rich in no time. You can surely make lots of money during some time and there isn't a necessity of producing and advertising anything but a huge homework is required to learn first. You have to know how this market works and which factors can take the exchange rate up or down. You should also be aware of the effective management for your money not to lose everything.

The majority of traders starting at Forex, look for their ultimate strategy that will cause no losses and will bring only profit. The desire of such people is to make a strategy that guarantees stable profit and millions of earnings in a short time without any losses for them to quit and enjoy their fortune and the new huge house. This will never bring any success.

There is no strategy that will give you only profit and such research is only waste of time. High profits of trading are caused by high risk, and you won't earn a fortune without being on the knife edge. Don't be sure that every trade will close in advantage to you. You will always feel uncertain and there is no way to vanish it. It means that you should always be ready to the possibility of your strategy failing even if it is thought as perfect.

You'll save a plenty of time and nerves by avoiding the search for the perfect strategy of earning millions. Even if you find this strategy you won't ever need it. You'll see why later.

2. Apply fundamental and technical analysis.

At the beginning of my trading I relied only on the money management on which I wanted to base my strategy and saw no sense of these analyses. But money management which is still very important doesn't worth omitting them. You can forecast the direction of the market basing on your technical and fundamental strategies to see their effectiveness.

You'll be able to make forecasts of price movements by applying the past data of the prices and graphs to the technical analysis methods. You can predict future prices with the level of accuracy dependent on your technical analysis skills using the graphs of the rates you observe.

Trading with some brokers you can see technical indicators along with the graphs. You can apply it to your demo account and estimate your prediction skills necessary for planning trading decisions.

It is impossible to choose the most effective indicator among lots of various ones. Each trader has to decide for himself which indicator is best for him. You can't find any magic formula; you just see the graphs, make your forecasts and find out whether they come true seeing the values in the news later.

Your decisions form this formula along with your knowledge that occurs out of the practical experience. Starting trading with an online broker it's best for you to trade with yourself on the sheet of paper rather than invest real money at once.

There are a lot of technical analysis indicators available but here are the ones which are the most wide-spread: the Moving Average Convergence Divergence (MACD), the Bollinger Bands, Pivot Points, RSI, Stochastic, Fibonacci, EMA, Elliot Waves.

The broker's software will automatically make all the necessary calculations when you add the technical analysis indicator to the graph so that you'll see some facts which are unavailable without using these indicators. It is even possible for you to build your own technical systems basing on these indicators.

Fundamental analysis is another tool that maximizes your profit and minimizes your losses on the trades. There are some traders who prefer only one kind but the majority prefers both.

Fundamental analysis means trading following the news, e.g. telling about the economies or unemployment rate in the countries of the currencies you trade. They can also tell about the events that can have a strong influence on the currencies' exchange rate.

You can make forecasts on the market direction by following the news as well. That's why various trading software of the brokers like www.oanda.com offer a link to the page containing important news.

a) www.bloomberg.com
b) www.businessweek.com
c) www.economist.com
d) money.cnn.com
e) markets.ft.com
f) www.reuters.com
g) www.fxstreet.com

3. Use the strategies of money management.

Money management strategies let you win or lose. You should use them to be in a profit. Many traders make too vast investments in every trade and this is not always rational and reminds of a saying: "Expect to make too much and you will make too little, expect to make little and you will make a lot." It means that even if you invest much trying to get a lot on every trade you can lose all and even if you make small investments looking for a small reward you can make a lot in some period.

1% of the total sum of your account is the maximum sum of the potential risk. This is the first rule of the money management. Stop loss and limit orders may help you to follow this rule. This may be the reason of the small profit, especially if you have small initial investments, but by compounding a part of you profit or the whole one you can get an exponentially growing income.

This strategy of compound profits is the one that helped to make millions on financial market instead of gambling that results in losing all investments quickly.

Here is the example of the opposite tactics that many traders follow. Imagine that you have an initial investment of $5,000. You're lucky to possess the trading account and you enter a $1,000 trade. In case the markets trends down and you lose your $1,000 your assets become $4,000. You keep following your strategy and enter a $1,500 trade being sure that the market is at its low and hoping to get back your $1,000 plus earn $500 more. Then the market keeps moving against you leaving you with $2,500 on your account which is only one half of your starting capital. This is a very difficult situation to recover from.

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Forex history

Introduction

Long ago, the world's economy was based on the bartering method. The value of a particular item, was measured by it's worth in exchange for other items. But, this system had it's obvious limitations. If you had nothing of value to exchange, you had no way of obtaining items you needed. This created the need to establish a more acceptable way of buying and selling early in history.

In various cultures and economies, anything could be considered valuable as long as there was a need for it. In some cases items such as animal pelts, corn, wheat and even hand made items were exchanged to obtain other much needed items. Eventually, the monetary standard became precious metals such as gold and silver. These metals not only served as a widely accepted method of payment, they've also became one of the most popular methods of investment.

Coins were originally simply minted from the metal that was preferred at the time. But, during the Middle Ages, the introduction of paper forms of money gained wide acceptance. Although, paper forms of currency were more successfully introduced by force that by choice, they still served as the basis of modern day currencies.

Before the beginning of World War I, many of the major banks allowed their currencies to be converted to gold. But, while paper currency could be converted to gold at any time, very few people took advantage of this practice. For this reason, many often felt it was unnecessary for the government to stock a full reserve of gold in their central banks.

However, with an ever increasing supply of paper currency entering circulation and not enough gold to cover it, inflation occurred which resulted in an instable government. More and more foreign exchange controls were instated to protect the national interests and prevent the market from plunging. In July of 1944 during the latter stages of World War II, the Bretton Woods agreement was signed that established a fixed rate for the exchange of currency that was linked to the U.S. dollar.

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The Bretton Woods Agreement

 


In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, ho had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank's refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.

Friedman
M. Friedman

The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold. exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation.

The Bretton Woods Agreement
The Bretton Woods Agreement

But the gold exchange standard didn't lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money. As a result, money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, which would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.

After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as set up in Bretton Woods.

The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations became more freely floating, controlled mainly by the forces of supply and demand which acted in the foreign exchange market. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.

In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later.

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The Euromarket

A major catalyst to the acceleration of Forex trading was the rapid development of the eurodollar market; where US dollars are deposited in banks outside the US. Similarly, Euromarkets are those where assets are deposited outside the currency of origin. The Eurodollar market first came into being in the 1950s when Russia's oil revenue-- all in dollars -- was deposited outside the US in fear of being frozen by US regulators. That gave rise to a vast offshore pool of dollars outside the control of US authorities. The US government imposed laws to restrict dollar lending to foreigners. Euromarkets were particularly attractive because they had far less regulations and offered higher yields. From the late 1980s onwards, US companies began to borrow offshore, finding Euromarkets a beneficial center for holding excess liquidity, providing short-term loans and financing imports and exports.

London was, and remains the principal offshore market. In the 1980s, it became the key center in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance. London's convenient geographical location (operating during Asian and American markets) is also instrumental in preserving its dominance in the Euromarket.

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Forex: USD/JPY: The Dollar could attempt to set a new high next month, says Mizuho

FXstreet.com (Barcelona) ? The USD/JPY rose to a five month high at 100.45 on April the 6th, to drop back again to levels above 98.00, and according to Nicole Elliott, senior technical analyst at Mizuho Corporate Bank, the pair, while expected to remain moving broadly sideways, could attempt to set another interim high next month.

Elliott, convinced that the USD/JPY will remain sideways for the most part of the current year, affirms that the current decline is part of a corrective reaction: ?Because we predict a series of broadly sideways moves for the bulk of this year, with many interim highs and lows along the way, predicting where these lie will be a difficult problem which we will have to face again and again. This is the case with April?s high at 101.45, just as it was with March?s one at 99.69. At the moment we see the pull-back from the recent high as corrective, retracing just 38% of the previous rally, and an A, B, C-type move which should base imminently.?

For next month, Elliott points out to the possibility of reaching a new interim high next month: ?This should then set up for another cautious upside probe next month. However, if the market was to break and then trade consistently below the 97.00 area we will probably be tempted to say an interim high is already in place.?

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Closing Market Update: Global Equities Lose Ground over Growth Concerns

(CEP News) - A lack of top tier economic data on Monday provided little direction for European stocks and U.S. equity futures, which closed in negative territory. The weakness in equity markets helped boost safe haven currencies.

It was a quiet day with both the U.S. and Canadian markets closed for holiday. U.S. markets were closed in recognition of the Presidents Day long weekend. In Canada, the TSX was closed as several provinces observed provincial holidays.

According to market strategists Japanese fourth-quarter GDP, which contracted by its fastest pace in 35 years, has helped to keep pressure on global equity markets.

Japanese growth fell by 3.3% quarter-over-quarter, below economists' expectations for a 3.1% drop. On an annualized basis, GDP fell by 12.7%, against expectations for an 11.6% decrease.

Asian markets were lower, with the Japanese Nikkei closing down 29 points to 7750 and the Hang Seng Index down 99 points to 13456.

A report from the German Institute for Economic Research (DIW) did not help improve sentiment. According to the report, Germany's economy faces a contraction of "clearly more than 3%". DIW also revised down its forecasts for first quarter growth, which it expects to shrink 1.4% compared to the previous quarter.

David Jones, chief market strategist from IG Index, pointed out that the UK also received bad news about prospective growth in 2009. The CBI said it expects the UK slowdown to be worse than expected and that GDP could fall 3.3%.

Despite the grim news, equities remained range-bound, which Jones said could be interpreted as good news.

European stock markets closed lower, with the Eurostoxx down 27 points to 1939, the UK FTSE 100 down 55 points to 4135 and the German DAX down 47 points to 4367.

The only data releases in North America were Canadian manufacturing shipments and international securities transactions. Both reports highlight the grim state of the Canadian economy, but still had little impact on currency markets, analysts noted.

Foreign investors reduced their holdings of Canadian securities by $2.835 billion - more than twice the $1.4 billion expected, Statistics Canada reported.

Meanwhile, Statistics Canada reported that Canadian manufacturing shipments dropped 8.0% in December, the steepest fall since 1992 and worse than the 5.3% expected.

U.S. equity futures were weaker across the board, with Dow Futures down 20 points to 7759, S&P futures down 10 points to 809 and NASDAQ futures down 20 points to 1208

Weaker equity markets took their toll on currencies, which helped boost the safe haven currencies like the U.S. dollar and the Japanese yen. Both were up across the board.

Light volume has helped markets remain range bound. EUR/USD was trading near the lower end of its range but continued to hold gains above the key support level of 1.2760.

Neil Mellor, currency strategist from Bank of New York Mellon, said the euro does look vulnerable to move lower as long as fear remains in the market.

The euro is down 0.0101 to 1.2762 against the U.S. dollar, down 0.0011 to 1.5880 against the Canadian dollar, down 0.0006 to 0.8958 against the pound sterling and is lower by 1.10 to 117.19 against the yen.

The Canadian dollar has also remained stuck, testing the higher end of its current channel.

Adam Cole, global head of FX strategy at RBC Capital Markets, said the Canadian dollar has held up fairly well compared to other commodity currencies, but he expects that to change, with the loonie at risk of weakening.

"We are expecting the USD/CAD to break through 1.25 and ultimately our call is that we test the 1.30 level," Cole said.

The Canadian dollar is down 0.0092 to 0.8042 against the U.S. dollar (1.2446 USD/CAD) and down 0.53 to 73.82 against the yen.

The U.S. dollar is down 0.05 to 91.84 against the yen and the Dollar Index is up 0.619 to 86.660.

The pound sterling is down 0.0108 to 1.4247 against the U.S. dollar and down 0.0009 to 1.7725 against the Canadian dollar. 

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Forex - Dollar rallied to a 6-month high on raising concerns of recession in euro-zone

The Dollar has extended its rally of the past month, touching a 2008 high against a basket of currencies on the view that economic weakness, once US, is spreading globally. A jump in US consumer confidence in August to 56.9 vs 51.9 added to the Dollar advance. US housing data had little impact on Dollar trading. And investor did focus later on the release of the minutes of the last FOMC meeting.

The Ifo German business climate index for August fell more than expected to a three-year low of 94.8 vs 97.5, while German GDP
contracted in Q2 for the first time since 2004.

Ongoing worries that other countries are vulnerable to US economic weakness and views about the health of the financial services industry prompted investors to bail out of risky trades in higher-yielding currencies such as Australian and New Zealand Dollars.

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