Gold Prices Finish Slightly Higher
Gold turned modestly higher on Friday, gaining for a sixth straight session, as the U.S. dollar gave back some gains versus the euro.
December gold rose to $1,146.80, up $4.90 on the session. The metal hit as low as $1,132.50 in the early going, but later reached as high as $1,150.80.
The dollar rose to a 16-day high near 1.4800 against the euro before giving back some of its gains. the greenback also moved to a 17-day best against the sterling.
There was no major economic news out of the U.S. on Friday. Across the ocean, the Bank of Japan decided to hold the overnight lending rate at 0.1%.
Existing home sales data for October is due at 10 a.m. ET on Monday. Sales are expected to rise to $5.65 million, compared to $5.57 million in September.
Sunday, November 22, 2009
Oil Drops Below $77 On Stronger Dollar, Demand Worries
Crude oil continued to decline on Friday on demand concerns and finished below $77 per barrel.
Light sweet crude for December dropped to $76.72, down 74 cents on the session. Prices hit as low as $76.20 after briefly challenging $78.
For the week, oil finished up 37 cents. Crude finished last Friday's session at a monthly low.
The dollar hit 2 1/2-week highs against the euro and sterling before easing back. A weaker dollar reduces oil's value as a hedge investment.
Meanwhile, Macquarie Group oil economist Jan Stuart said could fall to $60 per barrel in this quarter and the next one, according to reports. Speaking at a conference in Hong Kong, Stuart also said prices will average near $80 by the end of next year.
There was no major economic news on Friday. Next week's calendar is highlighted by the GDP report on Tuesday.
Crude oil continued to decline on Friday on demand concerns and finished below $77 per barrel.
Light sweet crude for December dropped to $76.72, down 74 cents on the session. Prices hit as low as $76.20 after briefly challenging $78.
For the week, oil finished up 37 cents. Crude finished last Friday's session at a monthly low.
The dollar hit 2 1/2-week highs against the euro and sterling before easing back. A weaker dollar reduces oil's value as a hedge investment.
Meanwhile, Macquarie Group oil economist Jan Stuart said could fall to $60 per barrel in this quarter and the next one, according to reports. Speaking at a conference in Hong Kong, Stuart also said prices will average near $80 by the end of next year.
There was no major economic news on Friday. Next week's calendar is highlighted by the GDP report on Tuesday.
Saturday, November 21, 2009
About Forex market
Forex market- is an international foreign exchange market. It gets its name from English shortening FOReign Exchange- foreign exchange operations. Forex market is one of the youngest financial markets (Forex has existed since the 70th of the last century). However, it is the largest in volume and fastest-growing market. The daily trading turnover at Forex constitutes to 4 trillions dollars, which in 30 times exceeds the combined volume of all stock markets in the USA.
Like any other market, Forex trades certain goods. In case of foreign exchange market these goods are national currencies of different countries.
The key factor of currency rate movement is the need of state bodies as well as commercial companies to convert profits from the sale of goods and services abroad into its national currency. It accounts for 5% of the foreign exchange market turnover. The remaining 95% provides currency traders speculative capital aiming at extracting profit from currencies rate movement.
Distinctive feature of the foreign exchange market is its stability. It is a well-known fact that the main threat for any financial market is its meltdown, the fall of the stock index. However, unlike other markets (stock and commodity markets) Forex is defended owing to the specific of its commodity - currency. If shares devalue it is a financial collapse. If the dollar falls, this means that another currency has become stronger, market movement becomes more active. This is a good chance to generate additional profit for a trader. Unique stability of the Forex market lies in this Forex peculiarity: currency is one of the most liquid and reliable trading instrument among all existing.
The greatest interest for speculators is the most common (most liquid) currencies that are “basic”. At the moment more than 85% of all deals constitute to deals with basic currencies, which include: US dollar (USD), Japanese yen (JPY), Euro (EUR), British pound (GBP), Swiss franc (CHF), Canadian dollar (CAD) and the Australian dollar (AUD).
Forex is available everywhere. Due to the Internet, you may conclude deals with the clients who are in the other part of the world. As it was mentioned above, exchange market always gives you an opportunity to make profit, i.e. rates fluctuations of this or that size take place several times a day. Fluctuations of the currency rates, your intellectual potential, and new technologies allow to build high profitable business right now.
One more indisputable plus of the Forex market – is easiness of market entrance. It is not difficult to find a reliable Broker – there is a great supply at this market. The rest depends only on the person who decides to enter Forex.
* In 70s the world familiarized with Forex when president of the USA Richard Nixon announced about the decision to reject the gold standard on 15 August, 1971. This report ruins the system of the stable currency rates and commemorated as culmination of the postwar Bretton Woods system crises.
Forex market- is an international foreign exchange market. It gets its name from English shortening FOReign Exchange- foreign exchange operations. Forex market is one of the youngest financial markets (Forex has existed since the 70th of the last century). However, it is the largest in volume and fastest-growing market. The daily trading turnover at Forex constitutes to 4 trillions dollars, which in 30 times exceeds the combined volume of all stock markets in the USA.
Like any other market, Forex trades certain goods. In case of foreign exchange market these goods are national currencies of different countries.
The key factor of currency rate movement is the need of state bodies as well as commercial companies to convert profits from the sale of goods and services abroad into its national currency. It accounts for 5% of the foreign exchange market turnover. The remaining 95% provides currency traders speculative capital aiming at extracting profit from currencies rate movement.
Distinctive feature of the foreign exchange market is its stability. It is a well-known fact that the main threat for any financial market is its meltdown, the fall of the stock index. However, unlike other markets (stock and commodity markets) Forex is defended owing to the specific of its commodity - currency. If shares devalue it is a financial collapse. If the dollar falls, this means that another currency has become stronger, market movement becomes more active. This is a good chance to generate additional profit for a trader. Unique stability of the Forex market lies in this Forex peculiarity: currency is one of the most liquid and reliable trading instrument among all existing.
The greatest interest for speculators is the most common (most liquid) currencies that are “basic”. At the moment more than 85% of all deals constitute to deals with basic currencies, which include: US dollar (USD), Japanese yen (JPY), Euro (EUR), British pound (GBP), Swiss franc (CHF), Canadian dollar (CAD) and the Australian dollar (AUD).
Forex is available everywhere. Due to the Internet, you may conclude deals with the clients who are in the other part of the world. As it was mentioned above, exchange market always gives you an opportunity to make profit, i.e. rates fluctuations of this or that size take place several times a day. Fluctuations of the currency rates, your intellectual potential, and new technologies allow to build high profitable business right now.
One more indisputable plus of the Forex market – is easiness of market entrance. It is not difficult to find a reliable Broker – there is a great supply at this market. The rest depends only on the person who decides to enter Forex.
* In 70s the world familiarized with Forex when president of the USA Richard Nixon announced about the decision to reject the gold standard on 15 August, 1971. This report ruins the system of the stable currency rates and commemorated as culmination of the postwar Bretton Woods system crises.
Develop Your Own Trading Plan
Trading is about probabilities, not certainties. A Trading Plan establishes a series of steps that ensure a higher probability of success.
The Plan will set certain guidelines for:
What stocks to buy
When to buy
When to sell
The Structure of Your Trading Plan
A Strong Market:
Before deciding what to buy, first establish if the market is in a positive phase. If the KL Composite Market has been negative over recent weeks (or longer), it is not a good time to enter the market. If the majority of stocks are going down or sideways, the probability of you buying a share that is going to rise in the immediate future is slim.
A Strong Sector:
Having waited until the market is in a growth phase, determine if there are any sectors showing strong growth in the past few weeks. These are the sectors that have stocks performing well and are increasing in price.
Examine stocks in these strong sectors and determine those that are on an uptrend, meaning the price of the stock has been steadily going up for at least 3 months.
These stocks will qualify as having potential for ongoing growth as they are generating positive market sentiment. If they have adequate liquidity on top of that, you could add any of these to your portfolio knowing that you could exit quickly at any point in time.
Exit Strategy:
Having selected shares to include in your portfolio you must then have an Exit Strategy in the event that these shares show signs of reversing. Simply set an Early Exit price to ensure that the stocks you buy never generate losses.
This is a simple description of a Trading Plan. It holds the basics for selecting stocks that have a good probability of increasing in price and risk management to protect your capital. These three ingredients are the key to success in stock trading.
Trading is about probabilities, not certainties. A Trading Plan establishes a series of steps that ensure a higher probability of success.
The Plan will set certain guidelines for:
What stocks to buy
When to buy
When to sell
The Structure of Your Trading Plan
A Strong Market:
Before deciding what to buy, first establish if the market is in a positive phase. If the KL Composite Market has been negative over recent weeks (or longer), it is not a good time to enter the market. If the majority of stocks are going down or sideways, the probability of you buying a share that is going to rise in the immediate future is slim.
A Strong Sector:
Having waited until the market is in a growth phase, determine if there are any sectors showing strong growth in the past few weeks. These are the sectors that have stocks performing well and are increasing in price.
Examine stocks in these strong sectors and determine those that are on an uptrend, meaning the price of the stock has been steadily going up for at least 3 months.
These stocks will qualify as having potential for ongoing growth as they are generating positive market sentiment. If they have adequate liquidity on top of that, you could add any of these to your portfolio knowing that you could exit quickly at any point in time.
Exit Strategy:
Having selected shares to include in your portfolio you must then have an Exit Strategy in the event that these shares show signs of reversing. Simply set an Early Exit price to ensure that the stocks you buy never generate losses.
This is a simple description of a Trading Plan. It holds the basics for selecting stocks that have a good probability of increasing in price and risk management to protect your capital. These three ingredients are the key to success in stock trading.
Trade Only Liquid Stocks
Look at the column called Lots Done in your market report. This is the amount of stocks that were traded on the day. If you multiply this by the price of the stock, you can see how much money actually changed hands on that day. If this amount is high, then the stock is very liquid, meaning it is easy to buy and more importantly, easy to sell. The last thing you want once you've bought a stock is to be stuck with it because you can't find a buyer.
For example, if a company has traded 100,000 stocks today and the closing price was RM2.42, we can estimate that RM242,000 worth of that stock changed hands today.
For example:
Innovics' last price was RM 0.30 and Lots Done were 1000. This means that an average of RM 3,000 worth of stock changed hands today. In other words, Innovics is only trading an average of RM3,000 of shares each day.
Now, you own RM10,000 worth of Innovonics and you want to sell. If you enter your sell order on the market, you will inject 3 days worth of turnover onto the market. There will not be enough buyers for you to immediately sell the stock at your chosen exit price.
To ensure you invest in liquid shares, only trade stocks that show a daily turnover of at least ten times what you are planning to invest. If you are investing RM10,000 in a stock, look for an average daily turnover minimum of RM 100,000.
Look at the column called Lots Done in your market report. This is the amount of stocks that were traded on the day. If you multiply this by the price of the stock, you can see how much money actually changed hands on that day. If this amount is high, then the stock is very liquid, meaning it is easy to buy and more importantly, easy to sell. The last thing you want once you've bought a stock is to be stuck with it because you can't find a buyer.
For example, if a company has traded 100,000 stocks today and the closing price was RM2.42, we can estimate that RM242,000 worth of that stock changed hands today.
For example:
Innovics' last price was RM 0.30 and Lots Done were 1000. This means that an average of RM 3,000 worth of stock changed hands today. In other words, Innovics is only trading an average of RM3,000 of shares each day.
Now, you own RM10,000 worth of Innovonics and you want to sell. If you enter your sell order on the market, you will inject 3 days worth of turnover onto the market. There will not be enough buyers for you to immediately sell the stock at your chosen exit price.
To ensure you invest in liquid shares, only trade stocks that show a daily turnover of at least ten times what you are planning to invest. If you are investing RM10,000 in a stock, look for an average daily turnover minimum of RM 100,000.
Don’t Buy And Hold
The Malaysian stock market is one of the strongest and sometimes most dynamic markets in the world.
While the market has always recovered from falls, the same cannot be said for individual companies. Even during a booming market, some companies can suffer significant losses.
Trade only on an uptrend and sell the poor performers, this will make it impossible to experience a large loss. This is the secret to outperforming the market and achieving a consistently superior return.
Undertake some research on the Bursa Malaysia or in a local investment paper. List three shares that have showed decreased performance recently and three shares that have showed increased performance recently.
The Malaysian stock market is one of the strongest and sometimes most dynamic markets in the world.
While the market has always recovered from falls, the same cannot be said for individual companies. Even during a booming market, some companies can suffer significant losses.
Trade only on an uptrend and sell the poor performers, this will make it impossible to experience a large loss. This is the secret to outperforming the market and achieving a consistently superior return.
Undertake some research on the Bursa Malaysia or in a local investment paper. List three shares that have showed decreased performance recently and three shares that have showed increased performance recently.
Always Trade With The Trend
Trends are the cornerstone of trading. If a share price is rising, we can make money by buying that share. If the share price is falling, we need to look for other opportunities. It does not make sense to buy a falling share. Our aim is always simple – find a share in an uptrend and take a large chunk from the middle of the trend.
Overall Market Strength
It is important to look at how the overall market is doing. This can be gauged by looking at the top 500 shares, otherwise known as All Ordinaries. If All Ordinaries go up, it is because stocks in the top 500 have risen and the market is in an uptrend.
There are over 1000 companies listed on the Bursa Malaysia that you can invest in. To examine each one individually would take a great deal of time. Instead, you trade with the trend and find the strong sectors in the market.
Strength of an Industry Sector
What is a Sector?
A sector is a group of companies involved in the same industry. For example, mining companies are grouped together in the Materials sector while banking companies are in the Finance sector. Entire sectors are generally affected by economic conditions so entire sectors tend to trend in the same directions. Trends do not have hard and fast rules, individual stocks within these sectors will perform at different levels.
Strength of Shares in a Sector
Although the general rule of novice investors is to buy on an uptrend, there are people who buy during a downtrend as a strategy. This is a process of buying more shares as the price falls, so the average cost of the share is reduced with every purchase. This kind of bargain hunting is a riskier strategy, as the stock price may never recover. The second downside is that the price may fall and then stabilize, meaning the investor may have to wait for a while before recovering losses or making a profit. In this scenario, capital that could be used for profitable trading would be lying idle.
Resistance to this type of trading is not new. One of the greatest traders of the last century, Jesse Livermore wrote, “Experience has proven to me that the real money made in speculating has been commitments in a stock showing a profit right from the start.”
By now you should understand that trading with the trend is critical to success. Also, our objective is never to buy at the bottom or sell at the top of a trend. We simply want to take a large chunk out of the middle. Let the trend be your friend.
Trends are the cornerstone of trading. If a share price is rising, we can make money by buying that share. If the share price is falling, we need to look for other opportunities. It does not make sense to buy a falling share. Our aim is always simple – find a share in an uptrend and take a large chunk from the middle of the trend.
Overall Market Strength
It is important to look at how the overall market is doing. This can be gauged by looking at the top 500 shares, otherwise known as All Ordinaries. If All Ordinaries go up, it is because stocks in the top 500 have risen and the market is in an uptrend.
There are over 1000 companies listed on the Bursa Malaysia that you can invest in. To examine each one individually would take a great deal of time. Instead, you trade with the trend and find the strong sectors in the market.
Strength of an Industry Sector
What is a Sector?
A sector is a group of companies involved in the same industry. For example, mining companies are grouped together in the Materials sector while banking companies are in the Finance sector. Entire sectors are generally affected by economic conditions so entire sectors tend to trend in the same directions. Trends do not have hard and fast rules, individual stocks within these sectors will perform at different levels.
Strength of Shares in a Sector
Although the general rule of novice investors is to buy on an uptrend, there are people who buy during a downtrend as a strategy. This is a process of buying more shares as the price falls, so the average cost of the share is reduced with every purchase. This kind of bargain hunting is a riskier strategy, as the stock price may never recover. The second downside is that the price may fall and then stabilize, meaning the investor may have to wait for a while before recovering losses or making a profit. In this scenario, capital that could be used for profitable trading would be lying idle.
Resistance to this type of trading is not new. One of the greatest traders of the last century, Jesse Livermore wrote, “Experience has proven to me that the real money made in speculating has been commitments in a stock showing a profit right from the start.”
By now you should understand that trading with the trend is critical to success. Also, our objective is never to buy at the bottom or sell at the top of a trend. We simply want to take a large chunk out of the middle. Let the trend be your friend.
Employ Risk Management Strategies
With any investment, be it stock trading, real estate or business, it is important that you understand what the risks are and how to minimise your exposure to these risks. This process is known as 'Risk Management'.
The Three Elements Of Risk Management
1. Spread Your Risk: Don’t Put All Your Eggs In One Basket
Spreading you risk is as simple as not putting all your eggs in the one basket. This is called diversifying your portfolio.
Spread your capital so there is never more than 20% in a single stock.
Don’t however take this to extremes and over-diversify by investing in too many stocks at once. You cannot expect to outperform the market if your portfolio closely matches the market. A rule of thumb is to limit your portfolio to between 5 and 10stocks.
2. Plan Your Exit: What Is An Acceptable Risk?
Amateur traders buy a stock and their focus is to hope it increases in price. If it goes down, they continue to hold in the hope the price will recover. When a professional buys a stock they recognise that success is a probability, not a certainty. At the time of entering the trade they establish an Early Exit price. If the stock falls past this point the good investor will immediately exit and never run the risk of making a large loss.
Maintaining your capital is fundamental to successful trading. If you invest in a stock and make a large loss, then it is impossible to consistently profit from the stock market. Having incurred a large loss, you must now make a large profit just to break even. The key to successful trading is keeping your losses small.
3. Stop The Loss: Don’t Drive Without A Seatbelt
The second must sell signal is a Stop Loss. Just tracks the highest price reached by the share since purchase. If the share falls by more than 10% from this price, it is time to sell. We suggest 10% - you can change this depending on your trading style. Too small a percentage and it will get you out too early. Make the percentage too large and you give back too much of your profits before exiting. Start with a 10% fall and see what you feel comfortable with.
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© 2009 Bursa Malaysia Berhad. All rights reserved. Please read our disclaimer.
With any investment, be it stock trading, real estate or business, it is important that you understand what the risks are and how to minimise your exposure to these risks. This process is known as 'Risk Management'.
The Three Elements Of Risk Management
1. Spread Your Risk: Don’t Put All Your Eggs In One Basket
Spreading you risk is as simple as not putting all your eggs in the one basket. This is called diversifying your portfolio.
Spread your capital so there is never more than 20% in a single stock.
Don’t however take this to extremes and over-diversify by investing in too many stocks at once. You cannot expect to outperform the market if your portfolio closely matches the market. A rule of thumb is to limit your portfolio to between 5 and 10stocks.
2. Plan Your Exit: What Is An Acceptable Risk?
Amateur traders buy a stock and their focus is to hope it increases in price. If it goes down, they continue to hold in the hope the price will recover. When a professional buys a stock they recognise that success is a probability, not a certainty. At the time of entering the trade they establish an Early Exit price. If the stock falls past this point the good investor will immediately exit and never run the risk of making a large loss.
Maintaining your capital is fundamental to successful trading. If you invest in a stock and make a large loss, then it is impossible to consistently profit from the stock market. Having incurred a large loss, you must now make a large profit just to break even. The key to successful trading is keeping your losses small.
3. Stop The Loss: Don’t Drive Without A Seatbelt
The second must sell signal is a Stop Loss. Just tracks the highest price reached by the share since purchase. If the share falls by more than 10% from this price, it is time to sell. We suggest 10% - you can change this depending on your trading style. Too small a percentage and it will get you out too early. Make the percentage too large and you give back too much of your profits before exiting. Start with a 10% fall and see what you feel comfortable with.
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© 2009 Bursa Malaysia Berhad. All rights reserved. Please read our disclaimer.
. Start With A Financial Plan
Trading stocks should be treated as a business venture - it will require time, knowledge and money to succeed. Your Financial Plan represents your roadmap to success.
Decide Your Financial Objectives.
If you are a 60 year old looking for cash flow to fund your impending retirement, your priority would be to generate an income stream rather than large asset value growth.
If you are a 25 year old who wants to begin to invest, capital growth would be the priority, rather than income stream.
Your financial objectives will determine whether you trade liquid shares or not.
Decide Your Risk Level.
Decide on your risk level and the types of investments you can afford to make will be set. Remember, the higher the return you want to achieve, the higher the risk.
Low Risk Level
I am not very comfortable with risk and will invest in fixed interest/capital guaranteed securities (government bonds, bank term deposits).
Medium Risk Level
I can take on a moderate amount of risk (blue chip Industrial and Banking and Finance sector shares).
High Risk Level
I am comfortable with risk. I am seeking a high return and prepared to evaluate companies early in their growth phase (recently listed resource companies).
How Do You Fund Your Investments?
For most of us, we do not have immediate access to a large pool of ready savings. Using the equity you have in a property to fund your share portfolio is a common approach.
EPF savings is also an effective vehicle for providing funds for investing and the majority of Malaysians have access to these funds.
Most major banks and insurance groups offer margin loan facilities. This is where you start a portfolio with savings and then use this portfolio as security to borrow further funds to buy more shares.
In most instances, the problem is not acquiring funds to start a portfolio, it is having the knowledge to invest with confidence.
Trading stocks should be treated as a business venture - it will require time, knowledge and money to succeed. Your Financial Plan represents your roadmap to success.
Decide Your Financial Objectives.
If you are a 60 year old looking for cash flow to fund your impending retirement, your priority would be to generate an income stream rather than large asset value growth.
If you are a 25 year old who wants to begin to invest, capital growth would be the priority, rather than income stream.
Your financial objectives will determine whether you trade liquid shares or not.
Decide Your Risk Level.
Decide on your risk level and the types of investments you can afford to make will be set. Remember, the higher the return you want to achieve, the higher the risk.
Low Risk Level
I am not very comfortable with risk and will invest in fixed interest/capital guaranteed securities (government bonds, bank term deposits).
Medium Risk Level
I can take on a moderate amount of risk (blue chip Industrial and Banking and Finance sector shares).
High Risk Level
I am comfortable with risk. I am seeking a high return and prepared to evaluate companies early in their growth phase (recently listed resource companies).
How Do You Fund Your Investments?
For most of us, we do not have immediate access to a large pool of ready savings. Using the equity you have in a property to fund your share portfolio is a common approach.
EPF savings is also an effective vehicle for providing funds for investing and the majority of Malaysians have access to these funds.
Most major banks and insurance groups offer margin loan facilities. This is where you start a portfolio with savings and then use this portfolio as security to borrow further funds to buy more shares.
In most instances, the problem is not acquiring funds to start a portfolio, it is having the knowledge to invest with confidence.
Understanding Indices
A stock market index is a single number calculated from the prices of many different stocks. Index is also called indices when you talk about more than one of them. Indices are used as benchmarks of stock performance for portfolios like mutual funds.
Some investment funds (index funds) manage their portfolio so that their performance mirrors (tracking) the performance of a stock market index or a sector of the stock market.
For example, when you hear that the Consumer Price Index (CPI) for say, January to December 2005 increased by 3.0% to 109.1 compared with that of 105.9 in the same period last year. This tells you that the change in retail prices paid by households for goods and services increased in that period. CPI is designed to provide a broad measure of changes in retail prices.
An index is a tool which enables investors to measure the performance of a group of stocks from a defined market. It can form a benchmark for active or passively managed portfolios covering the particular market. Being part of an index is also a status symbol for the constituent companies and trading of constituent shares obviously supports the share price. Indices also allow the creation of investment products that give investors exposure to markets or groups of stocks which can help in markets where there are barriers to investment.
Stock market indices may be classed in many ways. A broad-base index represents the performance of a whole stock market— and reflects how investors feel about the economy. The most regularly quoted market indices are broad-base indices comprised of the stocks of large companies listed on a nation's largest stock exchanges, such as the American Dow Jones Industrial Average and S&P 500 Index, the British FTSE 100, the French CAC 40, the German DAX and the Japanese Nikkei 225.
The Use of Indices
Stock indices have developed in the last twenty years to become much more than economic indicators (market barometer) and with growing developments in financial markets, more technical functions of indices have been brought to the forefront.
Stock indices are used by investors and fund managers as one of the many tools to evaluate the performance of a stock market The application of indices is now much wider including the use of indices as benchmarks for investor portfolio comparisons and as underlying components of financial products, for example Exchange Traded Funds (ETFs) and derivatives.
Bursa Malaysia Indices
The existing Bursa Malaysia indices are calculated using the market capitalisation weighted method.
Market capitalisation means the total value of a listed companies shares based on the current market price. Therefore the bigger companies are given higher weightage compared to the smaller companies.
A stock market index is a single number calculated from the prices of many different stocks. Index is also called indices when you talk about more than one of them. Indices are used as benchmarks of stock performance for portfolios like mutual funds.
Some investment funds (index funds) manage their portfolio so that their performance mirrors (tracking) the performance of a stock market index or a sector of the stock market.
For example, when you hear that the Consumer Price Index (CPI) for say, January to December 2005 increased by 3.0% to 109.1 compared with that of 105.9 in the same period last year. This tells you that the change in retail prices paid by households for goods and services increased in that period. CPI is designed to provide a broad measure of changes in retail prices.
An index is a tool which enables investors to measure the performance of a group of stocks from a defined market. It can form a benchmark for active or passively managed portfolios covering the particular market. Being part of an index is also a status symbol for the constituent companies and trading of constituent shares obviously supports the share price. Indices also allow the creation of investment products that give investors exposure to markets or groups of stocks which can help in markets where there are barriers to investment.
Stock market indices may be classed in many ways. A broad-base index represents the performance of a whole stock market— and reflects how investors feel about the economy. The most regularly quoted market indices are broad-base indices comprised of the stocks of large companies listed on a nation's largest stock exchanges, such as the American Dow Jones Industrial Average and S&P 500 Index, the British FTSE 100, the French CAC 40, the German DAX and the Japanese Nikkei 225.
The Use of Indices
Stock indices have developed in the last twenty years to become much more than economic indicators (market barometer) and with growing developments in financial markets, more technical functions of indices have been brought to the forefront.
Stock indices are used by investors and fund managers as one of the many tools to evaluate the performance of a stock market The application of indices is now much wider including the use of indices as benchmarks for investor portfolio comparisons and as underlying components of financial products, for example Exchange Traded Funds (ETFs) and derivatives.
Bursa Malaysia Indices
The existing Bursa Malaysia indices are calculated using the market capitalisation weighted method.
Market capitalisation means the total value of a listed companies shares based on the current market price. Therefore the bigger companies are given higher weightage compared to the smaller companies.
Reading Market Reports
As a stock trader, you will begin to pay more interest to the business section of your local newspaper. Most feature a section that deals with Stock Market prices at close of the previous day. In this section, you will come across the following descriptions:
Year’s High - the highest price for a particular stock for the year.
Year’s Low - the lowest price for a particular stock for the year.
Stock Code - a unique numbering system to identify a particular stock.
Stock Counter - the stocks listed on Bursa Malaysia.
Cls’ng (Closing) - the closing price for a particular stock for that particular trading day.
+/- - the symbol for the increase or decrease in the stock price for that particular day.
+/-% - the symbol for the percentage increase or decrease in the stock price.
Lots Traded
- stocks are normally traded in board lots of 100 units; lots traded will tell you the number of lots traded on a particular day.
Day’s High - the highest price for a stock in that trading day.
Day’s Low - the lowest price for a stock in that particular day.
Div Yield
- a dividend yield is a method of valuing stocks; it is calculated as
Cash Dividend per Stock = Dividend Yield
Market Stock Price
P/E Ratio(Price/Earnings Ratio)
- the information obtained from this will enable you to make a performance comparison of a company with that of the industry, and from one period to another. The formula is:
Current Market Price = P/E Ratio
Earnings Per Stock
Earning per stock - amount of a company’s earnings attributable to each ordinary stock of that company.
M Cap(Market Capitalisation)
- this shows the total value of a listed company’s stocks based on the current market price; calculated as:
Stock’s Market Price x Number of Stocks Issued
NTA per Stock
- this indicates the value of assets backing the stock of a company; calculated by:
Net assets of a company
Number of ordinary stocks in it
Reading the stock market performance section of the newspaper is an easy thing to do. You just need to do it a few times until you begin to feel comfortable with it.
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As a stock trader, you will begin to pay more interest to the business section of your local newspaper. Most feature a section that deals with Stock Market prices at close of the previous day. In this section, you will come across the following descriptions:
Year’s High - the highest price for a particular stock for the year.
Year’s Low - the lowest price for a particular stock for the year.
Stock Code - a unique numbering system to identify a particular stock.
Stock Counter - the stocks listed on Bursa Malaysia.
Cls’ng (Closing) - the closing price for a particular stock for that particular trading day.
+/- - the symbol for the increase or decrease in the stock price for that particular day.
+/-% - the symbol for the percentage increase or decrease in the stock price.
Lots Traded
- stocks are normally traded in board lots of 100 units; lots traded will tell you the number of lots traded on a particular day.
Day’s High - the highest price for a stock in that trading day.
Day’s Low - the lowest price for a stock in that particular day.
Div Yield
- a dividend yield is a method of valuing stocks; it is calculated as
Cash Dividend per Stock = Dividend Yield
Market Stock Price
P/E Ratio(Price/Earnings Ratio)
- the information obtained from this will enable you to make a performance comparison of a company with that of the industry, and from one period to another. The formula is:
Current Market Price = P/E Ratio
Earnings Per Stock
Earning per stock - amount of a company’s earnings attributable to each ordinary stock of that company.
M Cap(Market Capitalisation)
- this shows the total value of a listed company’s stocks based on the current market price; calculated as:
Stock’s Market Price x Number of Stocks Issued
NTA per Stock
- this indicates the value of assets backing the stock of a company; calculated by:
Net assets of a company
Number of ordinary stocks in it
Reading the stock market performance section of the newspaper is an easy thing to do. You just need to do it a few times until you begin to feel comfortable with it.
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The Role Of A Broker
To buy or sell shares on Bursa Malaysia, you need to use a registered broker who is a member of Bursa Malaysia. You cannot deal directly with Bursa Malaysia as only brokers have direct access to the market.
A broker acts as your agent - much like a real estate agent that sells your house.
He/she earns a commission on the value of shares you trade - just like a real estate agent earns commission on buying and selling houses for people.
A broker can also be involved in the listing of a new company by underwriting the float and marketing the float to their group of clients.
There are many brokers to choose from – click here for a list of all brokers.
To buy or sell shares on Bursa Malaysia, you need to use a registered broker who is a member of Bursa Malaysia. You cannot deal directly with Bursa Malaysia as only brokers have direct access to the market.
A broker acts as your agent - much like a real estate agent that sells your house.
He/she earns a commission on the value of shares you trade - just like a real estate agent earns commission on buying and selling houses for people.
A broker can also be involved in the listing of a new company by underwriting the float and marketing the float to their group of clients.
There are many brokers to choose from – click here for a list of all brokers.
Understanding The Stock Market
The stock market is where the shares in companies are bought and sold, providing companies options to access capital, and investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance.
The stock market offers people the ability to generate a separate income stream apart from their daily jobs, or income streams which are superior to those from traditional savings deposits. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.
First time investors can become confused because of the terminology that is used to describe various market functions. These don’t take long to learn. Click here for your basic share trading terms. Incidentally, one common confusion is over the terms ‘ stocks’ and ‘shares’. Actually, they both mean the same thing and can be used interchangeably.
The Role of Bursa Malaysia
You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors. Companies are either listed on Bursa Malaysia Securities Main Market or ACE Market.
Raising Capital on the Stock Market
The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company they mean listed on Bursa Malaysia. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float the company. This involves selling part of the company to private individual and institutional investors who are then able to freely exchange these stocks on an open market. Purchasing stocks in a company that is listed on the stock market is done through an Initial Public Offering or IPO.
Once an IPO has been issued, you can contact the company (phone, fax or email) for a copy of the Prospectus and complete the application to apply for an allocation of shares. Or you can wait until the company is floated and buy shares on the open market. Besides Bursa Malaysia, stock brokers will also have information regarding Initial Public Offerings.
Companies that are already listed can also raise additional money on the stock market by offering existing stockholders the opportunity to buy more stocks in the company. For example, a listed company wanting to raise additional capital might issue one new share at 5sen each for every three shares an existing investor owns.
When you buy shares, you are buying a share in that company and so you own a percentage of that company. When the company makes a profit, you share in that profit in the form of a dividend. Typically, the number of shares that have been issued multiplied by the share price gives us how much a company is worth.
The stock market is where the shares in companies are bought and sold, providing companies options to access capital, and investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance.
The stock market offers people the ability to generate a separate income stream apart from their daily jobs, or income streams which are superior to those from traditional savings deposits. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.
First time investors can become confused because of the terminology that is used to describe various market functions. These don’t take long to learn. Click here for your basic share trading terms. Incidentally, one common confusion is over the terms ‘ stocks’ and ‘shares’. Actually, they both mean the same thing and can be used interchangeably.
The Role of Bursa Malaysia
You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors. Companies are either listed on Bursa Malaysia Securities Main Market or ACE Market.
Raising Capital on the Stock Market
The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company they mean listed on Bursa Malaysia. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float the company. This involves selling part of the company to private individual and institutional investors who are then able to freely exchange these stocks on an open market. Purchasing stocks in a company that is listed on the stock market is done through an Initial Public Offering or IPO.
Once an IPO has been issued, you can contact the company (phone, fax or email) for a copy of the Prospectus and complete the application to apply for an allocation of shares. Or you can wait until the company is floated and buy shares on the open market. Besides Bursa Malaysia, stock brokers will also have information regarding Initial Public Offerings.
Companies that are already listed can also raise additional money on the stock market by offering existing stockholders the opportunity to buy more stocks in the company. For example, a listed company wanting to raise additional capital might issue one new share at 5sen each for every three shares an existing investor owns.
When you buy shares, you are buying a share in that company and so you own a percentage of that company. When the company makes a profit, you share in that profit in the form of a dividend. Typically, the number of shares that have been issued multiplied by the share price gives us how much a company is worth.
Why Invest In Stocks?
Investing is making your money work for you by getting your money to generate more money. Investing in stocks has consistently proven to be one of the most profitable forms of investment available.
The benefits include:
Immediate Buy/Sell so you can sell part of your investment any time.
Very low transaction cost.
The freedom to work at your own place, at your pace in your own time.
Easy monitoring — log in to the market from anywhere in the world.
Being able to maximise returns whilst spreading your risk.
A predictable form of investment if you know what you’re doing.
Putting you in control and freeing you of fund management fees.
Considerable tax advantages.
Things to watch out for:
The market can be a volatile place.
You must acquire knowledge of what you are doing.
You must monitor your investments.
You must learn the discipline to enter and exit the market on entry and exit signals.
Can Ordinary People Profit from the Stock Market?
Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.
Not necessarily so.
Let’s take a look at three different scenarios of ordinary people in the stock market to see how they fared. This will let us view how the process works, the different approaches, and how returns are generated.
Scenario 1:
John works in a manufacturing plant earning RM33,000 a year. After rent, living and personal expenses, John has managed to save RM1,500 over the past 6 months that he wants to invest in the stock market. John buys 1,600 shares in ABC Mining at RM0.90 per share (RM1,440). He also pays RM32.95 brokerage fees for buying the shares. In total, John has invested RM1,472.95.
Six months later John decides to sell his shares. He has kept an eye on the performance of ABC Mining and they have risen to RM1.19 a share. John sells his shares for RM1,904. He also pays RM32.95 brokerage fees for selling his shares, leaving him with RM1,871.05. That is a profit of RM398.10.
RM398.10 may not sound a lot, but remember John only invested RM1,472.95 for 6 months, so he won’t make a huge return. Nevertheless, John made a 27% profit which is far better than he would have made by putting the money into his savings account.
Scenario 2:
May and Chong both work full-time in professional jobs. Together, they earn RM120,000 per year. After mortgage repayments, living and personal expenses May and Chong have managed to put away RM5,000 that they want to now invest in the stock market. They buy 1,500 shares in AAA Steel at RM1.48 a share (RM2,220) and 1,500 shares in XY Manufacturing at RM1.33 a share (RM1,995). They also pay RM65.90 brokerage fees for the two transactions. Their total outlay is RM4,280.90.
Over the next 12 months AAA Steel shares have risen to RM2.60 a share and XY Manufacturing shares have moved to only RM1.38 a share. May and Chong sell their shares for a total of RM5970. They pay their broker RM65.90 and are left with RM5904.10. Their initial investment was RM4,280.90. So, they make a profit of RM1,623.20.
Scenario 3:
Aminah is retired, owns her own home and earns a comfortable income from several long term investments. Aminah would like to invest RM15,000 that she has set aside for buying shares.
Aminah selects a portfolio of 5 companies and aims to invest around RM3,000 in each. Aminah buys 3,333 shares in ABC Mining at RM0.90 a share (an investment of RM2,999.70). She also buys 2,027 shares in AAA Steel at RM1.48 a share (RM2,999.96) and 2,255 shares in XY Manufacturing at RM1.33 a share (RM2,999.15). To complete her portfolio, Aminah buys a further 2,912 shares in MM Multimedia at RM1.03 a share (RM2,999.36) and 3,000 shares in BB Furniture at RM1.00 a share (RM3,000). Aminah also pays RM164.75 brokerage fees for buying the shares. In total, Aminah has invested RM1,5162.92.
12 months later Aminah sells her shares. Four of the shares have increased in value but BB Furniture has dropped to RM0.95 a share. ABC Mining rose to RM1.19 a share returning RM3,966.27. AAA Steel rose to RM2.60 a share returning RM5,270.20. XY Manufacturing rose to RM1.38 a share returning RM3,111.90. MM Multimedia rose to RM1.09 a share returning RM3,174.08. BB Furniture dropped to RM0.95 a share returning RM2,850. In total, Aminah’s shares returned RM18,372.45 less RM164.75 for brokerage. This gives a total of RM18207.70, earning a profit of RM3,044.78.
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© 2009 Bursa Malaysia Berhad. All rights reserved. Please read our disclaimer.
Investing is making your money work for you by getting your money to generate more money. Investing in stocks has consistently proven to be one of the most profitable forms of investment available.
The benefits include:
Immediate Buy/Sell so you can sell part of your investment any time.
Very low transaction cost.
The freedom to work at your own place, at your pace in your own time.
Easy monitoring — log in to the market from anywhere in the world.
Being able to maximise returns whilst spreading your risk.
A predictable form of investment if you know what you’re doing.
Putting you in control and freeing you of fund management fees.
Considerable tax advantages.
Things to watch out for:
The market can be a volatile place.
You must acquire knowledge of what you are doing.
You must monitor your investments.
You must learn the discipline to enter and exit the market on entry and exit signals.
Can Ordinary People Profit from the Stock Market?
Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.
Not necessarily so.
Let’s take a look at three different scenarios of ordinary people in the stock market to see how they fared. This will let us view how the process works, the different approaches, and how returns are generated.
Scenario 1:
John works in a manufacturing plant earning RM33,000 a year. After rent, living and personal expenses, John has managed to save RM1,500 over the past 6 months that he wants to invest in the stock market. John buys 1,600 shares in ABC Mining at RM0.90 per share (RM1,440). He also pays RM32.95 brokerage fees for buying the shares. In total, John has invested RM1,472.95.
Six months later John decides to sell his shares. He has kept an eye on the performance of ABC Mining and they have risen to RM1.19 a share. John sells his shares for RM1,904. He also pays RM32.95 brokerage fees for selling his shares, leaving him with RM1,871.05. That is a profit of RM398.10.
RM398.10 may not sound a lot, but remember John only invested RM1,472.95 for 6 months, so he won’t make a huge return. Nevertheless, John made a 27% profit which is far better than he would have made by putting the money into his savings account.
Scenario 2:
May and Chong both work full-time in professional jobs. Together, they earn RM120,000 per year. After mortgage repayments, living and personal expenses May and Chong have managed to put away RM5,000 that they want to now invest in the stock market. They buy 1,500 shares in AAA Steel at RM1.48 a share (RM2,220) and 1,500 shares in XY Manufacturing at RM1.33 a share (RM1,995). They also pay RM65.90 brokerage fees for the two transactions. Their total outlay is RM4,280.90.
Over the next 12 months AAA Steel shares have risen to RM2.60 a share and XY Manufacturing shares have moved to only RM1.38 a share. May and Chong sell their shares for a total of RM5970. They pay their broker RM65.90 and are left with RM5904.10. Their initial investment was RM4,280.90. So, they make a profit of RM1,623.20.
Scenario 3:
Aminah is retired, owns her own home and earns a comfortable income from several long term investments. Aminah would like to invest RM15,000 that she has set aside for buying shares.
Aminah selects a portfolio of 5 companies and aims to invest around RM3,000 in each. Aminah buys 3,333 shares in ABC Mining at RM0.90 a share (an investment of RM2,999.70). She also buys 2,027 shares in AAA Steel at RM1.48 a share (RM2,999.96) and 2,255 shares in XY Manufacturing at RM1.33 a share (RM2,999.15). To complete her portfolio, Aminah buys a further 2,912 shares in MM Multimedia at RM1.03 a share (RM2,999.36) and 3,000 shares in BB Furniture at RM1.00 a share (RM3,000). Aminah also pays RM164.75 brokerage fees for buying the shares. In total, Aminah has invested RM1,5162.92.
12 months later Aminah sells her shares. Four of the shares have increased in value but BB Furniture has dropped to RM0.95 a share. ABC Mining rose to RM1.19 a share returning RM3,966.27. AAA Steel rose to RM2.60 a share returning RM5,270.20. XY Manufacturing rose to RM1.38 a share returning RM3,111.90. MM Multimedia rose to RM1.09 a share returning RM3,174.08. BB Furniture dropped to RM0.95 a share returning RM2,850. In total, Aminah’s shares returned RM18,372.45 less RM164.75 for brokerage. This gives a total of RM18207.70, earning a profit of RM3,044.78.
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© 2009 Bursa Malaysia Berhad. All rights reserved. Please read our disclaimer.
Bersama meraikan sumbangan internet yang telah merubah corak hidup kita dengan menghubungkan Malaysia kepada dunia dan mengukuhkan perpaduan sesama kita. Internet telah merubah cara kita berkomunikasi, belajar dan berurus niaga dengan membuka minda kita kepada dunia tanpa sempadan. Kini kita berupaya menerokai dunia tanpa meninggalkan rumah, belajar tanpa membuka buku dan berkomunikasi serta berniaga tanpa perlu bersemuka.
Internet memberikan kebebasan untuk kita bersuara menerusi penerbitan dalam talian dan blog. Gunakan kebebasan ini dengan bijaksana. Kini sesiapa sahaja yang mempunyai internet dan komputer mampu untuk menceburkan diri dalam dunia pelaburan forex.
Dalam pasaran saham, anda untung apabila membeli ketika harga turun (rendah) dan menjual ketika harga naik (tinggi) tetapi dalam forex ianya pasaran dua hala. Anda boleh mendapat keuntungan samada harga naik atau turun.
i) Membeli ketika harga rendah dan menjualnya ketika harga tinggi.
Buy Low : Sell High (Bullish Market)
ii) Menjual ketika harga tinggi dan membelinya ketika harga rendah.
Sell High : Buy Low (Bearish market)
Forex singkatan kepada Foreign Exchange, iaitu perdagangan tukaran matawang asing. Ia juga dikenali dengan nama FX. Forex sebuah entity kewangan yang terbesar di dunia dengan transaksi melebihi $1.95 trillion sehari!!. Forex melibatkan transaksi dimana kita membeli satu matawang dan menjual satu matawang yang lain. Matawang (currency pair) ini ditransaksikan melalui broker dalam bentuk pair (pasangan) sebagai contoh British Pound dengan US Dollar (GBP/USD).
Internet memberikan kebebasan untuk kita bersuara menerusi penerbitan dalam talian dan blog. Gunakan kebebasan ini dengan bijaksana. Kini sesiapa sahaja yang mempunyai internet dan komputer mampu untuk menceburkan diri dalam dunia pelaburan forex.
Dalam pasaran saham, anda untung apabila membeli ketika harga turun (rendah) dan menjual ketika harga naik (tinggi) tetapi dalam forex ianya pasaran dua hala. Anda boleh mendapat keuntungan samada harga naik atau turun.
i) Membeli ketika harga rendah dan menjualnya ketika harga tinggi.
Buy Low : Sell High (Bullish Market)
ii) Menjual ketika harga tinggi dan membelinya ketika harga rendah.
Sell High : Buy Low (Bearish market)
Forex singkatan kepada Foreign Exchange, iaitu perdagangan tukaran matawang asing. Ia juga dikenali dengan nama FX. Forex sebuah entity kewangan yang terbesar di dunia dengan transaksi melebihi $1.95 trillion sehari!!. Forex melibatkan transaksi dimana kita membeli satu matawang dan menjual satu matawang yang lain. Matawang (currency pair) ini ditransaksikan melalui broker dalam bentuk pair (pasangan) sebagai contoh British Pound dengan US Dollar (GBP/USD).
Learn to play the market by playing a game
October 17, 2009 by admin
Filed under Forex for Beginners
Leave a Comment
Forex is a complicated system which still often confounds people with years of trading experience. Knowing how a situation usually resolves itself does not mean that you will be able to correctly predict how it will resolve itself every time. The market data is an excellent way of judging what the situation is at any given time. It is also as good a way as you will find of predicting future market behavior. Nonetheless, it is not a guaranteed predictor and consequently even the most experienced traders sometimes make a mess of things.
The less experience you have – in anything – the more likely you are to have the wrong reaction to a given situation. If this is in a golf match, then all that rests on your mistake is a little personal pride. On the Forex market, it can end up costing you real money. It is therefore massively important that you have as much knowledge to back up your every decision as you possibly can. One way of accruing knowledge without making costly mistakes and potentially bankrupting yourself is to start by playing online Forex games. These are a kind of simulator which closely reflects the real-life market and tells you how good your instincts are – without ruining you if you make a mistake.
There are Forex games available on the Internet which run entirely free of charge. There is obviously some variation in quality, and you should ensure that you check out more than a couple before committing to one. The more experience you gather before playing for real, the better your chances of making real money in the future.
October 17, 2009 by admin
Filed under Forex for Beginners
Leave a Comment
Forex is a complicated system which still often confounds people with years of trading experience. Knowing how a situation usually resolves itself does not mean that you will be able to correctly predict how it will resolve itself every time. The market data is an excellent way of judging what the situation is at any given time. It is also as good a way as you will find of predicting future market behavior. Nonetheless, it is not a guaranteed predictor and consequently even the most experienced traders sometimes make a mess of things.
The less experience you have – in anything – the more likely you are to have the wrong reaction to a given situation. If this is in a golf match, then all that rests on your mistake is a little personal pride. On the Forex market, it can end up costing you real money. It is therefore massively important that you have as much knowledge to back up your every decision as you possibly can. One way of accruing knowledge without making costly mistakes and potentially bankrupting yourself is to start by playing online Forex games. These are a kind of simulator which closely reflects the real-life market and tells you how good your instincts are – without ruining you if you make a mistake.
There are Forex games available on the Internet which run entirely free of charge. There is obviously some variation in quality, and you should ensure that you check out more than a couple before committing to one. The more experience you gather before playing for real, the better your chances of making real money in the future.
4xtrading
Tuesday, November 3, 2009
A Financial Instruments
Spot
Financial Instruments transaction (except in the case of trades between the US Dollar, Canadian Dollar, Turkish Lira and Russian Ruble, which settle the next business day), as opposed to the future contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot transactions has the second largest turnover by volume after Swap transactions among all FX transactions in the Global FX market. NNM
Forward
One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a one day, a few days, months or years. Usually the date is decided by both parties.
Future
Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates — for example, $1000 for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Swap
The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.
Option
A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Exchange-Traded Fund
Exchange-traded funds (or ETFs) are open ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g., SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.
Posted by ali at 1:53 AM 0 comments
forex : Trading Characteristics
Trading Characteristics::
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in gross domestic product (GDP) growth, inflation (purchasing power parity theory), interest rates (interest rate parity, Domestic Fisher effect, International Fisher effect), budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
* EUR/USD: 27%
* USD/JPY: 13%
* GBP/USD (also called stering or cable): 12%
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (17.0%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.
Posted by ali at 1:47 AM 0 comments
ringgit open stonger against us dollar
FOREX: ->KUALA LUMPUR, Aug 6 (Bernama) -- The ringgit opened stronger against the US dollar on Thursday as the greenback lost its attraction in global markets, a dealer said.At 9.10am, the local unit traded higher at 3.4910/4950 against the greenback compared with 3.4950/5000 at yesterday's closing.The US dollar weakened on firmer crude oil prices, said the dealer who added that this week's sharp rally in the oil market was driven by improved economic recovery prospects."The greenback saw some sell-off today and we expect further selling-through in the near-term," he said. The bullish outlook for the stock market also supported sentiment, he added.The ringgit also strengthened against the Singapore dollar to 2.4350/4401 from 2.4355/4414, the yen to 3.6705/6762 from 3.6735/6807 and the British pound to 5.9357/9443 from 5.9366/9465.However, it weakened against the euro to 5.0319/0391 from 5.0290/0372 yesterday.-- BERNAMA
Posted by ali at 1:31 AM 0 comments
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+ A Financial Instruments
+ forex : Trading Characteristics
+ ringgit open stonger against us dollar
About Me
A Financial Instruments
Spot
Financial Instruments transaction (except in the case of trades between the US Dollar, Canadian Dollar, Turkish Lira and Russian Ruble, which settle the next business day), as opposed to the future contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot transactions has the second largest turnover by volume after Swap transactions among all FX transactions in the Global FX market. NNM
Forward
One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a one day, a few days, months or years. Usually the date is decided by both parties.
Future
Foreign currency futures are exchange traded forward transactions with standard contract sizes and maturity dates — for example, $1000 for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.
Swap
The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.
Option
A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.
Exchange-Traded Fund
Exchange-traded funds (or ETFs) are open ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g., SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.
Posted by ali at 1:53 AM 0 comments
forex : Trading Characteristics
Trading Characteristics::
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
Fluctuations in exchange rates are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in gross domestic product (GDP) growth, inflation (purchasing power parity theory), interest rates (interest rate parity, Domestic Fisher effect, International Fisher effect), budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
* EUR/USD: 27%
* USD/JPY: 13%
* GBP/USD (also called stering or cable): 12%
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (17.0%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.
Posted by ali at 1:47 AM 0 comments
ringgit open stonger against us dollar
FOREX: ->KUALA LUMPUR, Aug 6 (Bernama) -- The ringgit opened stronger against the US dollar on Thursday as the greenback lost its attraction in global markets, a dealer said.At 9.10am, the local unit traded higher at 3.4910/4950 against the greenback compared with 3.4950/5000 at yesterday's closing.The US dollar weakened on firmer crude oil prices, said the dealer who added that this week's sharp rally in the oil market was driven by improved economic recovery prospects."The greenback saw some sell-off today and we expect further selling-through in the near-term," he said. The bullish outlook for the stock market also supported sentiment, he added.The ringgit also strengthened against the Singapore dollar to 2.4350/4401 from 2.4355/4414, the yen to 3.6705/6762 from 3.6735/6807 and the British pound to 5.9357/9443 from 5.9366/9465.However, it weakened against the euro to 5.0319/0391 from 5.0290/0372 yesterday.-- BERNAMA
Posted by ali at 1:31 AM 0 comments
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