Scams to be wary of

A FOREX scam is one that involves trading but will turn out to be a fraud; you have no chance of getting your money back once you have invested it. If you were to invest money with a company stating they are involved in FOREX trading you want read closely to learn if they are permitted to do business in your country. Many companies are not permitted in the FOREX market, as they have defrauded investors before. In the last five years, with the help of the Internet, FOREX trading and the awareness of FOREX trading has become all the rage. Banks are the number one source for FOREX trading to take place, where a trained and licensed broker is going to complete transactions and requirements you set forth. Commissions are paid on the transaction and this is the usual. Another type of scam that is prevalent in the FOREX markets is software that will aid you in making trades, in learning about the foreign markets and in practicing so you can prepare yourself for following and making trades. You want to be able to rely on a program or software that is really going to make a difference. Consult with your financial broker or your bank to learn more about FOREX trading, the FX markets and how you can avoid being the victim while investing in these markets

WisdomTree Unveils New Multi-Currency ETF

The latest addition the Wisdom Tree family of currency ETFs officially debuted, and in its first two days of trading, the Emerging Currency Fund (CEW) returned an impressive 2.2%. It’s not worth annualizing this figure, but suffice it to say that its performance is already turning heads.

According to the prospectus, CEW “is an actively managed exchange-traded fund that seeks to provide the investor with a liquid, broad-based exposure to money market rates and currency movements within emerging market countries.” Investors will gain exposure both to the currencies themselves and to their respective short-term interest rates, via “short-term U.S. money market securities and forward currency contracts and swaps of the constituent currencies…designed to create a position economically similar to a money market security denominated in each of the selected currencies.”

Chosen from three regions (Latin America, Africa/Europe/Middle East, and Asia), the inaugural 11 currencies are as follows: Brazilian real, Chinese yuan, Chilean peso, Indian rupee, Israeli shekel, Mexican peso, Polish zloty, South African rand, South Korean won, Taiwanese dollar and Turkish new lira. According to WisdomTree, these currencies were selected not necessarily for economic reasons, but rather because of their relatively high liquidity and low correlation with each other. In addition, “The selected currencies are equally weighted in terms of dollar value at each currency assessment date and after each quarterly re-balancing,” to reflect fluctuations in exchange rates. Naturally, WisdomTree reserves the right to rejigger the portfolio in terms of constituent makeup, but this would probably only be effected to improve overall liquidity, rather to replace an under-performing currency.

The advantage of CEW lies in its automatic diversification, such that investors gain access to a variety of currencies but only have to transact in the fund itself. WisdomTree also points out that, “Emerging market currencies often move independently of domestic stock, bond and money market investments…[and] exhibit low correlations to other alternative asset classes, such as commodities and gold.” The chart below [courtesy of CEW promotional materials] makes this point indirectly, and it probably comes as a surprise that US stocks are collectively more volatile than individual emerging market currencies. “Incorporating a 10% allocation of emerging currency into balanced port folio mixes of the domestic stocks and domestic bonds over the last ten years…raised annual returns by an average of 0.66%, while lowering overall portfolio volatility” in a hypothetical exercise.

“In terms of taxation, WisdomTree says normal capital gains rules will apply to the sales of fund shares. However, income from the portion of the fund invested in U.S. money market securities usually will be taxed as ordinary income, while the tax treatment of the local currency forward contracts could vary with the situation.” The fund’s expense ratio, meanwhile, is .55%.

If the preceding paragraphs read like a sales pitch, I apologize, as that was not my intention. At the same time, I’m personally quite positive about CEW (as well as ETFS in general, for that matter), since it provides quick and easy exposure to a bunch of quality currencies, eliminating the need to buy them separately. Not to mention that this fund is debuting right when both the carry trade and emerging markets (and their currencies) are coming back in vogue.

I’m not sure if the timing was deliberate, but it could certainly have been worse. It’s tough to say whether the market rally of the last two months is sustainable, but if the decline in risk aversion that ignited the rally continues to obtain, it will be good for CEW.

What is Rate of Change (ROC) and How To Compute It?

Forex article

Rate of Change or ROC is a technical indicator that measures the changes between the percentage compared to the most recent price and the price "n" periods in the past. It is also said that it monitors the momentum of the market. It estimates the market’s rate of change comparative to the previous trading intervals. In the highest level, the indicator might say a market is quite overbought. Valleys or troughs also points out an oversold market situation.

It can also stand alone as an essential indicator used by many technicians interested in market momentum. It has a horizontal median called equilibrium. It is this median that tells us everything we need to know about this type of rate. A few technicians in the market often use a very simple approach for the Rate of Change learning. It is concern with buy and sells signals based upon the zero line or the midpoint. This presumes oversold or overbought market conditions which pave the way of crossover. You may sell when the rate of change line go across from above to below on the other hand you may buy when the indicator intersect from below to above.

It trades with price changing amount during the exact time and match to it as an oscillator that shows the cyclical movement. It goes up along with the prices up-trending and it decreases when the prices go down. If prices go high, changes gives the according significant rate changing.

Mostly, it is best to use this indicator as an antecedent to change in market direction. One good thing to do is to establish extreme zones for the study, much like the Relative Strength Index or Stochastic. However, a good technical analyst must know how to tolerate the study in extreme bull and bear markets. It can generate many sham signals under those market conditions. In addition, the indicator is parallel to an oscillator when it comes to the market accelerating or decelerating.

To compute it, here’s a good example:

Period (10) - the number of bars, or interval, used to calculate the study using the value you specify, it may be computed as the change from the current price relative to the price from the number of specified intervals prior to the current price.

The general formula is as follows:

ROCt = (Pricet / Pricen) * 10000

ROCt is the rate value for the current period. Pricet is the current price. Pricen is the price you specify for the nth interval (open, high, low, close, midpoint or average).

Take the example below which use current price of 7485 and a 7440 price n intervals ago:

ROC = (7485 / 7440) * 10000 = 1.006 * 10000 = 10006

There is a tendency to loss in futures trading. Past results on the other hand are not analytical of future results.

It may also be calculated by using the following formula:

(Closing Price Today - Closing Price "n" Periods Ago) / Closing Price "n" Periods Ago.

Guide to the Best Forex Resources

Forex market is the biggest financial market in the world. Moreover, currency trading is one of the fastest growing forms of investing.

Here’s how to find information and resources to deepen your knowledge about the fast and exciting world of foreign exchange and how to use it for trading purposes.

Internet has changed the way people view forex markets. No longer are the best currency analyst reports unavailable to the public, live real-time data too expensive for common investors, or capital requirements too high.

In fact, many companies have introduced mini forex accounts, with starting capital requirements for selected accounts in some brokerages under $1000. These smaller accounts have made currency trading available to everyone, increasing the need to be educated on forex and currency trading.

Ways to Learn About Forex Markets

There are many ways you can learn about forex markets. If you’re a business student, many universities have classes in foreign exchange operations and macroeconomic mechanisms that affect currency fluctuations.

Outside of the formal education field, you can learn about forex and currency trading from traders, salespeople, and analysts. Moreover, you can learn foreign exchange operations from educators through specifically arranged seminars, courses, and mentoring.

And don’t leave out forex magazines and books for background information and latest news to keep you ahead of the curve.

Forex Trading Systems and Solutions

Once you’ve covered the basics of foreign exchange operations, you might also want to know the ways currency trading is done, through brokerages, forex trading systems, and with different currency trading systems.

The tools and services you’ll need for you own forex trading or operations will depend on your particular approach to forex.

In fact, many corporations do not want to take any risks with forex fluctuations and will hedge their positions. Others, traders and speculators, seek to profit from the fluctuation with their systems and views.

From this site, you’ll find information on resources that will help you understand better the complex world of investments for forex markets and currency trading.

The Value of Trade Balance to Local Economy

The balance of trade also referred as trade balance, which sometimes is symbolized as NX, is the difference of the monetary value of imports and exports in one economy in a given period of time. The balance of trade is considered the biggest part of a country’s balance of payments.

Imports, domestic spending, foreign aid, and investment abroad are called debit items while credit items includes exports, foreign investments in domestic economy and foreign spending in domestic economy.

A trade surplus is a positive balance of trade which is consists of more exporting than importing. A trade deficit is the negative balance of trade or sometimes called a trade gap. The trade balance can sometimes be divided as services balance and goods balance just like in the United Kingdom which they use the terms invisible and visible balance.

The balance of trade is a part of current account which includes transactions that includes income derived from international investment and international aid. Thus, if the current account comes as a surplus then the nation’s international net asset increases also while deficit will decrease the international net asset.

A good trade surplus is achieved when a country exports products more than buying imported goods. A trade deficit is eventually experience as a result of the opposite of a trade surplus. The trade balance is alike to the difference of a country's output and the domestic demand. These factors may affect the trade balance: prices of goods manufactured, taxes and tariffs, trade agreements, business cycle (home or abroad), and exchange rates.

The trade balance is different in many business cycles. For instance, export growth like oil and industrial goods which improves when there is economic expansion.

In developed countries like; Japan, China and Germany usually run at trade surpluses in which they experience a higher savings rate. Around the world there are different natural resources which a country may have for instance, countries from the coastal regions are major producers of fish, Canada can be a major producer of lumber because of its huge forests while in the Middle East, has the most oil reserves.

International trade is important so in order to sustain the balance of trade. A country should be totally self sufficient without international trade. Through international trades, each country will have the opportunity to produce specialize goods efficiently. In relation, when a nation specializes in producing these goods, the total production increases instead of trying to be self sufficient. Nations will benefit from international trades and also meets their needs. Generally, nations will trade to other nations when they gain from the trade. But the gains are not usually equal in terms of benefits and profit

Forex trading article

How Interest Rates Play a Role in the Currency Markets

Interest rates play the foremost important role in moving the prices of currencies in the Forex market. As the institutions that set interest rates, central banks are therefore the most influential factors. Interest rates dictate flows of investment. Since the currencies are representations of a country’s economy, differences in interest rates affect the relative worth of currencies in relation to one another. When central banks change interest rates they cause the Forex market to experience movement and volatility. In the realm of Forex trading, accurate speculation of central banks’ actions can enhance the trader's chances for a successful trade.

An increase in interest rates encourages traders to invest within that market and causes the demand for the currency to rise. As demand rises, the currency becomes scarcer and consequently more valuable. Investors are drawn to the currency, causing it to appreciate, because they will gain a higher yield on their investments, as in the Jane example. In order to purchase the country's assets (stocks or bonds), Jane will have to convert her domestic currency to the target country's currency also increasing demand. Conversely, a fall in interest rates discourage investors from purchasing assets in that particular economy, as the return on their investment is now smaller. The economy's currency will depreciate as a result of the weaker demand.

Forex Rebates

Forex rebates are a relatively new concept, but a great way for traders to maximize their Forex profits. There are a number of companies in the market today who cater expressly to provide rebates to individual traders. The explosion in the currency market over the past 5 years has been incredible. No longer is the currency market the preserve of the rich and well connected investor. Today, anyone with an internet connection and a laptop can partake in this activity.

Today there are literally hundreds of forex brokers offering their services to the investment community. One way they can promote their services is to recruit a number of agents, or introducing brokers, to help them sign up new clients. In return, these introducing brokers are paid a fee by the forex broker for each new client that signs up through the introducer. This fee will depend on how much trading the client does with the broker, in terms of how much volume of notional currency is traded.

Forex is trading lots. Each lot is a notional sum of $100,000. Typically, the introducer is paid a commission of around $10 for each lot which is traded by the new client. In an attempt to persuade traders to join the broker they are promoting, what some companies and organizations are now doing is to offer a rebate of part of this commission. This is usually around half - so that the trader will receive around $5 for each lot he or she trades. Over a period of weeks or month, this soon adds up to a substantial sum if the trader is trading regularly.