Make Money by being a Forex Loser
You don't have to have a big success rate to make money trading the Forex market. Most success full traders have failure rates of between fifty and twenty five percent. How frequently would you trade if you knew that you make one thousand dollars for every 100 trades you make in spite of getting forty five percent of those trades wrong?
If you add up all the losses made by a successful trader (in dollar terms) the losses are often much larger than the gains or losses made by an unsuccessful trader. Therefore good Forex traders are not only the bigger winners but also the biggest losers (in dollar terms). Trading activity is sometimes much more important to trying to get a hundred percent record all the time.
There are many explainantion of this. Good traders have accepted the fact that losing is part of Forex trading. They therefore process and accept loses in a very positive way. They are not distracted by loses or become emotionally upset. They view their losses as learning experiences and therefore get great value from loses.
They also know that a trader's success rate is only one of the components to a financially rewarding Forex trading career. They know that to succeed it take a balance of many trading skills and factors. These factors include good money management, a positive and objective trading psychology, how much profit you make on gains, how much you lose on losers.
Using this constructive attitide allows them to trade more often (Not talking about over trading) as they are not distracted by trading psychology problems such as depression and paralysis. They are also more confident at increasing the number of lots traded based on their past successes.
Money Making traders
Money Making traders are more active and trade bigger trades. Not only do they make more (in dollar terms) on their winning trades but at the same instance they lose more on their losing trades because their size of of lots are slowly increased.
Because of their ability to not deal with losses very well unsuccessful traders don't risk as much on the deals as they become so cautious. This increases their insecurity and gives them a trading inferiority complex. Most unsuccessful traders are so distracted by their losses that they start their quest for the Holy Grail over and over again every week.
You can save so much energy and time processing your losses positively. Almost all trading techniques can be made to be profitable by adding a number filters anyway (or reversing the trading direction on unsuccessful systems) so the trading system is the easier part.
Poor traders lose cash due to poor (or no) money management and having an inappropriate trading psychology (which includes how losses are accepted by the trader).
Good traders lose money because it is part of trading (the market will always do what the market will do) and they don't lose any sleep about these loses. How well do you deal with your trading knocks?
The biggest difference between successful traders and unsuccessful traders is the ability to deal with losses positively.
Because of their ability to not deal with losses very well unsuccessful traders don't risk as much on the deals as they become so cautious. This increases their insecurity and gives them a trading inferiority complex. Most unsuccessful traders are so distracted by their losses that they start their quest for the Holy Grail over and over again every week.
You can save so much energy and time processing your losses positively. Almost all trading techniques can be made to be profitable by adding a number filters anyway (or reversing the trading direction on unsuccessful systems) so the trading system is the easier part.
Poor traders lose cash due to poor (or no) money management and having an inappropriate trading psychology (which includes how losses are accepted by the trader).
Good traders lose money because it is part of trading (the market will always do what the market will do) and they don't lose any sleep about these loses. How well do you deal with your trading knocks?
The biggest difference between successful traders and unsuccessful traders is the ability to deal with losses positively.
Forex Scalping Forex
What Are The Most Important Forex Trading Strategies
There are many different types of forex trading and there is almost certainly a style you can use to suit your needs. Forex Scalping Forex scalping is where the trader aims to profit from very small price movements. Scalping is often done using high leverage so more substantial returns can be achieved from smaller movements.
Of course, it is important to be aware that leverage will make losses as well as gains bigger. Scalp trades usually last up to a few minutes. It is not uncommon for a scalping trader to make many 10's or even 100's of trades per day. Due to the high volume of trades, finding a broker with very small spreads is absolutely critical to have any chance of success.
Also, some retail forex brokers dislike traders using scalping strategies, so it is a good idea to speak with the broker before you begin scalping with them. Carry Trades A carry trade is where the trader buys a currency with a high base rate, whilst selling a currency to a low base interest rate. Historically New Zealand has had a significantly higher base rate than Japan.
By going long on the pair NZD/JPY, you will earn the difference between the New Zealand bank rate and the Japanese bank rate for each day the position is open. Carry trades are renowned for having severe periods of "unwinding". A carry trade unwind involves a significant dip in carry pairs, often resulting in losses for traders who keep their positions open. It can often be an ideal opportunity to buy a carry pair after a major unwinding.
Day Trading A day trader opens and closes his or her positions during the same trading day. Positions are not held overnight. Day trading is perhaps one of the most difficult trading styles to be successful. It can be extremely stressful and does require a great deal of time spent at the computer waiting for trading setups to arise. Most day traders do lose money.
The odds are stacked against the trader for various reasons including; large quantities of trades are made, often making it difficult to make a profit after paying the broker spreads and the high time commitment of day trading can make it stressful and make you prone to making more mistakes. Another factor is it can be hard to eliminate the random noise when trading short time frames.
However, this said, there are day traders who are successful, but it is usually after a lot of hard work. Swing Trading Swing trading strategies generally involve keeping positions held overnight. Typical swing trades are open between two days to several weeks. Swing trading is less time demanding than day trading and a swing trader will typically make fewer trades than a day trader, thus reducing the broker fees.
There are many different types of forex trading and there is almost certainly a style you can use to suit your needs. Forex Scalping Forex scalping is where the trader aims to profit from very small price movements. Scalping is often done using high leverage so more substantial returns can be achieved from smaller movements.
Of course, it is important to be aware that leverage will make losses as well as gains bigger. Scalp trades usually last up to a few minutes. It is not uncommon for a scalping trader to make many 10's or even 100's of trades per day. Due to the high volume of trades, finding a broker with very small spreads is absolutely critical to have any chance of success.
Also, some retail forex brokers dislike traders using scalping strategies, so it is a good idea to speak with the broker before you begin scalping with them. Carry Trades A carry trade is where the trader buys a currency with a high base rate, whilst selling a currency to a low base interest rate. Historically New Zealand has had a significantly higher base rate than Japan.
By going long on the pair NZD/JPY, you will earn the difference between the New Zealand bank rate and the Japanese bank rate for each day the position is open. Carry trades are renowned for having severe periods of "unwinding". A carry trade unwind involves a significant dip in carry pairs, often resulting in losses for traders who keep their positions open. It can often be an ideal opportunity to buy a carry pair after a major unwinding.
Day Trading A day trader opens and closes his or her positions during the same trading day. Positions are not held overnight. Day trading is perhaps one of the most difficult trading styles to be successful. It can be extremely stressful and does require a great deal of time spent at the computer waiting for trading setups to arise. Most day traders do lose money.
The odds are stacked against the trader for various reasons including; large quantities of trades are made, often making it difficult to make a profit after paying the broker spreads and the high time commitment of day trading can make it stressful and make you prone to making more mistakes. Another factor is it can be hard to eliminate the random noise when trading short time frames.
However, this said, there are day traders who are successful, but it is usually after a lot of hard work. Swing Trading Swing trading strategies generally involve keeping positions held overnight. Typical swing trades are open between two days to several weeks. Swing trading is less time demanding than day trading and a swing trader will typically make fewer trades than a day trader, thus reducing the broker fees.
Long-Term Forex Trading
An Easier Way To Trade The Markets?
One of the main reasons why people are drawn to forex trading is because the volatility of the major currency pairs makes it possible to trade the markets on an intraday basis. Indeed many people generate some decent returns from day trading the forex markets, but in my opinion you should always focus on finding a profitable long-term trading system as well.
In relation to the forex markets, long-term generally refers to trades that last anything from a few hours up to a few days, weeks or months, and in my view if you use the 4 hour charts and upwards, then you are a long-term trader.
I always believe that if you only focus on short-term intraday trading methods, then you are taking undue risks and are missing out on lots of profitable trading opportunities. Of course it's possible to make money trading the 1, 5 and 15 minute charts, for example, and indeed I trade these time frames myself on occasions, but it's much easier to trade the longer time frames.
The reason why it's easier is simply because you avoid much of the random price movements that occur on these shorter time frames. Therefore trends are much more clearly defined and therefore easier to trade.
Furthermore the longer the time frame you use, the greater profits you can make because the trends are obviously so much greater. If you wanted to you could easily make some decent profits trading EMA crossovers (such as the EMA (5) crossing the EMA (20)) on the weekly or monthly charts. The only drawback is that this requires a lot of patience and you need to use quite a large stop loss to allow the position to unwind, which may not be ideal for beginners.
However it is a very profitable way of trading the markets. I personally like to trade the 4 hour and daily charts to trade the major currency pairs. I use the daily chart to identify the current trend and then use the 4 hour chart to find opportunities to enter a position in the same direction as this trend.
This method works extremely well for me and I would recommend it to anyone. It's certainly a lot easier, and generally a lot more profitable, than trying to trade the 1 minute or 5 minute charts, for instance, which whipsaw all over the place.
So to sum up, even if you do like to trade the shorter time frames, I would still think about trying to find a longer term strategy that you can use as well because these longer time frames are so much easier to trade.
One of the main reasons why people are drawn to forex trading is because the volatility of the major currency pairs makes it possible to trade the markets on an intraday basis. Indeed many people generate some decent returns from day trading the forex markets, but in my opinion you should always focus on finding a profitable long-term trading system as well.
In relation to the forex markets, long-term generally refers to trades that last anything from a few hours up to a few days, weeks or months, and in my view if you use the 4 hour charts and upwards, then you are a long-term trader.
I always believe that if you only focus on short-term intraday trading methods, then you are taking undue risks and are missing out on lots of profitable trading opportunities. Of course it's possible to make money trading the 1, 5 and 15 minute charts, for example, and indeed I trade these time frames myself on occasions, but it's much easier to trade the longer time frames.
The reason why it's easier is simply because you avoid much of the random price movements that occur on these shorter time frames. Therefore trends are much more clearly defined and therefore easier to trade.
Furthermore the longer the time frame you use, the greater profits you can make because the trends are obviously so much greater. If you wanted to you could easily make some decent profits trading EMA crossovers (such as the EMA (5) crossing the EMA (20)) on the weekly or monthly charts. The only drawback is that this requires a lot of patience and you need to use quite a large stop loss to allow the position to unwind, which may not be ideal for beginners.
However it is a very profitable way of trading the markets. I personally like to trade the 4 hour and daily charts to trade the major currency pairs. I use the daily chart to identify the current trend and then use the 4 hour chart to find opportunities to enter a position in the same direction as this trend.
This method works extremely well for me and I would recommend it to anyone. It's certainly a lot easier, and generally a lot more profitable, than trying to trade the 1 minute or 5 minute charts, for instance, which whipsaw all over the place.
So to sum up, even if you do like to trade the shorter time frames, I would still think about trying to find a longer term strategy that you can use as well because these longer time frames are so much easier to trade.
The basic principals of Forex
Technical Analysis Basics For Your Trading Success
A great deviation from forex technical drives past fundamental and is practised only to price action and forex technical analysis comprises of an diversity of forex technical disciplines. All one utilised to find the market direction. Technical analysis correlates the motions and consequences of prevailing markets and currency outlooks are short-run. Data acquired on a trading day determines the interest in the markets and informs forex traders of a bull market.
The Forex technical analysis checks movement trends and brings about far-flung "trend is your friend" a phrase amongst Forex traders. The linchpin for maintaining a effective profit level is the selling and buying at the correct time and acknowledging when it is safe to enter or exit a position.
The basic principals of Forex technical is support an resistance which are the guiding points for a chart to depict recurring ups and down pressure. The low point is the support level an while the level of resistance is a high point in the pattern. During the resistance levels, buying and selling is the strategy by the veteran trader.
History frequently repeats itself and generally in the circumstance of price movements is a maxim of the technical analysis. The repetitive nature of price movements is oftentimes granted to the Forex market psychology. Traders have a response to related inputs of the market in special periods of time. The technical analysis applies formulas to break down Forex movements within the market and translates the trends too.
However, many of these charts have been and are still used today and they are still considered very applicable since they illustrate the price movement patterns frequently repeated. This should give you an idea of the Fundamental and Technical Analysis and should be useful to you when you are ready to begin your career as an investor. Just remember - do not invest any funds you do not have or can't afford to invest.
A great deviation from forex technical drives past fundamental and is practised only to price action and forex technical analysis comprises of an diversity of forex technical disciplines. All one utilised to find the market direction. Technical analysis correlates the motions and consequences of prevailing markets and currency outlooks are short-run. Data acquired on a trading day determines the interest in the markets and informs forex traders of a bull market.
The Forex technical analysis checks movement trends and brings about far-flung "trend is your friend" a phrase amongst Forex traders. The linchpin for maintaining a effective profit level is the selling and buying at the correct time and acknowledging when it is safe to enter or exit a position.
The basic principals of Forex technical is support an resistance which are the guiding points for a chart to depict recurring ups and down pressure. The low point is the support level an while the level of resistance is a high point in the pattern. During the resistance levels, buying and selling is the strategy by the veteran trader.
History frequently repeats itself and generally in the circumstance of price movements is a maxim of the technical analysis. The repetitive nature of price movements is oftentimes granted to the Forex market psychology. Traders have a response to related inputs of the market in special periods of time. The technical analysis applies formulas to break down Forex movements within the market and translates the trends too.
However, many of these charts have been and are still used today and they are still considered very applicable since they illustrate the price movement patterns frequently repeated. This should give you an idea of the Fundamental and Technical Analysis and should be useful to you when you are ready to begin your career as an investor. Just remember - do not invest any funds you do not have or can't afford to invest.
About Forex Trading?
What Hours Should I Be Ready For Trading?
Once you have decided to enter the Forex trading world you will find that FX trading has many advantages over other capital markets. Including among others; very low margins, free trading platforms, high leverage and around-the-clock trading.
It is my main concern in this article to let you know what hours you should be ready and focus for start trading, so you can expect the highest profits in your trades, and not just consider that around-the-clock trading means you should randomly trade through out the day.
In short, it is important to know what the best hours to trade are because if you want to find an appreciable number of profitable trades you need to enter the forex market at the best period of time, i.e., when the activity, the volume of transactions, is the highest.
At any given time; somebody, somewhere in the world is buying and selling currencies. As one market closes, another market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day. Giving you 5.5 entire potential trading days.
Forex Trading begins in New Zealand at Sunday 5pm EST, and then is followed by Australia, Asia, the Middle East, Europe, and America in this order and through out the day and through out the week until Friday 4pm EST when the American market closes.
Other important facts every Forex trader should know are: the US & UK markets account for more than 50% of the forex market transactions; Forex major markets are: London, New York and Tokyo. Nearly two-thirds of NY activity occurs in the morning hours while European markets are open. And maybe one of the most important characteristics; Forex Trading activity is heaviest when major markets overlap.
So, the answer to the question; "What hours should I be trading?" is dictated by this last characteristic, you should trade when the major markets overlap. Now, when do they overlap?.
Considering the different time zones of the world and open and close times for Australian, New Zealand, Japan, America and Europe markets. We can arrive to the conclusion that there are two major time gaps when two of the major markets overlap during trading hours.
These hours are between 2 am and 4 am EST (Asian/European) and between 8 am to 12 pm EST(European/N. American).
So if you want to catch the best trading opportunities of the day and you are in the American continent you must be ready to wake up early or go to sleep late some times. Of course things change around the world. What's the best region where to trade from if you can't wake up early?... Maybe the Ukraine.
Once you have decided to enter the Forex trading world you will find that FX trading has many advantages over other capital markets. Including among others; very low margins, free trading platforms, high leverage and around-the-clock trading.
It is my main concern in this article to let you know what hours you should be ready and focus for start trading, so you can expect the highest profits in your trades, and not just consider that around-the-clock trading means you should randomly trade through out the day.
In short, it is important to know what the best hours to trade are because if you want to find an appreciable number of profitable trades you need to enter the forex market at the best period of time, i.e., when the activity, the volume of transactions, is the highest.
At any given time; somebody, somewhere in the world is buying and selling currencies. As one market closes, another market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day. Giving you 5.5 entire potential trading days.
Forex Trading begins in New Zealand at Sunday 5pm EST, and then is followed by Australia, Asia, the Middle East, Europe, and America in this order and through out the day and through out the week until Friday 4pm EST when the American market closes.
Other important facts every Forex trader should know are: the US & UK markets account for more than 50% of the forex market transactions; Forex major markets are: London, New York and Tokyo. Nearly two-thirds of NY activity occurs in the morning hours while European markets are open. And maybe one of the most important characteristics; Forex Trading activity is heaviest when major markets overlap.
So, the answer to the question; "What hours should I be trading?" is dictated by this last characteristic, you should trade when the major markets overlap. Now, when do they overlap?.
Considering the different time zones of the world and open and close times for Australian, New Zealand, Japan, America and Europe markets. We can arrive to the conclusion that there are two major time gaps when two of the major markets overlap during trading hours.
These hours are between 2 am and 4 am EST (Asian/European) and between 8 am to 12 pm EST(European/N. American).
So if you want to catch the best trading opportunities of the day and you are in the American continent you must be ready to wake up early or go to sleep late some times. Of course things change around the world. What's the best region where to trade from if you can't wake up early?... Maybe the Ukraine.
Electronic Trading
courtesy of: Hexaware Technologies.
Solutions
Hexaware offers a comprehensive solution for Electronic Trading catering to front, middle and back office, dramatically improving an organization’s performance in multiple trading environments. The solutions adhere to FIX, SWIFT and other trading protocols. Our dedicated electronic trading/FIX/STP Resource Center has expertise to ensure smooth, consistent and risk-free solution implementations
Electronic Trading Solution
Beneficiaries of our solutions range from Exchanges, vendors, ATS, ECNs, small buy-side firms to large multinational brokerage and fund management companies whom we help by enhancing their industry standards/protocols based trade order management or routing systems.
Hexaware has competencies in providing Implementations, Support and Maintenance services for third party products like Eagle, CR, LD, Misys, Iress, etc.
Value Proposition
End-to-end solutions with defined deliverables:
We provide comprehensive set of solutions covering all the domain services under Electronic Trading across financial institutions to deliver high quality services from implementation to governance for the leading products in the market
Knowledge garnered with experience:
We leverage our knowledge in areas like Risk & Compliance, FIX and STP, gained through prior client experiences to explore areas to meet business objectives
Performance leads to high productivity:
Our solution streamlines FIX integration, while giving users the flexibility to customize transactions on a per-counter-party basis. Organizations can typically reduce time-to-market with additional trading parties, increasing overall ROI
Competitive edge with high value benefits:
We assist CIOs’ to acquire competitive advantage in the marketplace, equipping their organizations with the ability to handle very high trade volumes electronically at increased speeds, with reduced latency and at reduced costs
soure: Hexaware Technologies
An Excellent Resource for Any Investor
Magic Formula investing is based on a simple yet powerful way of searching for undervalued stocks. According to Joel Greenblatt’s The Little Book That Beats The Market, portfolios of stocks selected quantitatively based on MFI criteria have handily outperformed the S&P 500 over the past couple of decades.
Magic Formula Performance vs. S&P 500, 1988-2004
Magic Formula Investor
Researches and recommends individual stocks on the screen, allowing you to make smart picks for your Magic Formula portfolio. Also provides frequent Quick Take reviews of MFI stocks that may interest you.
Small Cap Investor
Detailed research on small cap stocks is hard to find. Large research services don't bother to cover small caps because of a relative lack of interest from their institutional clients. The Magic Formula screen is littered with excellent and cheap small cap stocks, but many of these are quite risky. By using the service's research and opinions, the small cap investor can quickly produce a list of attractive opportunities.
Value Investor
The Magic Formula screen itself is in essence a value based screen. Any stocks researched are by definition cheap in a statistical sense. Adherents to the Warren Buffett school of value investing will appreciate MagicDiligence's competitive position, risks, and management research as they search for those wide moat stocks.
Low Maintenance Investor
This service flags the exceptional Magic Formula stocks as Top Buys - effectively a recommendation of that stock. By following these newsletter style picks, those who want to buy great businesses at cheap prices can simply follow the recommendations and duplicate the service's returns.
Magic Formula Performance vs. S&P 500, 1988-2004
Magic Formula Investor
Researches and recommends individual stocks on the screen, allowing you to make smart picks for your Magic Formula portfolio. Also provides frequent Quick Take reviews of MFI stocks that may interest you.
Small Cap Investor
Detailed research on small cap stocks is hard to find. Large research services don't bother to cover small caps because of a relative lack of interest from their institutional clients. The Magic Formula screen is littered with excellent and cheap small cap stocks, but many of these are quite risky. By using the service's research and opinions, the small cap investor can quickly produce a list of attractive opportunities.
Value Investor
The Magic Formula screen itself is in essence a value based screen. Any stocks researched are by definition cheap in a statistical sense. Adherents to the Warren Buffett school of value investing will appreciate MagicDiligence's competitive position, risks, and management research as they search for those wide moat stocks.
Low Maintenance Investor
This service flags the exceptional Magic Formula stocks as Top Buys - effectively a recommendation of that stock. By following these newsletter style picks, those who want to buy great businesses at cheap prices can simply follow the recommendations and duplicate the service's returns.
Insider Trading
Security analysts gather and compile information, talk to corporate officers and other insiders, and issue recommendations to traders. Thus their activities may easily cross legal lines if they are not especially careful.The CFA Institute in its code of ethics states that analysts should make every effort to make all reports available to all the broker's clients on a timely basis.
Analysts should never report material nonpublic information, except in an effort to make that information available to the general public. Nevertheless, analysts' reports may contain a variety of information that is "pieced together" without violating insider trading laws, under the mosaic theory.
This information may include non-material nonpublic information as well as material public information, which may increase in value when properly compiled and documented.
In May 2007, a bill entitled the
"Stop Trading on Congressional Knowledge Act, or STOCK Act"
was introduced that would hold congressional and federal employees liable for stock trades they made using information they gained through their jobs and also regulate analysts or "Political Intelligence" firms that research government activities.
The bill has not passed.
Traders
Since insiders are required to report their trades, others often track these traders, and there is a school of investing which follows the lead of insiders.This is of course subject to the risk that an insider is making a buy specifically to increase investor confidence, or making a sell for reasons unrelated to the health of the company (e.g. a desire to diversify or pay a personal expense).
As of December 2005 companies are required to announce times to their employees as to when they can safely trade without being accused of trading on inside information.
Trading on Information in General
Not all trading on information is illegal inside trading, however.For example;
While dining at a restaurant, you hear the CEO of Company A at the next table telling the CFO that the company will be taken over, and then you buy the stock, you might not be guilty of insider trading unless there was some closer connection between you, the company, or the company officers.
Illegal Insider Trading
Rules against insider trading on material non-public information exist in most jurisdictions around the world, though the details and the efforts to enforce them vary considerably. The United States is generally viewed as having the strictest laws against illegal insider trading, and makes the most serious efforts to enforce them.
For example;
Illegal insider trading would occur if the chief executive officer of Company A learned (prior to a public announcement) that Company A will be taken over, and bought shares in Company A knowing that the share price would likely rise.
For example;
Illegal insider trading would occur if the chief executive officer of Company A learned (prior to a public announcement) that Company A will be taken over, and bought shares in Company A knowing that the share price would likely rise.
Legal Insider Trading
Legal trades by insiders are common, as employees of publicly-traded corporations often have stock or stock options. These trades are made public in the US through SEC filings, mainly Form Prior to 2001, US law restricted trading such that insiders mainly traded during windows when their inside information was public, such as soon after earnings releases.
SEC Rule 10b5-I clarified that the U.S. prohibition against insider trading does not require proof that an insider actually used material nonpublic information when conducting a trade; possession of such information alone is sufficient to violate the provision, and the SEC would impute an insider in possession of material nonpublic information uses this information when conducting a trade.
However, Rule 10b5-I also created for insiders an affirmative defense if the insider can demonstrate that the trades conducted on behalf of the insider were conducted as part of a preexisting contract or written, binding plan for trading in the future.
For example;
if a corporate insider plans on retiring after a period of time and, as part of his or her retirement planning, adopts a written, binding plan to sell a specific amount of the company's stock every month for the next two years, and during this period the insider comes into possession of material nonpublic information about the company, any subsequent trades based on the original plan might not constitute prohibited insider trading.
SEC Rule 10b5-I clarified that the U.S. prohibition against insider trading does not require proof that an insider actually used material nonpublic information when conducting a trade; possession of such information alone is sufficient to violate the provision, and the SEC would impute an insider in possession of material nonpublic information uses this information when conducting a trade.
However, Rule 10b5-I also created for insiders an affirmative defense if the insider can demonstrate that the trades conducted on behalf of the insider were conducted as part of a preexisting contract or written, binding plan for trading in the future.
For example;
if a corporate insider plans on retiring after a period of time and, as part of his or her retirement planning, adopts a written, binding plan to sell a specific amount of the company's stock every month for the next two years, and during this period the insider comes into possession of material nonpublic information about the company, any subsequent trades based on the original plan might not constitute prohibited insider trading.
Leverage
In finance, leverage (or gearing) is borrowing money to supplement existing funds for investment in such a way that the potential positive or negative outcome is magnified and/or enhanced.It generally refers to using borrowed funds, or debt, so as to attempt to increase the returns to equity.
Deleveraging is the action of reducing borrowings.
Casual Trading and Floor Trading
The principal differences between casual trading and floor trading are in the traders' experience, volume and location. Professional traders usually carry out their trades from the trading floor and carry large volumes.Casual traders do not trade as a profession but as an addition to their everyday lives. They usually trade from their own homes or "day job" offices using an Internet connection and a trading platform software day trading software, which is monitored and regulated by the National Futures Association (NFA).
General Trading Markets
There are three major markets in casual trading. They are -- stocks, foreign exchange (forex) and commodities.
Stock market stock trading or (equity trading) is trading of company stock and derivatives of company stock at an agreed price. Both of these are securities listed on a stock exchange as well as those only traded privately.
In foreign exchange (currency or forex or FX), market traders select a currency pair in which one currency is traded for another. It is by far the largest financial market in the world, with the average daily trade in the global forex and related markets estimated at US$ 3 trillion.
In forex, it is common to use leveraging which enables traders to generate large profits but which is considered quite risky for the inexperienced trader.
Commodities are things for which there is demand, but which are supplied without qualitative differentiation across a given market. Characteristic of commodities is that their prices are determined as a function of their market as a whole.
Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, etc
Stock market stock trading or (equity trading) is trading of company stock and derivatives of company stock at an agreed price. Both of these are securities listed on a stock exchange as well as those only traded privately.
In foreign exchange (currency or forex or FX), market traders select a currency pair in which one currency is traded for another. It is by far the largest financial market in the world, with the average daily trade in the global forex and related markets estimated at US$ 3 trillion.
In forex, it is common to use leveraging which enables traders to generate large profits but which is considered quite risky for the inexperienced trader.
Commodities are things for which there is demand, but which are supplied without qualitative differentiation across a given market. Characteristic of commodities is that their prices are determined as a function of their market as a whole.
Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, etc
Casual Trading
Casual trading is a newly developed variant of financial trading. It consists of the same principles carried out in trading rooms but involves the use of trading platforms that can be operated from the trader's residence.
Casual trading is a general name for all trading actions that are carried out by individuals without the use of a mediator. They can be found in stock exchange, foreign exchange, commodities and other markets.
Casual trading is a general name for all trading actions that are carried out by individuals without the use of a mediator. They can be found in stock exchange, foreign exchange, commodities and other markets.
Magic Formula Investing
The Little Book That Beats The Market
by: Joel Greenblatt
It was a milestone book in value investing. In a short 155 pages that can be read in 2 hours and understood by anyone, Mr. Greenblatt concisely lays out a simple investment strategy where stocks are picked by only 2 factors: pre-tax return on tangible capital (ROTC), and earnings yield. A high ROTC is a sign of a good company. A high earnings yield is a sign of a cheap stock. The "Magic Formula" simply ranks all U.S. stocks by both metrics, adds them together, and buys the highest ranked stocks.
Simple, right? And to simplify things even more, Mr. Greenblatt advises to buy 5-7 stocks every few months, holding them for a year and then selling, replacing with new picks. He even created a website, www.magicformulainvesting.com, that lists all the current stocks by his rankings.
Magic Formula Investing is a term that refers to an investment technique outlined by Joel Greenblatt that uses the principles of value investing.
- Establish a minimum market capitalization (usually greater than $50 million).
- Exclude utility and financial stocks
- Exclude foreign companies (American Depositary Receipts)
- Determine company's earnings yield = EBIT / enterprise value.
- Determine company's return on capital = EBIT / (Net fixed assets + working capital)
- Rank all companies above chosen market capitalization by highest earnings yield andhighest return on capital (ranked as percentages).
- Invest in 20-30 highest ranked companies, accumulating 2-3 positions per month over a 12-month period.
- Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
- Continue over long-term (3-5 year) period.
Barbell Strategy
In finance, a Barbell strategy is formed when a Trader invests in Long and Short duration bonds but does not invest in the intermediate duration bonds.The Short Duration Bond Portfolio strategy invests in high-quality short- and ultra short-term bond funds, floating rate high-income funds, intermediate bond funds, intermediate government income bond funds, and mortgage-backed securities funds.
Bond volatility and risk is managed by using fundamental, technical, and cyclical analysis. Careful monitoring of the money supply and the direction of interest rates is essential for reading developing economic trends and how that might influence bonds. Relative strength comparisons between high-grade bond funds and high-yield bond funds are helpful in identifying dominant trends. Oscillators are especially useful in identifying cyclical influences.
This strategy is ideal for defensive investors focused on capital preservation during difficult economic times. This strategy provides lower volatility risk relative to the U.S. stock market. Consequently, in a weak economic environment, high-grade bonds will rally in value.
The opposite is Bullet strategy.
ECNs and the Stock Market
For stock, ECNs exist as a class of SEC-permitted Alternative Trading Systems (ATS). As an ATS, ECNs exclude broker-dealers' internal crossing networks – i.e., systems that match orders at the broker-dealer using prices from an exchange, without actually sending the order to a public venue.
ECNs and the Currency Market
FX ECNs, like Baxter-FX, provides access to an electronic trading network, supplied with streaming quotes from the top tier banks in the world. The matching engine performs limit check and matches orders in less than 100 milliseconds per trade.
The matching is quote driven and these are the prices that match against all orders. Spreads are discretionary but in general multibank competition creates 1-2 ticks on Majors and Euro Crosses.
The order book is not a routing system that sends orders to individual market makers. It is a live exchange type book working against the best bid/offer of all quotes.
By trading through an ECN, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace.
The banks also reduce their costs as there is less manual..
The matching is quote driven and these are the prices that match against all orders. Spreads are discretionary but in general multibank competition creates 1-2 ticks on Majors and Euro Crosses.
The order book is not a routing system that sends orders to individual market makers. It is a live exchange type book working against the best bid/offer of all quotes.
By trading through an ECN, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace.
The banks also reduce their costs as there is less manual..
Electronic Communication Network
An electronic communication network (ECN) is the term used in financial circles for a type of computer system that facilitates trading of financial products outside of stock exchanges.
The primary products that are traded on ECNs are stocks and currencies. ECNs came into existence in 1998 when the SEC authorized their creation.
ECNs increase competition among trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours.
The primary products that are traded on ECNs are stocks and currencies. ECNs came into existence in 1998 when the SEC authorized their creation.
ECNs increase competition among trading firms by lowering transaction costs, giving clients full access to their order books, and offering order matching outside of traditional exchange hours.
Selling Strategy Indices
These indices have been sold under the following premises which need not be always true,
1. They offer a new asset class that is uncorrelated to conventional asset classes such as equities, bonds and commodities.
2. Compared to hedgefunds and mutual funds, these strategies are very transparent and the client can buy them only if they like the idea behind the strategy.
3. Some types of strategies also benefit from accounting reasons, for instance, in Germany, Notes linked to interest rates can be issued in the Schuldshein format. This enables interest rate linked strategies to be issued as Schuldsheins.
1. They offer a new asset class that is uncorrelated to conventional asset classes such as equities, bonds and commodities.
2. Compared to hedgefunds and mutual funds, these strategies are very transparent and the client can buy them only if they like the idea behind the strategy.
3. Some types of strategies also benefit from accounting reasons, for instance, in Germany, Notes linked to interest rates can be issued in the Schuldshein format. This enables interest rate linked strategies to be issued as Schuldsheins.
Developing and Trading Strategies Indices
Strategy Indices are indices that track the performance of an algorithmic trading strategy. The algorithm clearly and transparently specifies all the actions that need to be taken. The following are examples of algorithms that strategies can be based on.
1) Pairs Trading Strategy. This strategy examines pairs of instruments that are known to be statistically correlated. For example, consider Shell and Exxon. Both are oil stocks and are likely to move together. Knowledge of this trend creates an opportunity for profit, as on the occasions when these stocks break correlation for an instant, the trader may buy one and sell the other at a premium.
2) Fed Funds Curve Strategy This strategy takes a view on the shape of the curve based on the actions of the Fed. In this strategy, one puts on a steepener or flattener, based on whether the Federal Reserve has cut the benchmark rate or raised it. This is based on the conventional wisdom that the curve steepens when the rate is expected to be cut and vice versa.
3) Implied Volatility against Realized Volatility In a number of markets such as commodities and rates, the implied volatility, as implied by straddle prices is higher than the realized volatility of the underlying forward. One way to 'exploit' this is to sell a short expiry straddle on day 1 and delta-hedge the straddle every day. The strategy makes money if at expiry, the premium received, the final value of the straddle and the final value of the forwards is greater than zero.
1) Pairs Trading Strategy. This strategy examines pairs of instruments that are known to be statistically correlated. For example, consider Shell and Exxon. Both are oil stocks and are likely to move together. Knowledge of this trend creates an opportunity for profit, as on the occasions when these stocks break correlation for an instant, the trader may buy one and sell the other at a premium.
2) Fed Funds Curve Strategy This strategy takes a view on the shape of the curve based on the actions of the Fed. In this strategy, one puts on a steepener or flattener, based on whether the Federal Reserve has cut the benchmark rate or raised it. This is based on the conventional wisdom that the curve steepens when the rate is expected to be cut and vice versa.
3) Implied Volatility against Realized Volatility In a number of markets such as commodities and rates, the implied volatility, as implied by straddle prices is higher than the realized volatility of the underlying forward. One way to 'exploit' this is to sell a short expiry straddle on day 1 and delta-hedge the straddle every day. The strategy makes money if at expiry, the premium received, the final value of the straddle and the final value of the forwards is greater than zero.
Correlation Trading
In finance, correlation trading is a strategy in which the investor gets exposure to the average correlation of an index.
The key to correlation trading is understanding the principle of diversification -- that the volatility of a portfolio of securities is less than (or equal to) the volatility of a single security in that portfolio.
The lower the correlation among the individual securities, the lower the overall volatility of the entire portfolio.
To buy correlation, investors can:
a. buy a portfolio of options on the index and sell a portfolio of options on the individual constituents of the index.
b. buy a variance swap on the index and sell the variance swaps on the individual constituents.
Equity Risk
Equity risk is the risk that one's investments will depreciate because of stock market dynamics causing one to lose money.
The measure of risk used in the equity markets is typically the standard deviation of a security's price over a number of periods.
The standard deviation will delineate the normal fluctuations one can expect in that particular security above and below the mean, or average.
However, since most investors would not consider fluctuations above the average return as "risk", some economists prefer other means of measuring it.
The measure of risk used in the equity markets is typically the standard deviation of a security's price over a number of periods.
The standard deviation will delineate the normal fluctuations one can expect in that particular security above and below the mean, or average.
However, since most investors would not consider fluctuations above the average return as "risk", some economists prefer other means of measuring it.
Equity Premium Puzzle
The equity premium puzzle is a term coined in 1985 by economists Rajnish Mehra and Edward C. Prescott. It is based on the observation that in order to reconcile the much higher return on equity stock compared to government bonds in the United States, individuals must have implausibly high risk aversion according to standard economics models.
Similar situations prevail in many other industrialized countries. The puzzle has led to an extensive research effort in both macroeconomics and finance. So far a range of useful theoretical tools and several plausible explanations have been presented, but a solution generally accepted by the economics profession remains elusive.
In addition to explanations of the puzzle, some deny that there is an equity premium at all; notably, following the stock market crashes of the late 2000s recession, there has been no global equity premium over the 30-year period 1979–2009, as observed by Bloomberg.
In the United States, the observed "equity premium" - the risk premium (in fact the historical outperformance) on equity in stocks vs. government bonds - over the past century was approximately 6% per annum.
However, over any one decade, the outperformance had great variability - from over 19% in the 1950s to 0.3% in the 1970s. It is this gap that is much larger than would be predicted on the basis of standard models of financial markets and assumptions about risk attitudes.
To quantify the level of risk aversion implied if these figures represented the expected outperformance of equities over bonds, investors would have to be indifferent between a bet equally likely to pay $50,000 or $100,000 (an expected value of $75,000) and a certain payoff of $51,209 (Mankiw and Zeldes, 1991).
Similar situations prevail in many other industrialized countries. The puzzle has led to an extensive research effort in both macroeconomics and finance. So far a range of useful theoretical tools and several plausible explanations have been presented, but a solution generally accepted by the economics profession remains elusive.
In addition to explanations of the puzzle, some deny that there is an equity premium at all; notably, following the stock market crashes of the late 2000s recession, there has been no global equity premium over the 30-year period 1979–2009, as observed by Bloomberg.
In the United States, the observed "equity premium" - the risk premium (in fact the historical outperformance) on equity in stocks vs. government bonds - over the past century was approximately 6% per annum.
However, over any one decade, the outperformance had great variability - from over 19% in the 1950s to 0.3% in the 1970s. It is this gap that is much larger than would be predicted on the basis of standard models of financial markets and assumptions about risk attitudes.
To quantify the level of risk aversion implied if these figures represented the expected outperformance of equities over bonds, investors would have to be indifferent between a bet equally likely to pay $50,000 or $100,000 (an expected value of $75,000) and a certain payoff of $51,209 (Mankiw and Zeldes, 1991).
Equity investment
Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of the stock rises.
It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created).
When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.
It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created).
When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.
Financial statements
Generally, the call will begin with a company official reading a safe harbor statement to limit the company's liability should the future prove different from that stated in the discussion. Then one or more company officials, often including the Chief executive officer and Chief financial officer will discuss the operational results and financial statements for the period just ended and their outlook for the future.
The teleconference will then be opened for questions by investors, financial analysts, and other call participants. Management will answer many of these questions, although if the data is not available to them they may decline or defer response. Depending on the size and complexity of the company, the difference between actual and expected results, and other factors, the length of the call will vary.
There is no general requirement for how far in advance notice of a call must be given. However, keeping the investor and analyst communities happy is part of management's job, so the call will generally be announced a few days or weeks in advance. If the company has a website, there will probably be a section titled Investor Relations or Investors - this is the most likely part of their website to contain both call schedules and archived past calls.
Many companies are tracked by financial analysts that publish estimates of earnings per share. The company may also provide guidance as to what earnings per share are likely to be. If management knows that its results are going to be significiantly different from its guidance or from analyst expectations, it may choose to make a preannouncement of differing results.
The teleconference will then be opened for questions by investors, financial analysts, and other call participants. Management will answer many of these questions, although if the data is not available to them they may decline or defer response. Depending on the size and complexity of the company, the difference between actual and expected results, and other factors, the length of the call will vary.
There is no general requirement for how far in advance notice of a call must be given. However, keeping the investor and analyst communities happy is part of management's job, so the call will generally be announced a few days or weeks in advance. If the company has a website, there will probably be a section titled Investor Relations or Investors - this is the most likely part of their website to contain both call schedules and archived past calls.
Many companies are tracked by financial analysts that publish estimates of earnings per share. The company may also provide guidance as to what earnings per share are likely to be. If management knows that its results are going to be significiantly different from its guidance or from analyst expectations, it may choose to make a preannouncement of differing results.
Income Statement - earnings per share
Earnings Calls are a teleconference in which a public company discusses the financial results of a reporting period. The name comes from the bottom line numbers in the income statement - earnings per share.The U.S. based National Investor Relations Institute says that 92% of companies represented by their members conduct earnings calls and that virtually all of these are webcast.
Transcripts of calls may be made available either by the company or a third party.
The calls are usually preceded or accompanied by a press release containing a summary of the financial results, and possibly also by a more detailed filing under securities law.
Earnings calls usually happen, or at least begin, while the stock market on which the company's shares are traded is closed to trading, so that all investors will have had a chance to hear management's presentation before trading in the stock resumes.
Electronic trading
Electronic trading, sometimes called etrading, is a method of trading securities (such as stocks, and bonds), foreign currency, and exchange traded derivatives electronically.
It uses information technology to bring together buyers and sellers through electronic media to create a virtual market place. NASDAQ, NYSE Arca and Globex are examples of electronic market places.
Exchanges that facilitate electronic trading in the United States are regulated by either the Securities and Exchange Commission or [[CFTC, and are generally called electronic communications networks or ECNs.
Etrading is widely believed to be more reliable than older methods of trade processing, but glitches and cancelled trades do occur.
In modern times, financial institutions are facing unprecedented challenge in the form of exponential growth in trading volumes, order handling, trade routing and other trade applications. Scalable, cutting edge, feature rich Electronic Trading software solutions that include robust architectures are required to address these challenges. Financial industry participants trade with FIX and other related protocols, to ensure that their trading practices enhance their abilities to achieve the optimum level of straight through processing capabilities and comply with the stipulated regulatory norms. .
It uses information technology to bring together buyers and sellers through electronic media to create a virtual market place. NASDAQ, NYSE Arca and Globex are examples of electronic market places.
Exchanges that facilitate electronic trading in the United States are regulated by either the Securities and Exchange Commission or [[CFTC, and are generally called electronic communications networks or ECNs.
Etrading is widely believed to be more reliable than older methods of trade processing, but glitches and cancelled trades do occur.
In modern times, financial institutions are facing unprecedented challenge in the form of exponential growth in trading volumes, order handling, trade routing and other trade applications. Scalable, cutting edge, feature rich Electronic Trading software solutions that include robust architectures are required to address these challenges. Financial industry participants trade with FIX and other related protocols, to ensure that their trading practices enhance their abilities to achieve the optimum level of straight through processing capabilities and comply with the stipulated regulatory norms. .
Direct public offering
A company pursues a direct public offering (DPO) to raise capital by marketing its shares directly to its own customers, employees, suppliers, distributors and friends in the community.
DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where a company's shares are sold to the broker's customers and prospects.
Direct public offerings are considerably less expensive than traditional underwritten offerings. Additionally, they don't have the restrictions that are usually associated with bank and venture capital financing.
On the other hand, a DPO will typically raise much less than a traditional offering.
DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where a company's shares are sold to the broker's customers and prospects.
Direct public offerings are considerably less expensive than traditional underwritten offerings. Additionally, they don't have the restrictions that are usually associated with bank and venture capital financing.
On the other hand, a DPO will typically raise much less than a traditional offering.
Direct access trading
Direct access trading is a technology which allows stock traders to trade directly with market makers or specialists, rather than trading through stock brokers.
Direct access trading systems use front-end trading software and high-speed computer links to stock exchanges such as NASDAQ, NYSE and the various Electronic Communications Networks.
Direct access trading system transactions are executed in a fraction of a second and their confirmations are instantly displayed on the trader's computer screen.
This is in contrast to a typical conventional online trader who requires seconds or minutes to execute a trade.
Direct access trading systems use front-end trading software and high-speed computer links to stock exchanges such as NASDAQ, NYSE and the various Electronic Communications Networks.
Direct access trading system transactions are executed in a fraction of a second and their confirmations are instantly displayed on the trader's computer screen.
This is in contrast to a typical conventional online trader who requires seconds or minutes to execute a trade.
After-hours trading
After-hours trading is stock trading that occurs outside the traditional trading hours of the major exchanges, such as the New York Stock Exchange and the Nasdaq Stock Market.
Since 1985 the regular trading hours have been from 9:30 a.m. to 4:00 p.m. Eastern Time.
Trading outside these regular hours is not a new phenomenon, but it has generally been limited to high net-worth investors and institutional investors, such as mutual funds.
The emergence of private trading systems, known as electronic communication networks, or ECNs, has allowed individual investors to participate in after-hours trading.
After Hours trading on a day with a normal session is 4:15 - 8 p.m. EST
Since 1985 the regular trading hours have been from 9:30 a.m. to 4:00 p.m. Eastern Time.
Trading outside these regular hours is not a new phenomenon, but it has generally been limited to high net-worth investors and institutional investors, such as mutual funds.
The emergence of private trading systems, known as electronic communication networks, or ECNs, has allowed individual investors to participate in after-hours trading.
After Hours trading on a day with a normal session is 4:15 - 8 p.m. EST
Automated trading system
An automated trading system (ATS) is a computer trading program that automatically submits trades to an exchange.
An example of an early ATS is Instinet.
This allows traders to input trades invisibly to the market, with a crossing price determined by a VWAP measure. Instinet also enables anonymous conversations and negotiations to take place between bidders, and so reduces informational costs to the participants.
An example of an early ATS is Instinet.
This allows traders to input trades invisibly to the market, with a crossing price determined by a VWAP measure. Instinet also enables anonymous conversations and negotiations to take place between bidders, and so reduces informational costs to the participants.
Automated trading platform
An automated trading platform is used both by trading system publishers, and the investors who subscribe to them. Using it, traders can track marked-to-market performance using several different metrics for verifiability.
1. In addition to tracking performance of these "black box" systems, the automated trading platform also provides a venue to permit the system's buy/sell signals to be executed to the subscriber's brokerage account automatically. Some of the automated trading platforms are completely broker-agnostic and permit an interface with almost any brokerage firm.
The immediate benefit to investors is that it allows them to have insight into various trading systems that are on offer, which may make claims of profitability.
The platform "allows people or institutions that believe they can outperform the market to prove to the public in a verifiable way that they indeed can do so."
2. In the second stage of use, traders subscribe to one or more of these trading methodologies, and have the trades that are specified by the system executed automatically in a brokerage account.
Although turning over decisions and execution to a "black box" system requires the investor to give up an element of control, the automated trading platform does serve the purpose of allowing the trader to spend more time on strategy and on studying trends, rather than executing those strategies manually.
1. In addition to tracking performance of these "black box" systems, the automated trading platform also provides a venue to permit the system's buy/sell signals to be executed to the subscriber's brokerage account automatically. Some of the automated trading platforms are completely broker-agnostic and permit an interface with almost any brokerage firm.
The immediate benefit to investors is that it allows them to have insight into various trading systems that are on offer, which may make claims of profitability.
The platform "allows people or institutions that believe they can outperform the market to prove to the public in a verifiable way that they indeed can do so."
2. In the second stage of use, traders subscribe to one or more of these trading methodologies, and have the trades that are specified by the system executed automatically in a brokerage account.
Although turning over decisions and execution to a "black box" system requires the investor to give up an element of control, the automated trading platform does serve the purpose of allowing the trader to spend more time on strategy and on studying trends, rather than executing those strategies manually.
Principles of the Trading System
The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games.
Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:
Non-Discrimination.
It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members.
"Grant someone a special favour and you have to do the same for all other WTO members."
National treatment means that imported and locally-produced goods should be treated equally (at least after the foreign goods have entered the market) and was introduced to tackle non-tariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods).
Reciprocity.
It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.
Binding and enforceable commitments.
The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.
Transparency.
The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports.
Safety valves.
In specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneconomic objectives; articles aimed at ensuring "fair competition"; and provisions permitting intervention in trade for economic reasons.
There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only ten members. The body also has several groups relating to textiles.
Fundamental Analysis
A currency is used as the basis of trade for general goods and services within an economy. Usually, each country has its own currency, and exchange with the legal tender is only valid in the respective country. However, there are groups of nations that band together and use a single currency between the members (e.g. the Euro-zone).
Currency value is most broadly based on supply and demand, although some developing countries peg the value to a more stable country's currency or to a basket of currencies/investment vehicles
For a currency trader, fundamental analysis focuses on key underlying economic and political factors to determine the direction of a currency's value. There are a number of fundamental indicators traders may follow that reflect how an economy is changing and gleam insight into Forex market prices to come.
Currency value is most broadly based on supply and demand, although some developing countries peg the value to a more stable country's currency or to a basket of currencies/investment vehicles
For a currency trader, fundamental analysis focuses on key underlying economic and political factors to determine the direction of a currency's value. There are a number of fundamental indicators traders may follow that reflect how an economy is changing and gleam insight into Forex market prices to come.
Example of a Trade
In an example of a trade, an investor wanting to buy 200 shares—also known as two round lots, of 100 shares each—of IBM stock will telephone or e-mail the order to a brokerage firm. This communication is normally made to an individual called a stockbroker.
The investor might desire to buy the shares at the market, or current, price. On the other hand, the investor may choose to pay no more than a set amount per share. The brokerage firm then contacts one of its floor brokers at the NYSE, the exchange on which IBM stock is traded.
The floor broker then goes to IBM’s stock post—that is, the particular spot on the trading floor where IBM stock is traded. Here other floor brokers will be buying and selling the same stock. The activity around the post constitutes an auction market with transactions typically communicated through hand signals.
The most important person at the post is a broker-dealer called a specialist. The job of the specialist is to manage the auction process. The specialist will actually execute the trade and inform the floor broker of the final price at which the trade has been executed.
For this service, the investor will pay the original broker a commission, either as a flat fee or as a percentage of the purchase price.
The investor might desire to buy the shares at the market, or current, price. On the other hand, the investor may choose to pay no more than a set amount per share. The brokerage firm then contacts one of its floor brokers at the NYSE, the exchange on which IBM stock is traded.
The floor broker then goes to IBM’s stock post—that is, the particular spot on the trading floor where IBM stock is traded. Here other floor brokers will be buying and selling the same stock. The activity around the post constitutes an auction market with transactions typically communicated through hand signals.
The most important person at the post is a broker-dealer called a specialist. The job of the specialist is to manage the auction process. The specialist will actually execute the trade and inform the floor broker of the final price at which the trade has been executed.
For this service, the investor will pay the original broker a commission, either as a flat fee or as a percentage of the purchase price.
Stock Trading
Stocks are shares of ownership in companies. People who buy a company’s stock may receive dividends (a portion of any profits). Stockholders are entitled to any capital gains that arise through their trading activity—that is, to any gain obtained when the price at which the stock is sold is greater than the purchase price.
But stockholders also face risks. One risk is that the firm may experience losses and not be able to continue the payment of dividends. Another risk involves capital losses when the stockholder sells shares at a price below the purchase price.
A company can list its stock on only one major stock exchange. However, options on its stock may be traded on another exchange. Where a stock is traded depends on both the requirements of the exchange and the decision of the corporation. Each exchange establishes requirements that a company must meet to have its stock listed.
For example, to be listed on the New York Stock Exchange, a company, among other things, must have a minimum of 1.1 million shares outstanding with a market value of at least $100 million. But not all companies that satisfy NYSE requirements apply to have their stock traded on this exchange.
Intel and Dell Computer, two very large and well-known corporations, satisfy NYSE requirements but choose instead to have their shares traded on the over-the-counter Nasdaq.
The different exchanges tend to attract different kinds of companies. Smaller exchanges, such as the Nasdaq, typically trade the stock of small, emerging businesses, such as high-tech companies.
In the United States, the AMEX lists small to medium-sized businesses, including many oil and gas companies. The NYSE primarily lists large, established companies
But stockholders also face risks. One risk is that the firm may experience losses and not be able to continue the payment of dividends. Another risk involves capital losses when the stockholder sells shares at a price below the purchase price.
A company can list its stock on only one major stock exchange. However, options on its stock may be traded on another exchange. Where a stock is traded depends on both the requirements of the exchange and the decision of the corporation. Each exchange establishes requirements that a company must meet to have its stock listed.
For example, to be listed on the New York Stock Exchange, a company, among other things, must have a minimum of 1.1 million shares outstanding with a market value of at least $100 million. But not all companies that satisfy NYSE requirements apply to have their stock traded on this exchange.
Intel and Dell Computer, two very large and well-known corporations, satisfy NYSE requirements but choose instead to have their shares traded on the over-the-counter Nasdaq.
The different exchanges tend to attract different kinds of companies. Smaller exchanges, such as the Nasdaq, typically trade the stock of small, emerging businesses, such as high-tech companies.
In the United States, the AMEX lists small to medium-sized businesses, including many oil and gas companies. The NYSE primarily lists large, established companies
Transaction on the Stock Exchange
Most security trading is accomplished through brokerage firms. Persons and organizations that wish to purchase securities will call upon the brokerage firm to execute their transaction. To actually conduct the transaction on the stock exchange, the brokerage firm must have a membership, called a seat, on the exchange.
Stock exchanges limit the number of available seats, and the cost of a seat on an exchange is high. During 2002 the price of a seat on the NYSE ranged from $2 million to $2.6 million. Brokerage firms that have seats not only can complete trades on the floor of the exchange but also have the right to vote on exchange policy.
Brokerage firms are willing to pay high prices for exchange seats because of the profit opportunities available from membership in an exchange. Profits can be generated from the fees charged for the execution of trades as well as from trading on the firm’s own account. There are, however, risks associated with brokerage firm activity.
For example, brokerage firms can lose money if their clients default on margin loans (loans obtained to purchase securities).
Stock exchanges limit the number of available seats, and the cost of a seat on an exchange is high. During 2002 the price of a seat on the NYSE ranged from $2 million to $2.6 million. Brokerage firms that have seats not only can complete trades on the floor of the exchange but also have the right to vote on exchange policy.
Brokerage firms are willing to pay high prices for exchange seats because of the profit opportunities available from membership in an exchange. Profits can be generated from the fees charged for the execution of trades as well as from trading on the firm’s own account. There are, however, risks associated with brokerage firm activity.
For example, brokerage firms can lose money if their clients default on margin loans (loans obtained to purchase securities).
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