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The tax, vat and accounting Blog
2009
19
Aug

Rollovers & Currency Trading

by Ahmad Hassam

Rollovers represent the intersection of interest rate markets and forex markets. When an open position from one value date or settlement date is rolled over to the next value date or settlement date, this is known as Rollover in currency trading. Rollovers are unique to the currency markets.

Rollover rates depend on the difference between the interest rates of the two currencies in the pair that you are trading. Only remember that what you are trading is in fact the good old cash. Dont forget currency is money after all.

It is like having a deposit in a bank account when you are long on a currency. Its like take a loan from the bank if you are short. You should expect an interest gain or an interest expense on holding a currency position over time just as you would expect to earn interest on a bank deposit and pay interest on a loan.

by Layla Vanderbilt

Millions of Americans are moving heaven and earth to pay off their loans while an equal number of them are finding it extremely difficult to manage their loans. This can virtually leave you in a debt trap as a bad credit score will not allow you to get any kind of loan or set right your debt position. However, all hopes are not lost yet, as there are companies that are ready to lend you a helping hand in clearing your debts and improve your credit score, but you need to tread carefully so that you do not end up in a mess again.

On most occasions, Companies volunteer to talk to your bill collectors to bring your loans to a respectable level in order to help you clear them. As mentioned earlier, you should be careful while endeavoring to improve your credit position; you do not end up aggravating the situation. Assuming that the companies and your bill collectors help to reduce your loan burden, your credit report could still be reflecting it as a bad debt, which will in no way help your credit score.

by Ahmad Hassam

The most active traded crosses focus on the three non USD currencies (EUR, JPY and GBP). These crosses are known as the euro crosses, yen crosses and the sterling crosses. The most actively traded cross currency pairs are: EUR/CHF, EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY and NZD/JPY. Crosses enable currency traders to directly target trades to specific individual currencies to take advantage of news or events.

For a new traded there are some surprises in currency trading. You may notice that the currencies are combined in a seemingly strange way when you look up at the currency pairs. For example, if euro-yen (EUR/JPY) is a euro-yen cross, why it is not being also referred to as yen-euro (JPY/EUR)? The answer is these conventions have been designed to reflect traditionally strong currencies versus traditionally weak currencies with the strong currency coming first. Those quoting conventions were evolved over the years.

by Ahmad Hassam

Lets first define what Technical Analysis is. Technical Analysis is the study of historical and ongoing price data through charts, price patterns and chart indicators. Charts display price in time intervals using bars and candlesticks.

Technical Analysis is based on the following assumptions. 1) All available information is already impounded in the market prices of the securities. 2) Prices always move in trends or patterns. 3) History repeats itself meaning you can predict the future market by studying the past market prices.

Studies have shown that once a trend is in motion, it is most likely to continue rather than reverse it. The more one studies chart patterns in technical analysis, the clearer it becomes that reading and interpreting chart patterns and technical analysis are more an art form than a skill.

by Tim Barnby

Few things are more satisfying to me that bare chart trading. Ive seen traders with so many indicators on their screen that I could not even see the price of the currency pair. What do any of these indicators tell you anyway? Do I need a MACD or a CCI? I can see which direction the trend is moving without them. How about a stochastic? I can see where candles are closing relative to the high or low. Other than some horizontal lines at key support and resistance levels, some Fibonacci retracements, and trend lines I often have nothing on my charts at all. All of these are topics for future articles.

A bullish engulfing pattern is characterized by having a real body which completely engulfs the real body of the preceding candle. A simpler way of describing this is that the bullish engulfing candle has a higher open and a lower close than the preceding candle. A bearish engulfing candle has a lower open and a higher close than the bar immediately preceding it.

by Ahmad Hassam

Perhaps the best advice that you will receive from someone is live to trade another day. Currency markets are brutal, volatile and ruthless. In minutes you can lose many pips. You should learn to survive in the markets in the long run. Do not lose all your money in a single day.

The single most common factor that causes many currency traders to blow up their accounts and lose all their money is greed. You start taking unnecessary risks when you get greedy. You will spend many hours trying to find the Holy Grail technical indictor or a forex robot that can make you rich. You will believe that by discovering that secret, you will become rich.

Unfortunately there is no Holy Grail for anyone in trading. You will win and you will lose. So you must learn not to risk more than 2% of your account on one trade. Grow your account incrementally over time. Never ever be tempted to risk big making one single winning trade that can make you rich.

by Ahmad Hassam

Modified capitalization weighting involves adjustments to the capitalizations of the various component issues of the Nasdaq-100 index. The NDX contract at the CBOE is based on Nasdaq-100 as is the MNX. The Nasdaq-100 is a modified capitalization weighted index.

Russell 2000 is the well known benchmark for small capitalization sector. Several Russell Indexes have become benchmarks for specific areas of investment management. Frank Russell Company is one of the leading global investment consultants. It is also involved in performance measurement, analysis and investment management.

Russell 3000 Index as the name implies includes 3000 issues and these 3000 companies represent 98% of the investable US equities. The index is adjusted for certain factors such as cross holdings and the number of pairs in hands.

Russell 3000 is further split into subsets like Russell 1000 Index. It covers the top 1000 about 92% of the value of the entire 3,000 stock index. The Russell 2000 Index is the smallest 2000 companies in the Russell 3000 Index.

by Ahmad Hassam

There are 100s of ETFs and HOLDRS covering key industry benchmarks such as the various Standard & Poor Indexes, Russell Indexes or the Dow Jones Averages. There are ETFs that cover the other less well known narrow based sectors.

For example, SPY tracks the Standard & Poors S&P 500 Composite Index. It is the largest of the ETFs. You should know the major indexes as an investor that are either key benchmarks or have ETFs tied to them.

Standard & Poor: Standard & Poor (S&P) is the financial services segment of the McGraw Hill companies and has been providing independent and objective financial information, analysis and research for nearly 140 years.

It is also the provider of equity indexes. These indexes are also used as the basis for wide variety of financial instruments such as Index Funds, Futures, Options and ETFs. Investors around the globe use S&P Indexes for investment performance measurement.


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