Forex Secrets ? Delusion No1 ? Forex Currency Rate And Economic Factors Impact On Exchange Rate
It?s a fact that Forex trading became a highly preferable investment method in the last decade. Combined with the internet as a global 24/7 network forex is reachable to everyone. I?ll not give you about the basic explanation of forex trading in this article. I?m sure that i don?t have to tell what forex trading is. People which familiar or have an interest in an investment know forex already. Don?t they?
Forex trading is basically just an investment As any other investment, there are always benefits and risks beyond forex trading. Many people/organization, especially forex brokers, its affiliate and those who earn their income by providing some forex related services says that forex trading have so much advantages compared to other investments; Forex is easy, with its non-stop 24 hours market, its wide range adjustable leverage, its automated trading platform, its offered better opportunity for income resource, and many more ? you name it as much as you want to? Blinded by its ?beautiful dream imagination?, many small/personal traders, especially for the new ones forgot that forex trading is basically still an investment program. Traders should never have a thought that forex trading is an income resource.
The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller up front when the foreign currency option is initially purchased. Once the premium is paid, the foreign currency option holder has no other financial obligation (no margin is required) until the foreign currency option is either offset or expires. On the expiration date, the call buyer can exercise his or her right to buy the underlying foreign currency spot position at the foreign currency option?s strike price, and a put holder can exercise his or her right to sell the underlying foreign currency spot position at the foreign currency option?s strike price. Most foreign currency options are not exercised by the buyer, but instead are offset in the market before expiration. Foreign currency options expires worthless if, at the time the foreign currency option expires, the strike price is ?out-of-the-money.? In simplest terms, a foreign currency option is ?out-of-the-money? if the underlying foreign currency spot price is lower than a foreign currency call option?s strike price, or the underlying foreign currency spot price is higher than a put option?s strike price. Once a foreign currency option has expired worthless, the foreign currency option contract itself expires and neither the buyer nor the seller have any further obligation to the other party.
The Forex Option Seller ? The foreign currency option seller may also be called the ?writer? or ?grantor? of a foreign currency option contract. The seller of a foreign currency option is contractually obligated to take the opposite underlying foreign currency spot position if the buyer exercises his right. In return for the premium paid by the buyer, the seller assumes the risk of taking a possible adverse position at a later point in time in the foreign currency spot market. Initially, the foreign currency option seller collects the premium paid by the foreign currency option buyer (the buyer?s funds will immediately be transferred into the seller?s foreign currency trading account). The foreign currency option seller must have the funds in his or her account to cover the initial margin requirement. If the markets move in a favorable direction for the seller, the seller will not have to post any more funds for his foreign currency options other than the initial margin requirement. However, if the markets move in an unfavorable direction for the foreign currency options seller, the seller may have to post additional funds to his or her foreign currency trading account to keep the balance in the foreign currency trading account above the maintenance margin requirement.
We should keep in mind deeply that forex trading is an investment. There is no way that we could be a master in some investment that we?ve just dive in to for days or weeks. We have to do it by the right way, and don?t forget to eliminate your rush in the goal achievement. You will surely find your best trading system that suits you, I guarantee that. But it would cost you some time for several trial and error system testing while you developing your experience in forex trading.
The country?s interest rate, since the higher the rate, the greater number of investors is eager to invest into the country?s economy and hence into national currency strength. Rate of inflation (the higher the rate, the quicker the National Bank will hike the interest rate). With this assumption, the CPI constitutes a key factor. Money supply growth in domestic market, which fact brings about the inflation, leading to the interest rate hike. The country?s gold and currency reserve assets. Variation dynamics correlation of: balances of payment, trade balance, state budget, gross domestic product (GDP), etc. Trade and industry dynamics (industrial production, industrial orders, DGO, capacity utilization, retail sales, etc.) Construction statistics (construction spending, new home sales, housing under construction, building permits, etc.) Labor statistics (unemployment rate, new jobs, etc.) Society investigations (consumer confidence, consumer sentiment, purchase managers and service managers sentiment, etc.) To be considered additionally are the country?s political stability and tranquility (clearly, any political, natural and other cataclysms are sure to turn investors nervous making them withdraw the investments from the country, thus weakening its national currency). And with the currency being the national economy derivative, changes in economic data will inevitably result in the above currency rate movement. Conclusions:
Progress in economy results in the currency exchange rate rally. Decrease in economic indicators leads to the national currency rate decline. To sum it up, critical economic and political news (whose calendar is issued in advance and is familiar to any trader) constitute a standing factor giving rise to misbalance and causing the currency rate fluctuations. In anticipation of important economic and political news FOREX pair crawl to the rates as inspired by the estimates (?rumored trade?), whereas upon actual news there occurs a pulse motion of FOREX pairs in accordance with the scheme below; Forex rate grows if actual news are better than the estimated one; Forex rate declines if actual news are worse than the estimated one. ARE YOU FAMILIAR WITH THESE ABC BASICS OF STUDYING FOREX? Do you accept that one can earn money by way of using these basics, known to every trader? Then why, having absorbed these economic axioms, 90% of Forex traders in the world are losers rather than winners. Where is the delusion of the above ABC truth, nudging traders towards losses? Let us perform sort of point-by-point analysis.
Forex Trading-Is This Your Ticket To Financial Freedom And Personal Wealth Basics of Trading Forex Currencies and Why It Is So Popular
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