Foreign exchange market is different from the stock market
The foreign exchange market is also known as the FX market, and the forex market. Trading that takes place between two counties with different currencies is the basis for the fx market and the background of the trading in this market. The forex market is over thirty years old, established in the early 1970's. The forex market is one that is not based on any one business or investing in any one business, but the trading and selling of currencies.
The difference between the stock market and the forex market is the vast trading that occurs on the forex market. There is millions and millions that are traded daily on the forex market, almost two trillion dollars is traded daily. The amount is much higher than the money traded on the daily stock market of any country. The forex market is one that involves governments, banks, financial institutions and those similar types of institutions from other countries. The
What is traded, bought and sold on the forex market is something that can easily be liquidated, meaning it can be turned back to cash fast, or often times it is actually going to be cash. From one currency to another, the availability of cash in the forex market is something that can happen fast for any investor from any country.
The difference between the stock market and the forex market is that the forex market is global, worldwide. The stock market is something that takes place only within a country. The stock market is based on businesses and products that are within a country, and the forex market takes that a step further to include any country.
The stock market has set business hours. Generally, this is going to follow the business day, and will be closed on banking holidays and weekends. The forex market is one that is open generally twenty four hours a day because the vast number of countries that are involved in forex trading, buying and selling are located in so many different times zones. As one market is opening, another countries market is closing. This is the continual method of how the forex market trading occurs.
The stock market in any country is going to be based on only that countries currency, say for example the Japanese yen, and the Japanese stock market, or the United States stock market and the dollar. However, in the forex market, you are involved with many types of countries, and many currencies. You will find references to a variety of currencies, and this is a big difference between the stock market and the forex market.
Saturday, July 2, 2011
Friday, July 1, 2011
FIXED EXCHANGE RATE
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.
A fixed exchange rate is usually used to stabilize the value of a currency against the currency it is pegged to. This makes trade and investments between the two countries easier and more predictable, and is especially useful for small economies where external trade forms a large part of their GDP.
It can also be used as a means to control inflation. However, as the reference value rises and falls, so does the currency pegged to it. In addition, according to the Mundell–Fleming model, with perfect capital mobility, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.
There are no major economic players that use a fixed exchange rate (except the countries using the euro and the Chinese yuan). The currencies of the countries that now use the euro are still existing (e.g. for old bonds). The rates of these currencies are fixed with respect to the euro and to each other. The most recent such country to discontinue their fixed exchange rate was the People's Republic of China[citation needed], which did so in July 2005.[1] However, as of September 2010, the fixed-exchange rate of the Chinese yuan has already increased 1.5% in the last 3 months.
A fixed exchange rate is usually used to stabilize the value of a currency against the currency it is pegged to. This makes trade and investments between the two countries easier and more predictable, and is especially useful for small economies where external trade forms a large part of their GDP.
It can also be used as a means to control inflation. However, as the reference value rises and falls, so does the currency pegged to it. In addition, according to the Mundell–Fleming model, with perfect capital mobility, a fixed exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.
There are no major economic players that use a fixed exchange rate (except the countries using the euro and the Chinese yuan). The currencies of the countries that now use the euro are still existing (e.g. for old bonds). The rates of these currencies are fixed with respect to the euro and to each other. The most recent such country to discontinue their fixed exchange rate was the People's Republic of China[citation needed], which did so in July 2005.[1] However, as of September 2010, the fixed-exchange rate of the Chinese yuan has already increased 1.5% in the last 3 months.
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency.
There are economists who think that, in most circumstances, floating exchange rates are preferable to fixed exchange rates. As floating exchange rates automatically adjust, they enable a country to dampen the impact of shocks and foreign business cycles, and to preempt the possibility of having a balance of payments crisis. However, in certain situations, fixed exchange rates may be preferable for their greater stability and certainty. This may not necessarily be true, considering the results of countries that attempt to keep the prices of their currency "strong" or "high" relative to others, such as the UK or the Southeast Asia countries before the Asian currency crisis. The debate of making a choice between fixed and floating exchange rate regimes is set forth by the Mundell-Fleming model, which argues that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It can choose any two for control, and leave third to the market forces.
In cases of extreme appreciation or depreciation, a central bank will normally intervene to stabilize the currency. Thus, the exchange rate regimes of floating currencies may more technically be known as a managed float. A central bank might, for instance, allow a currency price to float freely between an upper and lower bound, a price "ceiling" and "floor". Management by the central bank may take the form of buying or selling large lots in order to provide price support or resistance, or, in the case of some national currencies, there may be legal penalties for trading outside these bounds.
There are economists who think that, in most circumstances, floating exchange rates are preferable to fixed exchange rates. As floating exchange rates automatically adjust, they enable a country to dampen the impact of shocks and foreign business cycles, and to preempt the possibility of having a balance of payments crisis. However, in certain situations, fixed exchange rates may be preferable for their greater stability and certainty. This may not necessarily be true, considering the results of countries that attempt to keep the prices of their currency "strong" or "high" relative to others, such as the UK or the Southeast Asia countries before the Asian currency crisis. The debate of making a choice between fixed and floating exchange rate regimes is set forth by the Mundell-Fleming model, which argues that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It can choose any two for control, and leave third to the market forces.
In cases of extreme appreciation or depreciation, a central bank will normally intervene to stabilize the currency. Thus, the exchange rate regimes of floating currencies may more technically be known as a managed float. A central bank might, for instance, allow a currency price to float freely between an upper and lower bound, a price "ceiling" and "floor". Management by the central bank may take the form of buying or selling large lots in order to provide price support or resistance, or, in the case of some national currencies, there may be legal penalties for trading outside these bounds.
How to make money in forex
In the forex market, you buy or sell currencies.
Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
Bid and Ask
All forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.
The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.
The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.
The difference between the bid and the ask price is popularly known as the spread.
On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.
Placing a trade in the foreign exchange market is simple: the mechanics of a trade are very similar to those found in other markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.
The object of forex trading is to exchange one currency for another in the expectation that the price will change, so that the currency you bought will increase in value compared to the one you sold.
Bid and Ask
All forex quotes are quoted with two prices: the bid and ask. For the most part, the bid is lower than the ask price.
The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency. This means the bid is the best available price at which you (the trader) will sell to the market.
The ask is the price at which your broker will sell the base currency in exchange for the quote currency. This means the ask price is the best available price at which you will buy from the market. Another word for ask is the offer price.
The difference between the bid and the ask price is popularly known as the spread.
On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.
Exchange rate
1 GBP in GBP
American Dollar 1.61681 0.6185
Argentine Peso 6.9443 0.144003
Australian Dollar 1.52277 0.656696
Brazilian Real 2.58781 0.386427
Bulgarian Lev 2.21596 0.451272
Canadian Dollar 1.58249 0.631918
Chilean Peso 761.901 0.00131251
Chinese Yuan 10.4649 0.0955577
Colombian Peso 2890.49 0.000345962
Croatian Kuna 8.39146 0.119169
Danish Krone 8.4514 0.118324
Euro 1.13302 0.882599
Hong Kong Dollar 12.6044 0.0793376
Hungarian Forint 303.263 0.00329747
Iceland Krona 187.101 0.00534471
Indian Rupee 72.5426 0.013785
Indonesian Rupiah 13898.8 7.19488e-05
Israeli New Shekel 5.55801 0.17992
Japanese Yen 129.968 0.00769418
Latvian Lat 0.803649 1.24432
Lithuanian Litas 3.91208 0.255619
Malaysian Ringgit 4.90052 0.20406
Mexican Peso 19.2393 0.051977
New Zealand Dollar 1.99977 0.500057
Norwegian Kroner 8.91628 0.112154
Pakistan Rupee 138.825 0.00720331
Philippine Peso 70.7297 0.0141383
Romanian Leu 4.78926 0.2088
Russian Ruble 45.3892 0.0220317
Singapore Dollar 1.99649 0.500879
South African Rand 10.985 0.0910329
South Korean Won 1760 0.000568182
Sri Lanka Rupee 177.12 0.00564588
Swedish Krona 10.4109 0.0960528
Swiss Franc 1.37129 0.72924
Taiwan Dollar 46.8776 0.0213321
Thai Baht 49.4425 0.0202255
Trinidad/Tobago Dollar 10.3326 0.0967807
Turkish Lira 2.58091 0.387461
Venezuelan Bolivar 6.9443 0.144003
American Dollar 1.61681 0.6185
Argentine Peso 6.9443 0.144003
Australian Dollar 1.52277 0.656696
Brazilian Real 2.58781 0.386427
Bulgarian Lev 2.21596 0.451272
Canadian Dollar 1.58249 0.631918
Chilean Peso 761.901 0.00131251
Chinese Yuan 10.4649 0.0955577
Colombian Peso 2890.49 0.000345962
Croatian Kuna 8.39146 0.119169
Danish Krone 8.4514 0.118324
Euro 1.13302 0.882599
Hong Kong Dollar 12.6044 0.0793376
Hungarian Forint 303.263 0.00329747
Iceland Krona 187.101 0.00534471
Indian Rupee 72.5426 0.013785
Indonesian Rupiah 13898.8 7.19488e-05
Israeli New Shekel 5.55801 0.17992
Japanese Yen 129.968 0.00769418
Latvian Lat 0.803649 1.24432
Lithuanian Litas 3.91208 0.255619
Malaysian Ringgit 4.90052 0.20406
Mexican Peso 19.2393 0.051977
New Zealand Dollar 1.99977 0.500057
Norwegian Kroner 8.91628 0.112154
Pakistan Rupee 138.825 0.00720331
Philippine Peso 70.7297 0.0141383
Romanian Leu 4.78926 0.2088
Russian Ruble 45.3892 0.0220317
Singapore Dollar 1.99649 0.500879
South African Rand 10.985 0.0910329
South Korean Won 1760 0.000568182
Sri Lanka Rupee 177.12 0.00564588
Swedish Krona 10.4109 0.0960528
Swiss Franc 1.37129 0.72924
Taiwan Dollar 46.8776 0.0213321
Thai Baht 49.4425 0.0202255
Trinidad/Tobago Dollar 10.3326 0.0967807
Turkish Lira 2.58091 0.387461
Venezuelan Bolivar 6.9443 0.144003
The currency band
The currency band is a system of exchange rates by which a floating currency is backed by hard money.
A country selects a range, or "band", of values at which to set their currency, and returns to a fixed exchange rate if the value of their currency shifts outside this band. This allows for some revaluation, but tends to stabilize the currency's value within the band. In this sense, it is a compromise between a fixed (or "pegged") exchange rate and a floating exchange rate. For example, the exchange rate of the renminbi of the mainland of the People's Republic of China has recently been based upon a currency band; the European Economic Community's "snake in the tunnel" was a similar concept that failed, but ultimately led to the establishment of the European Exchange Rate Mechanism (ERM) and ultimately the Euro.
A country selects a range, or "band", of values at which to set their currency, and returns to a fixed exchange rate if the value of their currency shifts outside this band. This allows for some revaluation, but tends to stabilize the currency's value within the band. In this sense, it is a compromise between a fixed (or "pegged") exchange rate and a floating exchange rate. For example, the exchange rate of the renminbi of the mainland of the People's Republic of China has recently been based upon a currency band; the European Economic Community's "snake in the tunnel" was a similar concept that failed, but ultimately led to the establishment of the European Exchange Rate Mechanism (ERM) and ultimately the Euro.
Basic forex guide
The foreign exchange market (forex, FX, or currency market) is a global, worldwide decentralized over-the-counter financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade.[2]
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world’s major industrial states after World War II), when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade.[2]
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world’s major industrial states after World War II), when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
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