Fibonacci Sequences and the Golden Ratio in Forex Trading

Fibonacci Sequences and the Golden Ratio in Forex Trading

   May 31, 2013       Unknown

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The Fibonacci Sequences

The Fibonacci sequence is a series of numbers that begins with 0, 1, 1, 2, 3, 5, 8, 13, etc. Each of the proceeding numbers in the sequence is derived by adding the preceding two numbers. For example, the number 13 in the series is obtained by adding 5 and 8. The next number in the series would be “21” (the sum of 8 and 13).

The Golden Ratio

What is intriguing about the Fibonacci sequence is not the numbers in the series but their ratios. The Golden Ratio, roughly 1.618, appears to be prevalent among us in nature. It is said that even the behaviour of the financial markets conforms to this ratio.

Fibonacci and Finance

Technical analysts generally rely on three to five percentages of the Golden Ratio. The most frequently used percentages are 23.6%, 38.2%, 50%, 61.8% and 76.4%.

Analysts apply these percentages to their analysis of the markets through four (4) main methods:

Fibonacci Retracements

Fibonacci Arcs

Fibonacci Fans

Fibonacci Time Zones

Fibonacci Retracements

As the most frequently used among the four (4) main types of Fibonacci-based tools, Fibonacci Retracement is used to identify probable reversal levels. The levels are obtained with the various percentages of the Golden Ratio. In addition to alerting traders to probable reversal areas, these retracement levels also alert them to areas of support and resistance. The most commonly used percentages for tracing retracement levels are 38.2% and 61.8%.

Normally, after a rally, analysts will use the various percentages of the Golden Ratio to try and identify the retracement levels as well as to predict the scale of pullback. It is also possible to use Fibonacci Retracements after a decline in prices in order to predict the extent of the counter trend correction.

It should be noted that the levels identified with Fibonacci Retracements do not represent hard reversal regions. Instead, they alert traders to regions that could reverse the trend. Traders should always use other technical analysis tools like candlesticks and moving averages to confirm their findings.

Fibonacci Arcs

Fibonacci Arcs are arcs which expand outward from a baseline. The first arc is based on the 38.2% ratio, the second arc on the 50% ratio and the third arc on the 61.8% ratio.

From the diagram above, we can see that the base line extends from the trough to the peak of the price movements. These arcs represent probable support and reversal areas that traders should pay special attention to as prices rebound after a rally.

Fibonacci Fans

Fibonacci Fans are trend lines based on retracement levels. They help traders identify possible support areas, resistance areas and reversal areas.

When prices drop below a Fan line, traders often predict that future prices will fall even further to the next corresponding fan line. As such, Fibonacci Fan lines act as a support level for an upward trending market.

Conversely, if prices rally above a Fan line, then that Fan line is seen to act as a resistance level. If, however, prices manage to cut across the Fan line, then the next higher trending Fan line is regarded as the resistance level.

Fibonacci Time Zones

Fibonacci Time Zones comprise vertical lines that are divided into a series of different time zones. The chart is divided into sections spaced according to the ratio of the Fibonacci sequence.

The areas indicated by these lines are areas in which a significant price shift is expected. In other words, Fibonacci Time Zones are used to identify potential areas of trend reversal.

Conclusion

Technical tools based on the Fibonacci sequence and Golden Ratio are very popular among traders. However, we should never form our analysis solely through the application of Fibonacci-based tools.

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Trading in Stocks in Forex

Trading in Stocks in Forex

   May 31, 2013       Unknown

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Among all the financial instruments that are available for investment, stocks or equities are by far the most familiar and popular financial assets among investors. When an investor buys a company’s stocks, the amount he buys represents his stake in the company. This stake entitles him to a certain percentage of dividends that the company pays out to its shareholders. Certain classes of stocks (preferred stocks) also entitle the stakeholder to vote at the company’s annual general meeting and to decide who sits on the board of directors.

The Stock Exchange

Stocks are traded through regulated stock exchanges like the New York Stock Exchange (NYSE). Some exchanges, however, are more of an electronic network than a physical location.

The main task of a stock exchange is to facilitate the buying and selling process of stocks between investors and sellers. The stock market is divided into the primary market and the secondary market. The primary market deals with the issuance of securities through stock launches called Initial Public Offers (IPOs). The secondary market deals with the trading of previously issued stocks.

Some of the major stock exchanges located around the world include:

• Tokyo Stock Exchange
• TMX Group
• Taiwan Stock Exchange
• SIX Swiss Exchange
• Singapore Exchange
• Shenzhen Stock
• Shanghai Stock
• NYSE Euronext
• National Stock Exchange of
• NASDAQ OMX Group
• Moscow Exchange
• London Stock Exchange
• Korea
• JSE Limited
• Hong Kong Stock Exchange
• Deutsche Börse
• Bombay Stock
• BME Spanish Exchanges
• BM&F Bovespa
• Australian Securities Exchange

In addition to the major exchanges listed above, there is also the “Over-The-Counter Bulletin Board” (OTCBB), where stocks of smaller public companies are traded. As a result of the fact that the OTCBB lacks regulation, investing in stocks listed there is considered risky.

Stock Prices

Although stock prices are determined by the laws of supply and demand, it is difficult to pinpoint exactly what makes an investor prefer one stock over another. The principal theory which seeks to explain investors’ behavior relies on the “perceived value” of a company’s stocks. Hence, the earning potential as well as any news that can impact a company will affect the demand for a stock. Nevertheless, sometimes the market just does not make any sense. A good example is the dot com bubble, which burst during the beginning of the new millennium. Internet-based companies’ stocks were then being snapped up even though they never made a single cent in profit.

Investing In Stocks

To invest in the stock market, investors will need to engage the services of a broker. Stockbrokers earn a commission every time one of their investors buys or sells a stock. Some brokers are considered “Full Service Brokers” who also offer expert advice and account management services. At the other end of the spectrum are “Discount Brokers” who offer nothing more than “Buy & Sell” services.

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Commodities and Indices

Commodities and Indices

   May 31, 2013       Unknown

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Investors have several options when choosing a financial market to invest in. Two of these are Commodities and Indices.

Commodities

The commodity markets are regulated exchanges in which primary products and raw materials are sold in the form of standardized contracts. These goods have a universal price. For example, a bushel of wheat will cost the same in the US and in China. Prices only differ when there is an imbalance of demand and supply.

The main commodity exchanges around the world include the following:

• Chicago Board of Trade
• Chicago Mercantile Exchange
• Kuala Lumpur Futures Exchange
• London Metal Exchange
• New York Mercantile Exchange

Investment in Commodities

As Commodities are widely traded and are not easily influenced by the actions of a single company or nation, they represent a good and stable form of investment. For example, while many financial institutions went bankrupt during the credit crunch of 2008, the commodity markets remained largely unaffected.

There are several ways to participate in the commodity markets. These include the following:

• Commodities Exchanges
• Commodities Indices
• Futures Contracts
• Options

What are Indices?

Indices measure the performance of the financial markets. There are different Indices for different types of markets. Normally, Indices give an average of a basket of prices that are representative of the market to be measured. For example, the S&P 500 is an average of the market capitalization of the top 500 companies traded in the US equity market.

Some of the major Indices traders pay attention to include the following:

• CAC 40
• DAX 30
• DOW JONES
• FTSE 100
• Hang Seng
• NASDAQ
• S&P500

Trading Indices

Apart from being a measure of performance, Indices are also widely regarded as an investment vehicle. Investors can speculate on the performance of the various market Indices through index mutual funds. As these funds are based on a basket of prices and are less volatile, they are less risky than a single financial investment.

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Risk Management for Traders

Risk Management for Traders

   May 31, 2013       Unknown

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Although risk management is a crucial and essential prerequisite for successful trading, it is often ignored by new traders. This is due to the fact that new traders fail to distinguish between speculation and gambling. With speculation, traders have some form of control over risk, whereas in gambling the casinos or bookmakers always hold the advantage. There are a few simple Forex Trading tips that novice traders can use when they start trading Forex. 

Two forms of risk management are fundamental and technical analysis, both of which help traders calculate the chances of concluding a profitable trade.

In addition to calculating the odds of a successful trade, a trader needs to decide—before he enters a trade—at which point he’ll put out (the cut-off point, or the point at which enough profit has been made). The difference between the cut-off point and the trader’s entry point is the trade’s level of risk.

Traders can manage risk in a volatile market by incorporating risk limiting “Stop Loss” and “Take Profit” points into their trading strategies.

Stop Loss and Take Profit Points

Stop Loss and Take Profit points are essentially two sides of the same coin. A Stop Loss point is the price at which a trader will sell, at a loss, in order to limit his overall losses. A Take Profit point, on the other hand, is the price at which a trader is willing to sell for a profit. Using these tools in the planning of an investment strategy prevents greed from overwhelming our trading decisions.

The Bottom Line

As a professional trader, you should always know exactly when you are going to enter and exit a trade. Always remember to:

Decide on a Stop Loss Point in order to limit your potential losses.

Exit the market at the Take Profit point.

Analyze the market properly before placing your Stop Loss and Take Profit points.

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Major Currency Pairs and the Dollar Index for Forex

Major Currency Pairs and the Dollar Index for Forex

   May 31, 2013       Unknown

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The main purpose of the Forex market is to facilitate the trading of currency pairs among market participants, an example of which is a multinational company that needs foreign currencies to pay for goods or services delivered by foreign suppliers. Nevertheless, there are countries whose currencies are more widely traded than others.

The seven (7) most commonly traded currency pairs can be grouped into four (4) “Majors” and three (3) “Commodity Pairs.” These pairs are the most liquid in the Forex market. The following four (4) pairs constitute 90% of Forex trades:

• The British Pound & US Dollar (GBP/USD)
• The Euro & US Dollar (EUR/USD)
• The US Dollar & Japanese Yen (USD/JPY)
• The US Dollar & Swiss Franc (USD/CHF)
• The three (3) Commodity Pairs are:
• The Australian Dollar & US Dollar
• The New Zealand Dollar & US Dollar
• The US Dollar & Canadian Dollar

The countries associated with the commodity pairs are major exporters of commodities. Both Australia and New Zealand are major exporters of Gold while Canada is a major exporter of Oil.

These Majors and Commodity Pairs (together with their combinations) make up 95% of all Forex transactions. To help you appreciate this number, bear in mind that the daily turnover of the Forex market amounts to roughly three (3) trillion dollars!

Currencies not listed above are traded on a smaller scale; accordingly, they are known as “Minor Currencies” in the Forex world.

The Dollar Index

In response to the “Nixon Shock” of 1971, the US Dollar Index (USDX) was established by the New York Board of Trade in 1973 in order to measure the performance of the US Dollar against a basket of six (6) other currencies. This basket includes the following currencies:

• Canadian Dollar, with a weight of 9.1%
• Euro, with a weight of 57.6%
• Japanese Yen, with a weight of 13.6%
• Pound Sterling, with a weight of 11.9%
• Swedish Krona, with a weight of 4.2%
• Swiss Franc, with a weight of 3.6%

The USDX is a key index, as the US Dollar is one of the “Majors.” A rising index signals increasing US monetary strength and opportunities for profit. It is possible to trade the USDX as:

• Exchange-Traded Funds (ETFs)
• Futures Contracts on ICE
• Mutual Funds
• Options

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Forex Fundamental Analysis

Forex Fundamental Analysis

   May 31, 2013       Unknown

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In this section, we will discuss trading analysis and how it helps traders make investment decisions. The exchange rate of a currency is determined by a variety of factors—economic or political, domestic or international. However, fluctuations in exchange rates are not limited to the factors mentioned above; they can also be influenced by the beliefs of market participants. We call this intrinsic factor the “Market Psychology” of the Forex market.

This is one of the key factors behind market sentiment. Considering all the uncertainties in the market, how do Forex traders make their trading decisions? In order to formulate their trading strategies, traders analyze the market using tools like fundamental and technical analysis.

Fundamental Analysis 

The key concept behind fundamental analysis is the idea that a positive economic outlook strengthens a country’s currency. When a country is politically stable and economically sound, it attracts foreign investment. Therefore, would-be investors have to purchase the country’s currency if they want to invest or start a business there. The surge in investment boosts the demand for a country’s currency and raises its value relative to other currencies.

Accordingly, any major news and announcements—economic developments, social upheavals, Central Bank policies governing interest rates, and the release of earnings reports—will affect the exchange rate of a country’s currency.

Major Economic Events 

Let us look more closely at some of the main economic events that can drive Forex price fluctuations. Take a few moments to familiarize yourself with these terms, for you will come across them often as you trade Forex.

Gross Domestic Product 

The Gross Domestic Product, or GDP, of a country is an indicator that measures how well the economy is doing. GDP calculates the total value of goods and services that were produced in the country over a period. Accordingly, any news about a country’s GDP is always keenly awaited by the financial markets.

Balance of Trade 

A country’s balance of trade shows the relationship between its exports and imports. A trade surplus is indicated by a positive value; a trade deficit is indicated by a negative value. To put it in another way, a trade surplus means a country’s exports were more than sufficient to pay for its imports; a trade deficit means the opposite. The significance of this figure depends on whether we are looking at it from a short-term point of view or a long-term point of view.

Countries with faster GDP growth rates than their trading partners tend to incur trade deficits, as imports normally rise more than proportionally to the GDP growth rate. However, trade deficits only represent a problem to a country’s economy if they occur persistently, in which case the affected country will incur foreign debt and the ensuing interest rate payments. Should the debt be perceived as unsustainable, this will result in a currency crisis.

Consumer Price Index  

The Consumer Price Index, or CPI, is the most commonly used indicator of inflation. It is used to measure the purchasing power of money. Inflation is not good for a country’s economy, as rising prices make it harder for consumers to buy goods.

The Producer Price Index  

In addition to the CPI, the Producer Price Index, or PPI, is also taken into account when measuring the inflation rate. The PPI measures the price of goods that are received by domestic producers. Because the PPI measures prices at the production end, it is a good indicator of future inflation in certain industrial sectors.

Unemployment Rate  

A country’s unemployment rate is another key indicator used in measuring the health of a country’s economy. The unemployment report shows the percentage of the country’s workforce that is unemployed, the number of jobs created, the average working hours per week, and the average earnings per hour. The release of this report usually causes the market to react significantly. This is because a drop in the unemployment rate is regarded as indicative of a strong economy. In Forex, a drop in unemployment means a stronger exchange rate.

Durable Goods Orders  

The Durable Goods Orders, or “Advance Report on Durable Goods Manufacturers' Shipments and Orders,” measures the value of goods with a lifespan of three years or more. This helps to provide an indication of a country’s future industrial activity. A rising trend in durable goods orders is indicative of rising inflation, increased employment, increased corporate profits, and a higher interest rate. This ultimately results in a stronger currency.

Retail Sales Index  

The Retail Sales Index represents goods that are sold within the retail sector. It is used as an indicator of consumer confidence. Due to the fact that retail sales form a large part of a country’s total GDP, a persistent drop in retail sales can mean that a recession is looming. For many traders in the Forex market, a positive consumer confidence indicates that the population is in a buying mood, which could lead to a higher interest rate and a stronger currency.

Real Estate Data  

The “New Residential Construction Report” in the US is a report on homes built by the real estate sector. Forex traders follow this index closely, for the purchase of new homes is a good indication of consumers’ willingness to spend on other goods (appliances, furniture, household items, and garden supplies).

A hike in the interest rate will eventually slow growth in the real estate sector, as mortgages become more expensive. As a result of the fact that the real estate sector has a ripple effect on other sectors of the economy, sluggish sales are usually understood by Forex traders as a sign of a weak economy.

Interest Rates  

Not surprisingly, Forex traders wait for any decision regarding the interest rate by the Central Bank. The reason for this is simple: A higher interest rate translates into more interest payment made on the invested currency (higher profits).

Nevertheless, one should always bear in mind that changes to the interest rate are an indirect result of the cumulative effect of the other majors indicators mentioned above. As such, it is sometimes possible to predict an interest rate decision by the Central Bank by closely monitoring the major announcements and analyzing the forecasts made by Forex market analysts.

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What Are Japanese Candlesticks in Forex

What Are Japanese Candlesticks in Forex

   May 31, 2013       Unknown

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One of the many tools used to analyze the financial markets is the Japanese Candlestick. Candlesticks were created by the Japanese during the 17th century to help them with the trading of rice. Candlesticks became popular among the financial traders of today largely due to the efforts of Steve Nison, who brought this technique of charting to the western world. Because of their form, candlesticks facilitate the reading of prices plotted on charts.

Today, candlesticks are primarily used by technical analysts as visual cues about the sentiment of the market. Using candlesticks, traders are also able to quickly identify and react to changes in the trend.

What Are Candlesticks?

Candlesticks are a type of bar chart that includes a graphical display of a financial asset’s opening and closing prices, its highs and lows. In addition, candlesticks also display whether or not an asset closed below or above its opening price. The diagram below illustrates what a basic candlestick looks like.

From this diagram, we can see that candlesticks actually look like a candle which has been burnt at both ends. The area between both “wicks” is known as the “Real Body”; it is normally displayed as black/white or blue/red. With just a glance, analysts can tell from the colors of the real body if the asset closed higher (white or blue) or lower (black or red) than its opening price.

The areas that are above and below the anareal body (the ‘wick’) are known as the upper shadow and lower shadow, respectively. The shadows indicate the highest (upper shadow) and lowest (lower shadow) traded prices of the asset.

From the diagram above, we can tell that the candlestick on the left side (black candlestick) closed lower than its opening price. The candlestick on the right side (white candlestick) shows that the closing price is higher than the opening price.

Basic Candlestick Patterns

Candlestick patterns can be further classified into several categories:

Spinning Tops

Spinning tops are characterized by long shadows at both ends and by a short real body. Regardless of their color, the short real body indicates very little price variation between the opening and closing prices. Spinning tops indicate an indecisive market.

Marubozu Patterns

Marubozu patterns can be either white or black.

The typical Marubozu pattern has no shadows. The black Marubozu represents a situation in which an asset’s opening price is equal to its high and its closing price is equal to its low. This situation is indicative of a bearish market. It also explains why the candlestick has no shadows. A white Marubozu, on the other hand, indicates a situation in which an asset’s opening price is equal to its low and its closing price is equal to its high (a bullish market).

Doji Patterns

A Doji pattern occurs when an asset’s opening and closing price are the same. This can be seen when the candlestick shows a small or short body, making it look like a thin line. There are typically four main types of Doji Candlestick patterns.

Doji Patterns and Their Implications

When traders detect a Doji pattern on a chart, they usually turn their attention to the candlesticks preceding the pattern.

When a Doji occurs after a series of white Marubozus, this is indicative of weakening market forces on the buyers’ side; that is, when there are not enough buyers in the market to help push up prices. The situation also implies that sellers are possibly looking to jump into the market to drive prices further down.

On the other hand, if the Doji appears after a series of black Marubozus, this indicates that the market forces on the sellers’ side are weakening. In order for prices to fall further, more sellers are necessary. In this situation, buyers will look to pick up a bargain.

Single Candlesticks Patterns

Apart from Marubozus and Doji candlestick patterns, there are also single candlestick patterns to watch out for.

The Hammer and Hanging Man Pattern

Both the Hammer and Hanging Man candlestick patterns look the same with the exception of their color of their real body.

The Hammer

The Hammer is indicative of a bullish reversal pattern, signaling a drop in prices as well as a bottoming out of the market. The long shadow indicates that sellers are pushing the prices of the asset lower.

Hanging Man Pattern

The Hanging Man pattern is the opposite of the Hammer pattern. It is indicative of a bearish trend reversal marked by a strong resistance near the peak of the trend. Here, there are more sellers than buyers in the market. The long shadow of the hanging man indicates strong selling pressure.

Shooting Star and Inverted Hammer

Identical in appearance with the exception of the color of their real bodies, the shooting star and inverted hammer patterns are characterized by long, thin upper shadows with a short real body.

The shooting star pattern is indicative of a bearish trend reversal, showing that an asset opened at the low and rose to a new high but closed at the bottom. It implies that buyers were trying to push prices up but were overwhelmed by selling pressure.

The inverted hammer, on the other hand, indicates a situation opposite from that of the shooting star.

In this situation, prices are falling, but as indicated by the long upper shadow, buyers are attempting to push prices higher. The closing price indicates that despite strong selling pressure, buyers were successful in pushing prices higher.

Other Candlestick Patterns

Conclusion

It is important to note that traders should never base their investment decisions solely on candlesticks. At best, they are just one of the more specialized tools that analysts use to confirm their analysis.

Commonly Asked Questions  

• How can I practice Forex trading without risking my money?
• What are the different types of trading account that UFXMarkets offers?
• What are the advantages of trading Forex with UFXMarkets?

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Leveraging in Forex Trading

Leveraging in Forex Trading

   May 31, 2013       Unknown

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Leverage is part of what makes Forex trading so exciting since it allows Traders to magnify their profits by multiplying the initial investment beyond what they might otherwise be able to afford. That’s why it’s important to check out how much leverage is offered before choosing a Forex Broker.

In essence, Leverage is a loan given by the broker to the traders. The amount of leverage is directly related to the amount that the Trader has invested himself.

Depending on the brokerage and the type of trading account, leverage can be anywhere from 1:50 to 1:1000. On UFXMarkets, the standard leverage is 1:200 although certain assets have 1:50 leverage.

By way of example, imagine that you have deposited $5,000 into your trading account and that your broker is offering you a leverage of 1:200. This means that you can conduct transactions on up to $1,000,000 and potentially make a lot more money that if you had only invested $5,000. Nevertheless, you should always bear in mind that leverage can multiply your losses if the market moves against you. By using leverage, your risk increases just as much as your potential payout.

Using Leverage makes it even more important that Traders take steps to decrease the risk involved in their investments. Many Forex brokers, including UFXMarkets, will automatically close trades if the Equity in a Trader’s account falls below a certain percentage of their account balance. At UFXMarkets, trades will be closed when the Equity Balance reaches 4%.

However, there are other steps that Traders can take on their own. One of the most important is to set a Stop Loss Order. This means that even if you’re not sitting at your computer, you can plan ahead and set the trade to close automatically if it drops below a certain point. The additional advantage of this is that it forces you to decide ahead of time how much you can afford to lose.

In fact, planning ahead is the most important thing to keep in mind when using Leverage on the Forex Market. When you are doing your research and analyzing the market, make sure you understand how much each pip means for you both before and after you’ve taken the Leverage into account. This will help you to set your Stop Loss and Take Profit orders at the appropriate points. Not only will that help you to minimize the larger risk involved with trading with Leverage, it will also help you to take advantage of the added profit that Leverage can bring you.

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What are Forex Charts?

What are Forex Charts?

   May 31, 2013       Unknown

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In technical analysis, we rely on forex charts to help us analyze price fluctuations in the market. Basically, there are three main types of charts that you will come across during the course of your Forex trading that you should know how to read: Line Charts, Bar Charts, and Candlestick Charts.

Line Charts

Line charts give us a quick overview of market trends. They also clearly identify two crucial pieces of information: support and resistance levels. 

Our example clearly shows that the market is trending downward. It is because of their simplicity and clarity in giving a quick overview that this type of chart is popular among Forex traders.

Bar Charts

For more detailed pricing analysis, you can use a bar chart. A bar chart shows the highest and lowest price for a traded currency during the trading day. Instead of appearing as a point on the chart, the pricing data is depicted with a vertical bar. The top of the bar shows the highest price while the bottom of the bar shows the lowest price; the left side of the bar shows the opening price while the right side of the bar shows the closing price. Accordingly, a single bar like the one shown here (Show example Bar Chart 1) represents a trading day. 

A typical bar chart for a trading period would actually look like this:

Candlestick Charts

Although candlesticks charts are similar to bar charts, they are more detailed in the information they display. Just like bar charts, which indicate the high and low price over a certain timeframe with a vertical line, candlestick charts also display the prices in the same manner. The top end of the line is known as the upper shadow while the bottom end of the line is known as the lower shadow—like the “wicks” of a candle.

The block at the center of the candlestick, known as the “real body,” shows the range between the opening and closing price. If the real body is dark or filled, the currency closed lower than the opening price. 

Conversely, an unfilled real body indicates the opposite.

In other words, an unfilled real body indicates bullish price movements while a filled real body indicates a bearish market condition. For an unfilled real body, the top shadow shows the closing price while the bottom shadow shows the opening price. The opposite is true for a filled real body. You will get a clearer picture by studying the example of the candlestick chart we have just shown.

Among the types of charts we have mentioned here, candlesticks are the most popular charts among Forex traders as they are easy on the eyes and contain all the necessary price information. Their simplicity also gives a clearer picture of the trading conditions.

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The History of Forex

The History of Forex

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Forex, or Foreign Exchange, refers to the trading of one currency for another. This was traditionally done in order to facilitate the payment of goods and services in the country from which these goods and services originated. Today, however, currencies are widely traded as an investment vehicle rather than as a way to facilitate trade. To better understand the Forex market, let’s look at its origins.

Barter System

Before Forex history began, prior to the existence of money, surplus goods were traded between different communities through the barter system. For example, if a person had surplus wheat, he could exchange it for something else perceived to have a similar value. Nevertheless, this form of trading had one major disadvantage: namely, it depended on a “coincidence of wants.” The seller of the surplus wheat needed to find someone who not only wanted wheat, but who also possessed something the seller wanted. Accordingly, no trade could take place if there was no “coincidence of wants.” In the absence of a standard measure for the goods to be traded against, a direct swap was often impossible.

Introduction of Money

In order to overcome the limitations of the barter system, traders began to trade their goods and services through an intermediary commodity. This intermediary commodity became the store of value with which traders exchanged their surplus goods and services. With the introduction of commodity money, traders were able to make the market for all other commodities more liquid. Initially, things like cowry shells and beads were used as a medium of exchange. Later, metals like bronze and copper were used.

Precious Metals as Money

As trade developed between the different communities in the ancient world, the use of precious metals like Silver and Gold became the preferred choice for money due to their scarcity and durability.

The Development of Paper Money

As the use of precious metals as money became more widespread, people discovered that carrying heavy coins was unsafe and inconvenient. To get around this, merchants began paying for goods and services with receipts of their deposited money and promissory notes. These were the precursors of paper money.

The Gold Standard

Initially, Gold and Silver were used as the standards to which Fiat money was pegged. However, with the establishment of a new minting ratio in 1717 for Gold and Silver by Sir Isaac Newton, Silver was phased out of circulation. By 1812, the UK had formally adopted the Gold Standard for its monetary system. As the UK was the leading industrialized power during that era, other countries also began adopting the Gold Standard as the basis of their own monetary systems.

The Bretton Woods Conference

The Gold Standard proved to be wholly inadequate in coping with the aftermath of the 1st and 2nd World Wars. This led to the Bretton Woods Conference of 1944, when 44 countries agreed to a new monetary order according to which countries based their monetary systems on the dominant US Dollar.

Abolishment of the Gold Standard

On August 15, 1971, the US terminated the convertibility of the US Dollar to Gold. The “Nixon Shock” resulted in the US Dollar becoming the world’s reserve currency; after that, all currencies pegged to the US Dollar became “free floating.” This shift helped make the Forex market what it is today, with an estimated daily turnover of three (3) trillion dollars.

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Beginners Forex Trading

Beginners Forex Trading

   May 31, 2013       Unknown

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Now, with just a click of the mouse, you, too, can take advantage of the unprecedented liquidity and profit potential of the online financial market. No commissions, no hidden fees, no middlemen—it’s no wonder so many enthusiasts are now choosing to trade online!

OK, how do I get started?

You’ll need to learn a few simple, easy-to-understand terms and concepts before getting started. Take some time to master these basics, for they are the building blocks of any trade.

Forex History

On August 15, 1971, President Nixon announced that the U.S. would no longer exchange gold for U.S. dollars. Five years later, in 1976, nations permanently abolished the gold standard, opening the floodgates to a market that now generates 4 trillion dollars—daily!

What are Pips?

Short for “percentage is point,” a pip is the smallest unit of change in a traded currency pair. Most of the major currency pairs are priced to four decimal points, meaning that the smallest unit of change is the fourth number after the decimal point. By way of example, imagine that you bought the EUR/USD at 1.4652 and sold it at 1.4689. That’s a movement of 0.0037, or 37 pips. You just made money!

What is Leverage?

Also called “trading on margin,” leverage is a loan from your broker. Traders use leverage to control large amounts of a currency pair, a commodity, a stock, or an index with a comparatively small amount of capital. Say, for example, that your broker offers you 100 to 1 leverage: This means that you will be able trade $100 for every dollar in your account.

What are the Major Currencies, Commodities, and Indices?

Currencies	Commodities	Indices
US Dollar: USD, Buck Canadian Dollar: CAD, Loonie Swiss Franc: CHF, Swissy Euro: Euro, Fiber Japanese Yen: JPY, Yen British Pound: GBP, Sterling Australian Dollar: AUD, Aussie	Gold   Oil   Silver	Dow Jones Industrial Average Standard and Poor’s 500 NASDAQ

What is a Forex Spread?

A Forex spread is the amount of pips between the Bid and Ask prices on a trade. For example, if the USD/CAD has a bid price (the buying price) of 0.9854 and an ask price (the selling price) of 0.9850, the spread would be 0.0004, which is equal to 4 pips.

How do I Read Forex Charts?

Forex charts contain all manner of useful information. Your personal trading coach will teach you how to utilize these charts to your trading advantage. For now, keep in mind that the three most crucial pieces of information on any Forex chart are price, time and volume.

What is a Forex Position?

When you open a Forex position, you are either buying or selling an underlying asset: a currency pair, a stock, an index, or a commodity.

What do Stop Loss, Take Profit, and Limit Orders mean?

Stop Loss, Take Profit, and Limit Orders are three of the most useful tools in the Forex market. By using them correctly, you will be able to maximize profits, minimize risk, and better control your trade. All three orders are set up before you place your trade.

When you set up a Stop Loss order, you are telling your broker to close your position should your losses reach a predetermined level.

When you set up a Take Profit order, you are telling your broker to close your position should your profits reach a predetermined level.

When you set up a Limit order, you are telling your broker to buy or sell an underlying asset (a currency pair, a stock, an index, or a commodity) when it reaches a specific price.

How do I Lower Risk?

No matter what your level of trading experience, all traders should obey the first commandment of trading: Trade with a Plan. Our personal trading coaches will help you find the trading strategy that works best for you!

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Most Influential Companies in India

Most Influential Companies in India

   May 30, 2013       Unknown

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While there are many big companies in India, both multinational and national, not all can be called influential or thought leaders. A research conducted for London-based consultancy TLG Partners by Nielsen ranks 20 most successful business Thought Leaders in India.

Tata - 

Rank in 2013: 1

Rank in 2011: 2

Tata group comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals.

Image: Tata's Jaguar's CX75 electric car is unveiled at the LA Auto Show in Los Angeles, California.

Photographs: Lucy Nicholson/Reuters

The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries.

Google

Rank in 2013: 2

Rank in 2011: 3

Google, a California-based company, is well-known for its search engine, online advertising and software products.

Maruti Suzuki

Rank in 2013: 3

Rank in 2011: 4

Maruti Suzuki India Limited is a subsidiary of Suzuki Motor Corporation of Japan. Maruti Suzuki is a leading manufacturer of passenger vehicles in India. Lovingly referred to as the people's car maker; over the past three decades Maruti Suzuki has changed the way people in India commute and travel.

Apple

Rank in 2013: 4

Rank in 2011: Not in Top 20

Apple, a California-based company, is famous for its iMac computers, tablets, smartphones and music player.

Delhi Metro

Rank in 2013: 5

Rank in 2011: Not in Top 20

The unique feature of Delhi Metro is its integration with other modes of public transport, enabling commuters to conveniently interchange from one mode to another. To increase ridership of Delhi Metro, feeder buses for metro stations are operated.

State Bank of India

Rank in 2013: 6

Rank in 2011: 7

The origin of the State Bank of India goes back to the first decade of the 19th century with the establishment of the Bank of Calcutta in Calcutta on June 2, 1806. Three years later the bank received its charter and was re-designed as the Bank of Bengal.

Life Insurance Corporation of India

Rank in 2013: 7

Rank in 2011: 12

Life insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on the Indian soil.

Infosys

Rank in 2013: 8

Rank in 2011: 1

An entrepreneurial adventure that began with seven engineers and $250, Infosys is now a publicly traded company driven by 150,000+ relentless innovators and annual revenues of more than $7 billion.

Facebook
Rank in 2013: 9
Rank in 2011: 8

Facebook, a California-based company, is world's biggest social networking website.


Mahindra & Mahindra
Rank in 2013: 10
Rank in 2011: 10

Founded in 1945 as a steel trading company, it entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, it has diversified into many new businesses in order to better meet the needs of its customers.

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Company Reports Issued By BSE-Axis Expert View

Company Reports Issued By BSE-Axis Expert View

   May 30, 2013       Unknown

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Company Reports Issued By BSE-Axis Expert View

Please find below the Result Update on Tata Motors, Tata Global Beverages, Rural Electrification Corporation, PVR , Power Grid Corporation, NHPC, L&T Finance Holdings, Colgate-Palmolive, Coal India, Cipla and BHEL.

Tata Motors : Strong Q4 indicates what lies ahead! …

Reco : Buy    Cmp : 304  Target : 381

Both standalone and JLR delivered better than expected revenue growth and EBIDTA margin (16.9% for JLR vs. 14.6% est and 2% for standalone vs.1.3% est).

IJLR benefited from better product mix (higher share of new models), regional mix, and favorable forex in Q4. This is in line with our thesis (refer our report – Hitting the right chord dated 13th May 2013) that JLR will continue to surprise on margin front.

Tata Global Beverages : Margin outlook remains muted …

Reco : Hold    Cmp : 145  Target : 145

TGBL’s Q4FY13 performance was mixed with weak revenue momentum of 6% (vs. our estimate of 10%) but profit growth was healthy at 16% (vs. our estimate of 12%). The profitability was aided by improved operating performance in its major markets, cost saving initiatives and favorable impact of foreign exchange.

Rural Electrification Corporation : High RoE despite loan growth, NIM moderation …

Reco : Buy    Cmp : 235  Target : 280

Q4 performance was impacted by sharp decline in yields (~60 bps QoQ) and higher provisioning. Yields were impacted due to (a) 25 bps reduction in lending rate, (b) interest rebate of ~Rs 300 mn in one account, and (c) lesser number of days in the quarter (Rs 800 mn impact). Higher provisioning was due to implementation of 0.25% standard asset provisioning. 

PVR : Synergies with Cinemax to play out in FY14 …

Reco : Buy    Cmp : 340  Target : 410

PVRL’s Q4FY13 performance was in line with our expectations. The company reported revenue ofRs~2.5bn, EBITDA of Rs165mn, and PAT ofRs117mn (consolidated numbers are not comparable YoY /QoQ due to the Cinemax acquisition during the quarter). The company recorded 55mn footfalls for FY13, which is impressive.

Power Grid Corporation : Equity dilution? Clarity likely by H2 …

Reco : Buy    Cmp : 113  Target : 137

PGCIL’s Q4operating performance was weak(EBITDA of Rs 28 bn vs. estimate of Rs 30 bn) as bulk of the asset commissioning (~75% of Rs 78 bn) took place towards the end of quarter.Management maintained its guidance of asset commissioning and capex in FY14 at Rs 180-200 bn and Rs 200 bn respectively. 

NHPC : Double-digit PAT growth in FY14; concerns priced in …

Reco : Buy    Cmp : 19  Target : 23

NHPC is likely to see 11% growth in earnings in FY14 led by: (a) capacity addition of 937 MW, (b) full benefit of 1% additional RoE for storage-based plants (approved by CERC in Feb ’13), and (c) expectation of normal monsoons

(vs. below normal monsoon in FY12). In FY13, the company added only 275 MW of capacity vs. guidance of 1,164 MW. The delayed capacities are likely to get commissioned during FY14.

L&T Finance Holdings : Only piece missing is ‘Banking’ …

Reco : Hold    Cmp : 79  Target : 77

LTFH is one of the front-runners for a new banking license. Banking license is a key target for LTFH as it would widen canvas of business opportunities along with a larger customer base .

RBI has recently released guidelines on new banking licenses and has invited applications to be sent by 1st July 2013. 

Colgate-Palmolive : Weak Q4; P&G’s entry biggest challenge …

Reco : Sell    Cmp : 1,473  Target : 1,110

Colgate disappointed yet again with 6% decline in earnings for Q4FY13 (vs. 14% growth expected) and just 10% earnings growth for FY13 (vs. 15% estimated) as margin (at 21%) continues to be under pressure since its mid-cycle peak of 24% in FY10. We expect entry of P&G in toothpaste (with Oral B) to put margin at further risk. Management too indicated its preparedness in increasing share of voice (SoV) to guard against potential market share erosion.

Coal India : Q4 in line; price hike drives EPS upgrade …

Reco : Buy    Cmp : 327  Target : 434

Coal India’s recent price adjustment to drive ~5% increase in average realization of linkage coal.

The company has announced price increase of 9-11% for low grade coal and a price cut of 12% for high grade coal. The price adjustment is across subsidiaries except Western Coalfields (only 1% price hike as low grade coal prices for the subsidiary already at high levels). 

Cipla : Q4 disappoints; FY14 outlook weak…

Reco : Hold    Cmp : 402  Target : 436

Cipla’s Q4 PAT (Rs 2.7 bn; down 8% YoY) was below our (Rs 3 bn) and Street (Rs 3.3 bn) estimates. This was largely due to decline in India generic business (slowdown in market; branded business grew 11%) and API exports (delay in few tenders).

BHEL : Margin decline ahead…

Reco : Hold    Cmp : 196  Target : 181

BHEL’s Q4FY13 performance was mixed – the company missed on revenue but surpassed our margin expectation. Management refrained from giving any guidance for revenue and margin, but indicated project execution pace in FY14 would be similar to FY13 or slightly better. Management also said power equipment market has bottomed out and will see improvement in ordering in FY14 with rising proportion of EPC orders. However, we remain cautious on revenue growth as 20% of BHEL’s order backlog is slow moving.

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