Wednesday, April 25, 2007

Beginners Forex – Currencies

FOREX (Foreign Exchange) can be described as buying and selling two different currencies simultaneously.


For example : USD /AUD

This is known as a currency pair. The USD is the base currency in our example and the AUD is the counter or quote currency. The base currency is the “basis” for the buy or the sell.

If you buy USD /AUD this simply means that you are buying the base currency and simultaneously selling the quote currency.

In Forex trading we exchange one currency for another in the expectation that the price will change, so that we hope the currency we bought will increase in value compared to the one we sold.

An exchange rate is simply the comparison of one currency valued against another currency. For example, the USD/AUD exchange rate indicates how many U.S. dollars can purchase one Australian Dollar, or vice versa.

The MAJOR Currencies traded are :

* USD (US Dollar)

* EUR (Euro Dollar)

* JPY (Japanese Yen)

* GBP ( British Pound Sterling)

* CHF (Swiss Franc)

* CAD (Canadian Dollar)

* AUD (Australian Dollar)

* NZD (New Zealand Dollar)

Some of these are traded to a lesser degree but are still traded as major currencies in FOREX.

Note the first two letters stand for the country and the last letter is for the name of the currency.

All other currencies are known as MINOR currencies.

For a standardised and convenient list of all currencies go here.

For a more comprehensive list of currencies go to Wikipedia.

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Sunday, April 15, 2007

Would you like to make 400 million yen ?

"In this world nothing can be said to be certain, except death and taxes."
Benjamin Frankin - Works of Benjamin Franklin - 1789.

As plain as the nose on our face nothing changes.
I came across this interesting and slightly amusing article.
But no matter how amusing, she must be a clever
lady, with her use of foreign exchange.
I have only put in excerpts here so for the full article go to
The Yomiuri Shimbun site at the end of the article.
Four hundred million yen converts to 3.3 million US dollars.
My greatest chuckle came from the last line. Just love you Yukiko !

With thanks to -
The Yomiuri Shimbun

'Woman hid 400 million yen made from forex trading'

The Tokyo Regional Taxation Bureau has filed a complaint with the Tokyo District Public Prosecutors Office against a housewife who allegedly failed to pay 130 million yen in taxes by not declaring 400 million yen in income earned through foreign exchange margin transactions over the three years to 2005, sources said Thursday.

Foreign exchange margin transactions are popular among individual investors as they can bring in high profits with a low initial investment. But many investors do not declare their earnings.

This is the first time an individual investor has been accused of not paying his or her taxes on such earnings.


The taxation bureau judged that Ikebe intentionally evaded taxes as she declared most of her earnings from commodity futures dealings, but did not file tax returns for money made through the margin transactions.


In foreign exchange margin dealings, investors buy and sell foreign currencies, making money from the fluctuation in value and interest rate differences.

Since investors can buy or sell foreign currency up to 100 times the value of the invested principal, they can potentially make a fortune--though at great risk.

With the yen lingering at a low level, the foreign exchange margin trading has become popular among investors, with annual transactions thought to total more than 300 trillion yen.

Ikebe refused to comment on the charges, but her husband said she had reflected on her wrongdoing and had revised her income declaration.

(Apr. 13, 2007)


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Thursday, April 12, 2007

Beginners FOREX – Trader comparisons in an historical sense.


“A foundation must be first laid…..It must receive the greatest care, and be made stronger than any other part.” James Allen


The Foreign Currency (FOREX ) market has no centralised physical location or central exchanger although London has the greatest amount of activity. London’s geographic location is fortuitous being between the Asian and American markets.

The process of foreign exchange (FOREX) is electronic through a network of banking systems with companies/corporations, financial institutions, brokers, dealers and individual traders executing currency exchanges.


FOREX is relatively new in its current form where individuals may trade alongside the large corporations. Forex was once a reserve only for the wealthy.

1971 was the pivotal year when exchange rates began their free float on the world stage. Some would disagree with me there citing the incident of 1967 in which, a Chicago bank refused a college professor, Milton Friedman a loan in pounds sterling because he had wanted to use the funds to short the British currency. He had reckoned sterling to be priced too high against the dollar, and wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thereby making a quick profit. The bank did not give him the loan due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold. The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from escaping across the nations, and restricting speculation in the world currencies.

Currency trading (FOREX) continues to escalate in popularity and with the event of the internet new sites proliferate in this exciting but sometimes dangerous (to your pocket) form of earning. This is the new “Golden Goose”!

See the previous post and the quote above …foundation, foundation ……foundation.

Today FOREX , using leverage, allows the small, individual trader and even beginners to take their position alongside even the largest investment banks and corporations (scaled ….of course).

It would be good to read a little of the history of FOREIGN EXCHANGE.

You may do so at Wikipedia which gives a detailed description of the international economic system that kept control of the currencies in such a way as to set fixed exchange rates. HISTORY HERE

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Saturday, April 07, 2007

The Emotions and Psychology of Learning FOREX

While anyone may enter this cash currency exchange market (FOREX) it is recommended that for beginners, a thorough education is gained before using your own dollars. A basic education can be gained via various methods such as online education sites, books, CD’s, seminars, online platforms and the experiences of a mentor. These days there are other methods of going into this business but I shall not cover them here as a basic education is the wisest way to proceed in the beginning before using the even the so called automatic trading. A well laid foundation gives confidence.

Various platforms also provide a very basic education and these may be used to “play” gaining experience in the “buy” and “sell” process. This forms no endorsement of any one platform and online research will reveal many but for ease of use one can be found HERE. It would be useful to familiarise your self with them. They can provide basics in learning and are very handy in practising while playing in real time without using “real” money.

It has been proven that many who go well on the practise run using the platforms can often fall flat once they start using their “own” money. The psychological triggers of using your own money affect performance. It has to be expected that you will have not only gains but losses. We can say you must try to be emotionally stable but with money that can be a difficult ask, so always but always cut your losses and never try to chase or add to a losing position. If you develop a passion for FOREX you can enjoy the game and succeed lucratively whilst enjoying some of the excitement it can ignite.

A book that is recommended is The Psychology of Trading by Brett N Steenbarger , a clinical psychologist who has an intimate knowledge of FOREX being a trader himself.

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