Starting to Trade FOREX
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Transcript of Starting to Trade FOREX
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Starting to Trade FOREX
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Risk Warning• High Risk Investment• Trading foreign exchange on margin carries a high level of risk,
and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
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How It Works
• Retail: Swaps (leveraged) • Large banks: Flows1. Identify rates/risk
2. Contract written with
buyer (BB)
EURUSD 1.5000 Sell 10k EURUSD
3. Close contract, repay liquidity
provider
Re-buy 10k EURUSD at 1.4000Profit 10k*50c = USD5k
1. Need to buy US T-bills for
safety
2. Sell Euros to buy Dollars
3. Buy US bonds
EURUSD 1.5000 Sell 10k EURUSD
Wait for next selling opportunity, get some interest
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FOREX and Equities
Advantages• Able to long and short
market• Large number of
correlations• Extremely liquid, good for
scalping/algos• RollS/RollB• 5, 6 pairs• Much easier to analyze
Disadvantages• Much higher risk• Almost always wrong• Easy to buy into losses
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Important
1. Manage risk2. Identify macroeconomic patterns3. Check opportunities of each pair4. Know your stops and limits
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What Affects Exchange Rates?
• Risk• Rate expectations• Repatriation
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RISK ON/RISK OFF
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Risk currencies
Safety Currencies• USD • JPY• (CHF)
• Risk CurrenciesCommodities Bloc– AUD, NZD, CAD
Anti-dollar– EUR, GBP
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Greece, the Euro and the S&P500
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Risk Correlation
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Risk Correlation
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Liquidity Flows
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RATES AND RATE EXPECTATIONS
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USDJPY and Yields
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Risk-driven Interest and Exchange Rates
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Rate Expectations
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During Rate Decisions
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REPATRIATION
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Post-Sendai USDJPY
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What to Remember
• Short term: Risk appetite• Medium term: Rates outlook• Long term: Structural changes/risk
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LOOKING AT CHARTS