Friday, September 28, 2007

Forex Market Overview

The foreign exchange market exists wherever one currency is traded for another. Individuals are currently a very small part of this market and may only participate indirectly through brokers. It is by far the largest market in the world, in terms of cash value traded. It includes trading between large banks, central banks, multinational corporations, governments, and other financial institutions.

The forex market is a cash inter-bank established in 1971 when floating exchange rates began to appear. The average daily trading volume of US Treasury Bonds is $300 billion and the US stock market has an average daily volume of less than $10 billion.

The foreign exchange market is unique because of:

The extreme liquidity of the market,
Its geographical dispersion,
Its trading volume,
The large number of traders in the market,
Its long trading hours - 24 hours a day

There are several types of financial instruments commonly used:-

Forward transaction: A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then.

Futures: Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.

Swap: In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date.

Spot: A spot transaction is a two-day delivery transaction, as opposed to the Futures contracts, which are usually three months.

One difference between Futures and Spot is how interest is credited. Each currency in a Forex transaction has an inherent interest rate attached to it. This interest is added every single day whether the market is trading or not. Interest cannot take a vacation; money and its loaning value are still important even if the financial world has stopped dealing. In Futures, the interest is built into the price of the contract. In Spot, however, interest is not taken into account in the offering price because the Spot market is a cash market, not a contract market.

The main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns.

Unlike a stock market, where all participants have access to the same prices, the Forex market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest investment banking firms. The top-tier inter-bank market accounts for 53% of all transactions.

Forex Blog provides detailed information on forex brokers, forex trading and market makers, and other forex-related topics. is the main site which has useful tips to make big money online.

What is FOREX Foreign Exchange Trading

Foreign Exchange Market, or Forex as it is commonly called, is an international exchange market to buy and sell different currencies from around the world. An investor has the ability to buy and sell these currencies in order to create gains from small movements in the value of one currency over another. The Foreign Exchange Market or Forex is open from Monday at 0:00 GMT until Friday at 10:00 GMT. For this reason Forex traders are not limited to the general time constraints of the New York Stock Exchange or NASDAQ.

This versatility attracts many investors to become Forex traders. The liquidity of the Foreign Exchange Market is also very attractive for the Forex investor as trades range from 1 to 1.5 trillion dollars on a daily basis. These massive amounts of trades make it extremely difficult for any one trader to affect the market.

Foreign Exchange Trading is simply the purchase and sales of currency based on the strength of the currency and the fluctuation in the value of that currency. For example, if one were to invest $1,000 against the British pound at 1.49989 with a 1% margin and anticipate the exchange rate to climb. If that occurs and you close the exchange rate at 1.5050 you would earn roughly $400. Forex is giving you a 40% return on your investment.

Forex offers the possibility of huge profits in relatively short periods of time. The stock exchange is very different in that positions are generally maintained over a longer period of time. Although there are day traders, Forex traders have much shorter hold times on positions. Similar to the stock market marginal accounts can be obtained in the Foreign Exchange Market as well.

Forex marginal accounts are very engaging as they allow Forex traders to take large positions without having to make a large deposit. In many circumstances one can fund a marginal account with .05% the necessary funds. In other words, $500 would allow a $100,000 position. In order to trade Forex effectively and profitably, one must have some type of method to follow. There are two methods used in determining what Foreign Exchange trades one should make. There are two methods, fundamental Forex analysis, and technical Forex analysis.

Technical Forex Analysis is the most commonly used practice and uses the assumption that the changes that occur in the Foreign Exchange Market happened for a reason and are accurate. The belief is that if a currency has been trading towards a high then that currency will mostly continue towards that high with the adverse being true as well. The technical Forex view does not try to make long term predictions about the market but instead simply tries to take advantage of what has already been seen in the past.

The fundamental Forex method takes into account all aspects of the country in which the currency is traded. Things such as the economy, the countries prime interest rates, war, poverty level, and other factors are taken into account. If there is a sharp rise in the prime interest rate a Forex trader may take a position based on that information.

Online Forex trading on the Foreign Exchange Market has the potential of being extremely lucrative. One can learn to trade by creating an online Forex Account and begin by using a learning account without real funds. This will help you to understand the Forex trading process and how currencies are affected by different things that are happening on a global scale.

Copyright 2006 Jason P Bertrand

Jason Bertrand is the President of JPB Financial Services, Inc., a Connecticut Corporation and member of the Better Business Bureau. He has over a decade of experience in the financial services industry and is a Notary Public in the State of Connecticut. Please visit the following sites: Free Home Purchase Guide Feel free to contact Mr. Bertrand with any questions or concerns through, or mail to: JPB Financial Services, Inc Attn: Jason P Bertrand PO Box 552 Vernon, CT 06066 860-982-5334.

Handling Tricky Stock Investment Transactions in Quicken

If youre an investor using Quicken, you should find your investment record-keeping pretty straight-forward. There are, however, several tricky investment transactions you may need to record, particularly if youre an aggressive investor (one whos willing to bear increased risk in the pursuit of greater returns). These transactions involve short sales, margin loans and interest, call and put activities, employee stock options, and corporate reorganizations. The following paragraphs briefly describe how you record these other types of transactions.

Short Sales

A short sale occurs when you sell stock you dont actually hold. The logic of a short sale is that rather than buying low and later selling high, you first buy high and then sell low. (To make the transaction, you actually borrow the stock from your broker.)

To record a short sale transaction in Quicken, you just sell a stock you dont own. Select the Enter Transaction command button, choose the Short Sale option, and fill in the appropriate categories in the Short Sale dialog box.

To show that these are shares you actually owe your broker, Quicken displays the number of shares and the current market value as negative amounts in the Portfolio View window. To record the transaction in which you close out your short position by buying the stock youve previously sold, you record a stock purchase in the usual way.

Margin Loans and Margin Interest

If you purchase a security and the total purchase cost exceeds the cash balance in a brokerage account, Quicken assumes that youve borrowed the needed cash on margin from your broker. To show the margin loan, it displays the cash balance as a negative value. To record margin loan interest in cases where you have a linked cash account, you record the margin loan interest as an expense when you record the withdrawal from the linked cash account that pays the margin interest.

To record margin loan interest in cases where you dont have a linked cash account, choose the Enter Transaction command button and choose the Margin Interest Expense option. When Quicken displays the Margin Interest Expense dialog box, use it to describe the margin interest.

Calls and Puts

A call is an option to buy a share of stock. A put is an option to sell a share of stock. You may write, buy, or exercise calls and puts.

Writing Calls and Puts

When you write a call or put, what you really do is collect money from someone in return for promising the person the option, or chance, to buy or sell a share of stock at a specified, or strike, price by some future date.

When a call or put expires without being exercisedand this is the usual caserecording the transaction is simple. If youre the one writing the call or put, just record the transaction as miscellaneous income.

Buying Calls and Puts

If youre the one buying the call or put, you just record the option purchase the way you do any other stock purchase. If the call or put expires and becomes worthless, just record the sale as a stock purchase with the amount set to zero. (This is the most common case.) If, on the other hand, you sell the call or put before the expiration date because the call or put can be profitably exercised, you record the sale as a stock sale with the amount set to whatever you sell the option for.

Exercising Calls and Puts

You probably wont actually exercise a call or put. Youll probably sell it, as described above. If you do exercise a call or buy option, however, you need to record two transactions. To record the exercise of a call option, first record a transaction that sells the call option for zero. Then record a transaction that purchases the optioned number of shares at the option price. To record the exercise of a put option, first record a transaction that sells the put option for zero. Then record a transaction that sells the optioned number of shares at the option price.


For income tax purposes, what you pay for a call needs to be counted as part of the purchase price if you exercise the call option and purchase shares. What you receive for a put needs to be counted as part of the sales price if you exercise the put and sell shares. This can get complicated, so you may want to consult your tax advisor.

Employee Stock Options

You can track the value of employee stock options in the same way that you track shares of stock. (The purchase price in this case is zero if you dont pay anything for the option.) The value of the option, of course, is the difference between the exercise price and the fair market value of the vested shares. The income tax accounting for stock options can get a little tricky, depending on whether the options are part of a qualified incentive stock-option plan or a nonqualified stock-option plan. You may have a taxable gain when you are granted or when you exercise the option, or you may have a taxable gain only later when you sell the shares. If you have questions about the income tax treatment, consult your tax advisor. Youll need to show him or her the stock option plan document, so be sure to bring that with you.

About the author: CPA Stephen L. Nelson wrote bestselling books on Quicken and QuickBooks. Which have together sold more than one million copies, and the popular downloadable do-it-yourself guides Information about the Corporation, and Costs & Benefits of Incorporation , Incorporating a Business in Pennsylvania, Incorporating a Business in Illinois .

The True Value of the Small Business Consulting Community

The Small Business IT consulting community is a dynamic and exciting community to be active in at this time. Many different opportunities are gaining some serious momentum in this underserved marketplace in Canada. The Small Business marketplace will be the fastest-growing segment in the information technology market. Currently, approximately 97% of the businesses in Canada have five hundred employees or less, which equates to a fantastic market to specialize in.

Microsoft launched their Small Business Specialist program in the summer of 2005 at their annual partner conference. Since that time, a number of information technology consulting firms have taken advantage of this program to commence their consulting practice. The Small Business Specialist program is designed to promote Microsofts offerings to small business. It establishes SBSC members as leaders in the small business IT consulting marketplace that has been thrust into the spotlight for growth potential.

The Small Business Specialist program serves as a best resource for IT professionals to access information, promotions, partnership opportunities and assistance to service a small business oriented client base. Groups have emerged on international, national and regional levels that assist the small business specialist in obtaining not only technical but also important business assistance. In addition, each year SMB Nation brings together the small business consulting community to network, learn, share and play.

The small business consulting community has grown out of the leadership of corporations like Microsoft, SonicWALL, and Symantec. It has also grown because of people like Harry Brelsford of SMB Nation and several other leaders in the community. Their leadership has provided Small Business Specialists with additional resources to sharpen their craft long before the official launch of programs from corporations like Microsoft.

The SMB community is open to sharing experiences, ideas, concepts and best practices so that emerging IT companies can seek knowledge to develop and grow. I like focusing on a market segment where I can really get to know my clients and have a direct, tangible impact on their businesses, claims Jeff Anderson, General Manager of Red Deers Bulletproof Networks, the citys leading Small Business Specialist. Business development, however, is often overlooked by those text book technicians who have decided to start their own businesses. Learning from others in the SBSC community allows the small business consultants like Jeff to learn two or three markets and become the expert specialist in that field in order to have the potential to gain new business clients.

New service offerings are demanding small business consultants start planning now on how to bring them to their client base. Clients today are in search of options that are evolving and they must be presented in a manner and language that they understand. Managed services, remote monitoring, software and hardware as services are starting to gain some traction in the market and as a new offering they need to be available from their SMB consultant. Small businesses want a company that they can trust. When you and your peers are representative of 97% of the Canadian marketplace, it makes sense to be working with the very businesses that share the same concerns and deal with the same issues you do. Who better to give them the right tools to succeed? states Elisabeth Vandervelt of Conamex International, an award winning Microsoft Small Business Specialist in Montreal.

Todays small businesses need innovative solutions to keep them competitive in the fast paced, on-demand, we-needed-it-yesterday and downtime-is-not-an-option environment we call todays business world. SBSC members have the luxury and the ability to have direct interaction with decision makers therefore sales cycles are generally shorter while the demand for services has never been higher.

Another luxury in the small business community is the ability to share work with each other across regional, national and international boundaries. Many firms are partnering locally to provide a one stop shop for their clients who need a specialized service or coverage in other locations where their clients may have a remote user or branch office. Partnering in the SBSC community is critical to the success of the small business consultants business since it gives small firms the reach and abilities of a much larger IT company and can be the their advantage over their competition in todays marketplace.

The Small Business Specialist can rest assured that they have the pride and recognition of a job well done combined with a community to back them up. All of these positive aspects provide an overwhelming sense of accomplishment for participants in the SBSC program.

I reflect back to when my youngest son was in Beavers and their leaders consistently reminded them of the Beaver motto, the same motto that is the cornerstone of the SBSC community and all other small business consulting groups: Sharing, Sharing, Sharing! Share your successes with others; help others who are struggling; and share of yourself to make our community strong.

Stuart Crawford is the Director of Business Development for Calgarys IT Matters Inc. IT Matters is a leading Microsoft Small Business Specialist and Gold Certified Partner. IT Matters is also a gold partner with SonicWALL and an active member in the TechData TechSelect program.

Avoiding Forex Trading System Headaches

If you are a trader and you have tried to find a forex trading system that might work for you and have curiously looked up the words forex trading system in Google, havent you been surprised and annoyed at the amount of rubbish and useless material on this subject out there?

Your first job is to ignore the typically glowing testimonials telling you how great a certain forex trading system is...

Guess what? They all say great things!

Anyone who is serious about trading needs to have a forex trading system that is tailored to them, but there is no reason to start constructing your forex trading system from scratch. Look for your most important criteria as it relates to your trading style for the trading system you are planning to buy, and if it fulfills them; then you are quite certainly making a good decision by planning to use it going forward in your trading career.

Any good online forex trading system will gives traders discipline, as good systems will run the big profitable trades and cut losers quickly to give great profit potential over the longer term. If you are just starting, you should look at longer term forex trading systems that milk the big trends for profit, and cuts losses quickly. Whatever you decide on for your forex currency trading system, however, you almost certainly can't go wrong by subscribing to some of the forex newsletters. Even if you've gone through quality forex training, smart traders subscribe to newsletters written by professional currency traders that offer both fundamental and technical analysis on the markets. In other words, more knowledge and information is a good thing.

Once you know what sort of forex trading system will work best for you, look at the components that make it work. Both the desktop based and web based forex trading software have their own advantages, so use the version that you are most comfortable with. Don't forget to take advantage of some of the generous free offers by various online forex brokerages that allow you to trade in real time with paper money so you can get the hang of how things work. Couple that with the guarantees that most of the marketers provide for you to try out their systems for 30, 60 or 90 days.

You also want to choose a forex trading system company that will put your money first, and that will listen to what you want to do, and how you want to do it. After all, it is your career they are looking after.

Forex is a great money making opportunity for those who know their way around, most newbies fall hard after flying high for a while. That's because forex trading is not straightforward. You see, it is simple to enter a trade and let it run, but making yourself a profitable trader takes more than just willingness; it takes knowledge and experience.

And finally, we dont have space here to go through the actual systems being currently marketed, but with a bit of research and testing you will see why a forex trading system built on the above principles, will work, and will continue to work.

Sydney Johnson gives you more free information at Forex Trading Introduction. Search other helpful articles at- Forex Trading List of Articles. Click here

The Commodity Swing Method, PART 2 - Lock In Profits, Reduce Risk And Trade The Swings

Getting into a market is simple. Getting out with a maximum profit is difficult and is an art. How do we know when to take a profit and when to take a loss? Will I miss the big move if I get out now? Here's some methods that can take the mystery out of what to do at these critical times.

So what would be the ideal market scenario to profit using the Thomas Swing Method? Let's take an example. We are long two calls and the futures market rallies. We sell one future contract and the futures market declines. We cover the future contract at the lows and the market rallies to new highs. We sell another futures contract and the market declines, and so on. Essentially, we have taken all the option rally profits and strung them together into one line (like a string) by absorbing their declines, using the futures contract as a hedge.

Let's look at a less favorable situation. Once hedged with the short futures contract, if the futures market declines sharply into a new bear market, we still might do well if the options lose their value but the futures contract keeps profiting. Conversely, if the market explodes to the upside, the deltas of the options get closer to 1.0, so that at some point the two options will more than cancel out one futures contract and will show a reasonable profit. These are interesting possibilities considering how limited the profit chances are just holding eroding call options alone.

What is the most undesirable outcome? If the futures market goes sideways after the hedge, then the options will erode (as normal) and the futures contract will stay near break-even. Do not continue to hold the hedge if the options erode to a delta below 0.5 or have less than 30 days to expiration. This is approaching a naked futures contract since the commodity options have a smaller offset. Another overall negative is you will need to maintain margin for the futures contract no matter what commodity options you hold.

This strategy can be reversed for a long commodity put option position. (looking for a decline) You would buy a futures contract against two put options after a profitable decline.

The Thomas Swing Method is a technique any long-term commodity option holder should consider. Holding on for the big swing can be easier when we lock in short-term profits along the way. It takes a good feel of short term timing to execute this method properly. Spend time practicing this strategy on paper until it's clear. It's another tool to have ready in your trading arsenal when buying and holding commodity options for the big swing.

Good Trading!

There is substantial risk of loss trading futures and options and may not be suitable for all types of investors. Only risk capital should be used.

Thomas Cathey - 27-year trading veteran heads the managed futures division of Thomas Capital Management, LLC. View his TimeLine Trading market predictions and get his complete 44+ lesson, "Thomas Commodity Trading Course" - they're all free.

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