Prices Are Relative in Forex Trading

Let’s pick up where we left off in the last article on the basic happenings of the foreign exchange market. We mentioned that people buy and sell currencies for one another, but we need to establish how these prices are set.

In forex, prices for currencies are relative to one another.

How forex prices work

It’s hard to imagine giving a price for a currency in another currency. That just doesn’t make sense; it’s much easier to understand currency value as what we can exchange it for.

We can easily know that 1.25 US Dollars is enough to buy a soda–a Coca-Cola. However, how can traders know that $1.25 is equal to 1 Euro, .80 Pounds, or 10 Mexican Pesos?

It’s the economy!

In many ways, the value of each currency is tied to the performance of the economy it represents.

When the American economy is performing well, the dollar is likely to rise in value against other currencies. Thus, holding dollars is very much like investing in every person, company, and government in America, since the value of the dollar is dependent on everyone’s success.

Isn’t it great we all benefit from the success of everyone else? A strong economy almost always leads to a stronger national currency.

Taking that point to its logical conclusion, it would make sense that when the US economy is strong, so too is the dollar. Thus, the dollar’s value rises against other, weaker economies. A new perspective: if the US economy is growing and Mexico was experiencing a recession, the US dollar would likely be a stronger investment than the Mexican Peso. The market would reflect this, and it would take more Pesos to buy a dollar.

Investors who notice this trend can profit by speculating on the changes in currency values. If the dollar is soon to rise against the Peso, a trader could exchange Pesos for dollars through a currency broker. This trader would make a profit after the exchange rates change in his or her favor.

For example: Assume that we borrow 10 Mexican Pesos and trade them for 1 US Dollar.

If the currency rates change so that now it takes 11 Pesos to buy 1 US Dollar, we can exchange our US Dollar for 11 pesos, pay back the 10 pesos we borrowed, and enjoy a 1 peso profit. That one peso profit, at the current exchange rate of 11:1, is worth $.09. We made a 9% return on our dollars!

This is the very simple core of the foreign exchange market. When traders speak of buying and selling currencies, they’re really just talking about swapping one currency for another to make a profit. Of course, the full story is slightly more complicated, but keep reading and we’ll share all the nitty-gritty details.

What is Forex?

To put it in very simple terms, the foreign exchange market is a currency market, where investment banks, institutions, commercial companies, and individual investors go to buy, sell, and ultimately swap one currency for one another.

Different currencies are used in different places around the world. In the United States, we use the US dollar, which is our currency. In Australia, the official currency is the Australian Dollar. In Great Britain, they use the Pound. Europe uses the Euro.

All of these currencies have a different value, which is dependent on other currencies.
So what is forex?

Forex is the foreign exchange market. The foreign exchange market is a virtual market where investors buy and sell currencies for other currencies.

If you’ve traveled out of your home country before, you’ve interacted with the foreign exchange market and you didn’t even know it.

If you were to travel from the United States to Canada, you would trade your US Dollars for Canadian dollars at a bank, airport teller, or any currency exchange service. In trading your US dollars for Canadian Dollars, you participated on the global forex market.

But we’re just small fry in this massive global market.

You see, we’re just individuals. We don’t have tons and tons of money like banks, institutional investors, hedge fund managers, or mega-corporations. In comparison to these oversized professionals, we’re merely a drop in the bucket.

Mega-corporations rely on the foreign exchange market to trade in their currencies that they earn all around the world. Walmart, one of the largest retail companies in the world, has stores in 44 countries around the globe, even though it is based in the United States.

When it earns money in France, the company isn’t paid in dollars. Walmart gets paid in Euros. The company has to trade its Euros in for dollars to account for profits and losses.

Naturally, Walmart participates in the foreign exchange market to convert its foreign currencies into its home currency.

You Don’t Have to Be Big to Trade Forex

But you don’t have to be a Fortune 500 company to trade on the foreign exchange market. In fact, many traders make money in foreign exchange in buying and selling currencies for a profit. We’ll get to this in the following tutorials, but the point needs to be made that:

There are many reasons currencies are swapped for one another
You don’t have to be a millionaire or billionaire to trade forex

By now you’re probably wondering how we establish a price for money. We’ll get to that in the next tutorial…

forexonlinelearning

Why Rewards Credit Cards?

Why Rewards Credit Cards?

We all already use credit cards. They’re a part of our daily lives. If you’re like most people, chances are, you even have more than one. Given that we’re all already using credit cards in our daily lives, rewards cards are an optimal means to get extras out the plastic cards we use unthinkingly. Rewards cards provide all the convenience and benefits of a typical credit card with the chance to capitalize on free flights, hotels, meals and more.

Creditors offer rewards cards for every lifestyle. Frequent flyer mile cards are the most well known rewards credit cards. For regular travelers, miles cards offer a great means of accruing free flights and travel benefits. For those that stay closer to home, many rewards programs offer points that can be redeemed for gift cards, merchandise and services such as rental cars or hotel stays. There’s always the option of a cash back rewards card too—they typically refund 1% of all purchases you make with the card.

Rewards benefits and limitations vary from card to card, but there are some disadvantages of rewards cards to consider. Many rewards cards require that you pay an annual fee. Additionally, rewards cards don’t typically offer the low APRs of standard cards. Be sure to read the fine print before you commit to any rewards credit card.

On the whole though, rewards cards are a sound alternative to typical credit cards. We’ve taken a look at leading rewards credit cards and compiled our top ten picks. With side-by-side feature comparisons and in-depth reviews, we’re confident you can find the card that is right for you.
What to Look for in a Rewards Credit Card

Depending on your credit rating, lifestyle and desired rewards type, there are many features to consider as you select the best rewards credit card. For our top ten rewards card selections, we considered the benefits of their respective awards programs first and foremost. Our reviews also account for interest rates, annual fees, customer support and extras. A good rewards card should excel in the following categories:

Rewards Features: Rewards programs typically operate on a point-based system where one dollar spent earns you one rewards point. A good rewards card will offer bonuses such as double points at selected retailers or on certain types of purchases. Expiration dates and point limits are important elements of a rewards program.

APR
While rewards programs are a nice bonus, we still expect rewards cards to offer reasonable interest rates to applicants with good credit ratings.

Fees/charges
Many rewards programs charge annual fees. We looked for rewards credit cards with low or no annual fees. Further, we considered international transaction fees, late fees and other fees for our rankings.

Key features
Trustworthy creditors provide cardholders with zero liability coverage in the event of unauthorized transactions. We also expect to see good online banking options, free account alerts and travel insurance benefits with rewards credit cards.

Customer support
From telephone customer support to emergency card replacement. Good customer support is a must.

U.S. futures sharply lower as Fed rally short-lived; Dow drops 1.5%

Forexpros – U.S. stock futures pointed to a broadly lower open on Wednesday, after rallying sharply the previous day on the Federal Reserve's pledge to keep rates at ultra-low levels “at least” through mid-2013.

Ahead of the open, the Dow Jones Industrial Average futures pointed to a loss of 1.5%, the S&P 500 futures fell 1.3%, while the Nasdaq 100 futures dropped 1.9%.

The Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until “at least through mid-2013.”

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

The Fed also indicated that it “discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability” and said it was prepared to employ the tools “as appropriate”.

Meanwhile, shares in Walt Disney tumbled 4.3% after the company reported restructuring and impairment charges totaling USD34 million in the third quarter.

On the upside, department store operator Macy’s saw shares climb 3% after reporting a 64% increase in second quarter profit. The upbeat results prompted the company to raise its full-year earnings forecast.

Clothing retailer Polo Ralph Lauren saw shares surge 10.2% after it said fiscal first quarter net income rose 52% to USD184.1 million. Revenue in the quarter rose 28% to USD1.49 billion, above expectations for revenue of USD1.43 billion.

Other notable earnings scheduled for Wednesday include, technology firm Cisco Systems and media giant News Corp., which were both slated to report results after the closing bell.

Meanwhile, shares in Bank of America could be active, as chief executive Brian Moynihan was scheduled to face an investor conference call later in the day with Fairholme Capital, which owns around 92 million shares in the bank.

Across the Atlantic, European stock markets posted sharp losses, as mounting fears over sovereign debt contagion weighed. The EURO STOXX 50 tumbled 1.7%, France’s CAC 40 fell 1.5%, Germany's DAX shed 0.5%, while Britain's FTSE 100 edged 0.25% lower.

During the Asian trading session, Hong Kong’s Hang Seng Index jumped 2.1%, while Japan’s Nikkei 225 Index rose 0.9%.

A report from China’s National Bureau of Statistics showed that China’s trade surplus widened to USD31.5 billion in July, the highest level in more than two years. Analysts had expected China’s trade surplus to widen to USD27.4 billion.

Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

U.S. federal budget balance falls less-than-expected

Forexpros - The U.S. federal budget balance fell less-than-expected last month, official data showed on Wednesday.

In a report, Department of the Treasury said that U.S. federal budget balance fell to a seasonally adjusted -129.4B, from -43.1B in the preceding month.

Analysts had expected U.S. federal budget balance to fall to -140.0B last month

Forex - EUR/USD down on economic data

Forexpros - The Euro was lower against the U.S. Dollar on Wednesday after the release of U.S. data on Federal Budget Balance.

EUR/USD was trading at 1.4226, down 1.04% at time of writing.

The pair was likely to find support at 1.4070, Friday’s low, and resistance at 1.4426, Monday’s high.

Earlier in the day, official data showed that The U.S. federal budget balance fell less-than-expected to a seasonally adjusted -129.4B last month from -43.1B in the preceding month.

Analysts had expected U.S. federal budget balance to fall to -140.0B last month.

Meanwhile, the Euro was down against the British Pound and the Japanese Yen, with EUR/GBP shedding 0.14% to hit 0.8798 and EUR/JPY falling 1.26% to hit 109.24.

Forex: Commodity currencies erased daily losses

FXstreet.com (Córdoba) – High-yield currencies moved considerably during the American session, as initially reached fresh highs against the Dollar but then turned lower, to new monthly lows to then bounced sharply back to the upside erasing losses. The Kiwi is outperforming the Loonie and the Aussie on Friday.

Commodity currencies are moving in line with Wall Street main stock indexes. The Dow Jones bottomed earlier at 11,140, the lowest level since early December but then jumped more than 300 points and currently is rising 97 points or 0.86%.

AUD/USD bottomed at 1.0375, fresh 4-month lows but then rebounded sharply to test daily highs at 1.0525. Currently it is struggling to close the week above 1.0500.

NZD/USD reached the lowest level on Asian hours at 0.8275 but currently is testing levels on top of 0.8420.

USD/CAD is trading at 0.9780/85, just a few pips below the price it had at the beginning of the day after peaking at 0.9852, the strongest level since June 29.

Market sentiment improved after reports suggested that the ECB was willing to buy Italian bond and following a press conference where Italian Premier, Silvio Berlusconi, announced a G-7 meeting of Finance ministers and also said that the budget will be balanced by 2013.