Determinants Of Foreign Exchange Rates

A country’s foreign exchange rates are an indication of its economic health. Its exchange rate plays a very important role in its trade level. It is for this reason that rates are constantly scrutinized, analyzed and at times manipulated by government departments. For the individual investor, these rates often have an adverse effect on their portfolios.

Trading activities between countries is the main factor that affects currency rate fluctuations. When a country shows an increase in its currency rate, its export prices will increase, and its import prices will drop in the foreign market. The reverse is true when a country has a low currency rate. If a country has a low exchange rate, its trade balance will increase, but a high exchange rate will decrease its trade balance.

Current Account Deficit

The trade difference between a country and its trade partners is termed as a ‘current account.’ It shows the difference between payments made from one country to another for interest, dividends, goods and services. A deficit in a country’s current account shows that it is spending more on foreign trade than it is earning from other countries. It is also indicative of the fact that a country requires funding from foreign sources to get rid of its deficit. This indicates that a country requires more foreign currency than it is earning from its exports. This means that the demand for its products is not very high.

Interest Rates

The correlation between inflation, interest rates and foreign exchange rates is extremely strong. If central banks make the decision to manipulate interest rates, there is a direct influence on inflation and the currency exchange rate. By raising the interest rate, lenders achieve a higher return than in other countries. This attracts investment from foreign countries which causes an increase in the exchange rate. When interest rates are brought down, the return for lenders decreases which brings down the exchange rate.

Inflation

If a country has a consistently low inflation rate, its currency value will increase. This is so because the country’s purchasing power increases in relation to foreign currencies. The countries who maintained low inflation rates during the past fifty or so years are Germany, Japan and Switzerland. Low inflation in North America was only achieved much later. Countries that have a high inflation rate experience a dip in their currency rate as opposed to their trade partners. This phenomenon is linked to high interest rates.

The foreign currency exchange rates linked to your investments will be the determining factor of the actual value of your investment portfolio. There are a huge number of factors that determine a country’s exchange rate and these are complicated enough to leave many experienced traders confused. If you are an avid investor or foreign currency trader, you should become familiar with concepts that determine currency values. These rates will have a dramatic effect on the return on your investments.

Foreign currency exchange rates are determined by several factors and this not only affects trading between countries, it also affects the individual consumer in several ways. Corporations who trade with other countries are also affected negatively at times.

 

AN INTRODUCTION TO FOREIGN EXCHANGE RATE

Cost of Money

Modern economies are dependent upon their national currency. It allows the determination of the value of goods across all countries. The foreign exchange rate can be termed as the cost of one currency compared to another currency. For example if you require US dollars and you have British pounds, you can exchange one British pound for $1.52.

The History of U.S. Foreign Exchange Rates

All the world currencies used to be determined by gold reserves. It meant that any paper money issued by a government had to be equivalent to the same amount of gold held in reserve by that government. During the 1930s, the United States set the dollar’s value at a level of $35 to an ounce of gold. After the Second World War, other countries started basing their currency’s value on the US dollar. Since the U.S. had a set value to their dollar, it was simple for other currencies to use the same calculation.

The U.S. inflation rate increased, lowering the value of its currency. This made other currencies more valuable compared to the dollar and the US had to make a decision regarding their currency’s value. It was then determined that the value of the dollar would be reduced and the value of an ounce of gold was placed at $70. The U.S. removed the gold standard completely in 1971. This meant that its currency value was determined by market forces only.

Exchange Methods

Governments of different countries make use of two main systems to determine its exchange rate. These are pegged and floating currency exchange rates.

Floating Rate

• A floating exchange rate is determined by market factors. This means that a country’s currency is valued at the rate buyers are prepared to pay for it. The basis for this valuation is supply and demand which has driving forces such as inflation, foreign investment and other economic factors. This is not a perfect system as countries with unstable economies often suffer under the supply and demand economic law.

Pegged Rate

• A pegged rate is a fixed system whereby the rate is set and maintained artificially by a government. This rate generally suffers no fluctuation.

• National banks have to hold huge amounts of foreign currency to ride the waves of supply and demand. In the event that there is a sudden demand for a specific currency, the central bank has to release sufficient currency to meet that demand.

There are many determining factors related to foreign exchange rates. Those who wish to trade in this market should be aware of these factors.

A Review of Automated Forex Brokers – Part 2

GFT Forex is an automated forex broker, whose DealBook FX 2 software offers the investor both a demo and a live forex trading tool in the currency market. This forex trading software offers the investor direct access to some of the tightest spreads, through a stable, standalone forex trading platform, 24 hours a day.

The DealBook FX 2 software shows live, dealable prices, real time data, free real time world and financial news, forex charts, more than 65 technical indicators, and the ability to build the investor’s own indicators.

GCI Financial Ltd., another automated forex broker, provides trading software that tracks real time prices in 20 major currencies, live charts, and real time profit and loss account tracking. The software is offered as a demo also. Market orders are confirmed within seconds at prices clicked on or accepted by the client.

The FX3K is an online automated dealing and trading platform used by automated forex brokers. The FX3K online trading environment includes real time quotes, charting, technical analysis tools, and news. FX3K integrates the client, dealer, back office and system administrator functions. Product features include high speed execution of client orders and the ability to monitor real time margin availability, net exposure and profit and loss on all open positions. FX3K has chat options to allow trader-dealer conversations.

The COESfx Level 1 Trading Platform is used by automated forex broker as an Electronic Currency Network for the execution of best prices for buyers and sellers of foreign exchange. It offers traders live and executable prices, thereby making each participant a market maker. Traders gain access to “best bid/best offer” quotes directly from price providers and other traders. COESfx pricing is derived from a number of partners in the network such as banks, Futures Commission Merchants (FCM’s), Introducing Brokers (IB’s), fund managers and other traders on its Electronic Currency Network.

A Review of Automated Forex Brokers – Part 1

GFT Forex is an automated forex broker, whose DealBook FX 2 software offers the investor both a demo and a live forex trading tool in the currency market. This forex trading software offers the investor direct access to some of the tightest spreads, through a stable, standalone forex trading platform, 24 hours a day.

The DealBook FX 2 software shows live, dealable prices, real time data, free real time world and financial news, forex charts, more than 65 technical indicators, and the ability to build the investor’s own indicators.

GCI Financial Ltd., another automated forex broker, provides trading software that tracks real time prices in 20 major currencies, live charts, and real time profit and loss account tracking. The software is offered as a demo also. Market orders are confirmed within seconds at prices clicked on or accepted by the client.

The FX3K is an online automated dealing and trading platform used by automated forex brokers. The FX3K online trading environment includes real time quotes, charting, technical analysis tools, and news. FX3K integrates the client, dealer, back office and system administrator functions. Product features include high speed execution of client orders and the ability to monitor real time margin availability, net exposure and profit and loss on all open positions. FX3K has chat options to allow trader-dealer conversations.

The COESfx Level 1 Trading Platform is used by automated forex broker as an Electronic Currency Network for the execution of best prices for buyers and sellers of foreign exchange. It offers traders live and executable prices, thereby making each participant a market maker. Traders gain access to “best bid/best offer” quotes directly from price providers and other traders. COESfx pricing is derived from a number of partners in the network such as banks, Futures Commission Merchants (FCM’s), Introducing Brokers (IB’s), fund managers and other traders on its Electronic Currency Network.

Algorithmic Trading: The Basis Of Forex Robot

Forex robots are all based on a method of what is known as algorithmic trading. Algorithmic trading is a system that employs advanced mathematical models for making transaction decisions in the financial markets. These algorithmic models are all supposed to have strict built-in rules that attempt to determine what the best time would be to place an order that will have the least effect on the price of a stock or a currency. Large blocks of shares are usually purchased by dividing the large block of shares into smaller ones and allowing the algorithms to decide when the smaller blocks are to be purchased. Algorithmic trading is most commonly used by large institutional investors due to the large amount of shares they purchase daily. The use of these algorithms allows them to obtain the best possible price without significantly affecting ( i.e. increasing) the stock’s price and increasing purchasing costs. Trading algorithms themselves have been around a lot longer than actual algorithmic trading.

The computerization of the order flow in financial markets began in the early 1970s. An early example of this was the introduction of the New York Stock Exchange’s (NYSE) DOT system (an acronym for “designated order turnaround”). DOT (later renamed SuperDot) electronically routed orders to the proper trading post in order that they could then be performed manually. Though somewhat controversial at the time (and blamed by many for being a significant factor in bringing about the infamous stock market crash of 1987), the system of algorithmic based automated trading has since evolved to the point where in some financial markets, so-called “algo trading” comprise as much as 80% of all trades executed.

Within the context of forex trading, robots using algorithmic-based charting software can aid traders in understanding the forex market through the use of such devices as charts and indicator analysis. Typically they are provided with charts that show the price movements for sets of currency pairs over a period of time which are then overlaid with price change or “tick” charts and moving average-based momentum calculations. Once a trader has selected the currency pair(s) he or she wishes to trade, algorithmic, automated trading analyzes and assembles the factors that influence the currency’s value. Whenever these factors are in what have been deemed to be their proper alignment, trades are executed automatically without any further involvement from the trader. Most estimates figure that at least 25% of all forex orders are executed via algo trading.

At present, there is still considerable debate as to whether the algorithmic formulas trumpeted by the developers of different forex robot software programs actually work as well as advertised. Notwithstanding the often grandiose claims made, there remains a significant degree of skepticism out there based on the volume of forum post out there, both pro and con. Moreover, some of the so-called “reviews” of forex robot software appear to be posted by affiliate marketers just saying positive things in exchange for a piece of the action. Generally speaking, if you are already a knowledgeable trader, then trading software might very well work, but they are not a cure-all for poor trading decisions. If you are a novice, your best bet is to take a training course that teaches the basics and how to use the automated forex expert advisers.

The History Of Forex Exchange

The lack of sustainability in fixed foreign exchange rates continues to be a potential hardship for commercial companies that do business globally. However, for investors and financial institutions it continues to represent significant new opportunities. The size of foreign exchange markets today is bigger than the world’s stock and bond markets combined, with more than $ 3 billion US traded daily.

Mankind has been buying, selling and exchanging goods and services for thousands of years. In the beginning, the value of goods was expressed in terms of other goods, i.e. an economy based on barter between individual market participants. The obvious limitations of such a system encouraged the establishment of more generally accepted means of exchange at a fairly early stage in history. In different economies, beads, produce, stones and so on served this purpose at various times, but before long metals- mainly gold and silver- established themselves as an accepted means of payment as well as a reliable indices of value.

Prior to World War I, most central banks supported their currencies with convertibility to gold (known as the “Gold Standard”). Although paper money could always be exchanged for gold, in reality this did not occur often. This fostered among some elements of society the (incorrect) notion that there was not necessarily a need for full cover in the central reserves of the government. At times, a sudden increase in the supply of paper money without gold to back it led to rampant inflation and resulting political instability (Germany in the early 1920’s was a famous example of this). To protect local national interests, foreign exchange controls were increasingly introduced in a (usually futile) attempt to prevent market forces from punishing fiscal irresponsibility.

Near the end of World War II, the Bretton Woods agreement was reached in July 1944. The Bretton Woods Conference rejected John Maynard Keynes suggestion for a new world reserve currency in favor of a system built on the US dollar. Other international institutions such as the IMF, the World Bank and GATT (General Agreement on Tariffs and Trade) were created in the same period as a way to avoid the destabilizing monetary crises that were a feature of economic life prior to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that partly reinstated the gold standard, fixing the US dollar at USD 35/oz and fixing the other main currencies to the dollar.

However, this system came under increasing pressure as national economies moved in different directions during the 1960s. While efforts were made to keep the system functioning as intended, eventually it collapsed, The decision of the Nixon administration to take the US off the gold standard in August of 1971 meant that the dollar was no longer suitable as the sole international currency at a time when it was under severe financial pressure as the result of large increases in domestic spending and the expense of pursuing the Vietnam War.

Nonetheless, the idea of fixed exchange rates of some kind continues to live on. The EEC (European Economic Community) introduced a new system of fixed exchange rates in 1979, known as the European Monetary System. This system all but collapsed in 1992-93 however, when economic pressures forced the devaluation of a number of weak European currencies. Nevertheless, the quest for currency stability has continued in Europe with the renewed attempt to not only fix currencies but actually replace many of them with the Euro starting in 2001.

Robotic Forex Trading: Brokers Review

Robotic Forex Trading: Brokers Review

A number of companies offer you automatic foreign currency brokerage products and services. In the following post, you will find a brief reviews:

What forex trading brokers deliver automatic solutions?

GFT Forex trading is definitely an automatic foreign currency brokerage, whose DealBook FX 2 computer software supplies the investor both a demo and also a reside currency trading investing device within the currency marketplace. This foreign exchange investing software program supplies the investor direct admission to some of the tightest spreads, via a well balanced, standalone foreign currency dealing system, 24 hours each day.

The DealBook FX2 computer software shows stay, dealable charges, real time data, cost-free real-time global and economical news, foreign exchange charts, far more than 65 specialized indicators, and the ability to create the investor’s very own indicators.

GCI Economic Ltd., yet another automatic foreign currency brokerage, presents investing computer software that tracks real time rates in 20 main currencies, live charts, and instant earnings and reduction account tracking. The software program is offered being a demo also. Industry orders are confirmed in seconds at price ranges clicked on or accepted through the customer.

The FX3K can be an on-line automatic dealing and dealing program utilised by automatic foreign currency dealers. The FX3K on the web dealing surroundings involves instant quotes, charting, specialized analysis resources, and news. FX3K integrates the customer, dealer, back workplace and program administrator functions. Merchandise functions consist of higher speed execution off customer orders and the capacity to monitor instant margin availability, net exposure and revenue and reduction on all open positions. FX3K has chat capabilities to enable trader- trader conversations.

The COESfx Level 1 trading Program is utilized by automatic currency trading brokerage service as an Electronic Currency Network for your execution off best prices for buyers and sellers of foreign exchange. It provides traders live and executable prices, thereby resulting in making every single participant a market maker. Traders acquire access to “greatest bid/best offer” quotes directly from price providers and other traders. COESfx pricing is based on a number of partners from the network like banks, Futures Commission Merchants (FCM’s), Introducing Brokers (IB’s), fund managers and other traders on its Electronic Currency Network.

 

Forex Strategy System

Exchange of a nation’s currency for that of another is Foreign Exchange (FOREX). The foreign exchange market is a largest non-stop financial market in the world where currencies of different nations are traded. This Forex market is bigger than three times the aggregate amount of the US Equity and Treasury markets combined. This is not the traditional market as there is no physical location or central trading location. It is operated on a global network of banks, corporations and individuals trading one currency for another. Foreign exchange market conditions can change at any time in response to real-time events.
The purpose of investing in Forex trading is to earn profits from foreign currency movements. Forex trading is always done in currency pairs. Two currencies that make up an exchange rate are called currency pair. Investors who trade currency pairs need very fast buy and sell Forex signals. Without these Forex trading signals, it is difficult to decide market conditions in terms of entry or exit in the market. These Forex signals and trade alerts will indicate you for going out or coming into the market. Many Forex companies, who have been involved in this kind of business, have developed forex sms signal services. Several Forex signal providers got a “free test” also that is really beneficial.
Initial investors don’t go for in details; they often rely upon one or two technical signals to decide when to buy and when to sell a currency pair. When they get a good understanding of Forex market, they start to use Forex signal software to decide when to pick up a forex entry point and forex exit point. It is not very difficult to find a automatic Forex signal indicating when to buy and when to sell a currency. An investor should compare his investment to alternative options. It is wise to buy currency you expect an increase in value relative to the currency you are selling. In an open trade, a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position
To gain high profits in a Forex trading, you should use a Multi-Target Exit Strategy. This strategy is based on providing the customers with multiple acquiring profit and stopping losses.  This Forex trading strategy allows you to enter multiple Take Profit and Stop Loss levels.  This Forex strategy also requires that the trader follows the trade in real time.  A Forex trading strategy with a high profit percentage rewards you mentally also as it will boost you up for further trade and will make it enjoyable. A string of profits will increase your morale.
In Forex trading system, it’s not obligatory to buy some currency to sell it later. There are situations for buying and selling any currency without actually having it. Usually Internet-brokers establish the minimum deposit such as $ 2000, for working in the FOREX market, and grant a leverage of 1:100. The major currencies traded in FOREX, are Euro (EUR), Japanese yen (JPY), British Pound (GBP), and Swiss Franc (CHF). All of them are traded against the US dollar (USD). A technical analysis is also made that presumes all the information about the market and further fluctuations in prices. They too consider factors, economic, political or psychological.

A Review of Automated Forex Brokers

In the following articles, you’ll find brief reviews of each.

What forex brokers offer automated services?

GFT Forex is an automated forex broker, whose DealBook FX 2 software offers the investor both a demo and a live forex trading tool in the currency market. This forex trading software offers the investor direct access to some of the tightest spreads, through a stable, standalone forex trading platform, 24 hours a day.

The DealBook FX 2 software shows live, trading prices, real time data, free real time world and financial news, forex charts, more than 65 technical indicators, and the ability to build the investor’s own indicators.

GCI Financial Ltd., another automated forex broker, provides trading software that tracks real time prices in 20 major currencies, live charts, and real time profit and loss account tracking. The software is offered as a demo also. Market orders are confirmed within seconds at prices clicked on or accepted by the client.

The FX3K is an online automated dealing and trading platform used by automated forex brokers. The FX3K online trading environment includes real time quotes, charting, technical analysis tools, and news. FX3K integrates the client, dealer, back office and system administrator functions. Product features include high speed execution of client orders and the ability to monitor real time margin availability, net exposure and profit and loss on all open positions. FX3K has chat options to allow trader-dealer conversations.

The COESfx Level 1 Trading Platform is used by automated forex broker as an Electronic Currency Network for the execution of best prices for buyers and sellers of foreign exchange. It offers traders live and executable prices, thereby making each participant a market maker. Traders gain access to “best bid/best offer” quotes directly from price providers and other traders. COESfx pricing is derived from a number of partners in the network such as banks, Futures Commission Merchants (FCM’s), Introducing Brokers (IB’s), fund managers and other traders on its Electronic Currency Network.

Its More Than One: Kind of Forex Robots

Forex or the foreign exchange market is one of the biggest trading markets and also among the most volatile.  Forex trading can either be done manually or buying and selling through a broker or a financial brokerage firm. It can also be done by using the automated process like using a software or an expert advisor also known as a Forex robot.

Generally speaking, Forex is trading in the international currency market. Forex market deals with all the currency trading in the world. Because of its high level of unpredictability, some would refer the Forex market like gambling.  Currency values change very fast, that you would need good analysis and at the same time, luck, to be able to land a good transaction. Continue reading “Its More Than One: Kind of Forex Robots”