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Financial forex or foreign exchange trading is a way of making money that you may have seen advertised on TV, in magazines or online. Forex and FX are simply quick ways of referring to foreign exchange which involves buying and selling currencies on the world's fiscal markets. You can learn about them by reading any good currency trading tutorial online or offline.
Natutrally, exchanging currencies is something that people do all the time when they go on vacation or on a commercial trip overseas. You concurrently sell your own nation's currency and buy the currency of the nation that you are visiting. Businesses are also involved in forex transactions when they trade in imported or exported goods and services.
However, foreign currency trading is very different from this. It is a speculative investment, which means that the trader does not really want the currency that he is buying. He is simply investing in it with the hope that it will increase in price., he will trade it back later on.
Access to the international market is provided by forex brokers who allow the small time trader to find somebody to trade with. This is all done online and almost instantly. Just about anyone with a laptop and a broadband connection can get involved. The fx market is even open 24 hours a day Monday to Friday so you do not have to be online in the daytime if you have other commitments.
All forex transactions involve an exchange, for the reason that you have to give one currency in order to get another. This means that you are constantly dealing in two currencies. There are recognized currency pairs. Each currency has a three letter code, for instance USD for US dollar, AUDfor Australian dollar, YEN for Japanese Yen. The most traded pair is EUR/USD, the euro and US dollar.
Traders are able to control much more money than they essentially have themselves. This is called leverage or fx trading on margins. It works through a broker. You would invest a specified amount in your forex trading account with the broker. Let's say you invested $1,000 in a mini forex trading account. When you wanted to open a trade, you might put up $100 of that. If you used 100 times leverage, which is pretty low for the forex market, you may will control a trade of 100 x $100, i.e. $10,000.
The broker guarantees the outstanding $9,900 but he does not have to risk losing his money for the reason that he can close the trade if things go against you and you lose what is in your account. Of course, you would not choose to risk all of your money, so you would put in place what is called a stop loss that would close your trade automatically if you started to have a loss beyond a specific point. In this way you could limit yourr lot to $50 . You would not want to put up more than 5% of your funds on any one trade which would be $50 on a balance of $1,000.
Most skilled traders and any good currency trading tutorial will endorse risking less than this, say around 2%. This is a very important question for the reason that risk management done well or badly can make or break the forex trader. If you are thinking of getting into financial forex trading you will understand that it is risky and not all of your trades will be winners. You could have several losses in a row which would mean a gradually decreasing account balance. It is imperative that your exposure for each trade is low enough that a major part of your funds will continue intact through a losing position like that, this means that you can recover the balance later on if things start to go well again. It is also vital to be able to stay calm under pressure so that you do not make mistakes at critical moments.
The benefit of leverage is that it allows a winning trader to make a lot of money in a short time. However, it is critical to remember that money can be lost quickly too. Fortunately, nearly all brokers offer a demo account facility so that you can try out the technique and practice your financial forex trading skills without risking any real money. This no risk strategy combined with reading a good currency trading tutorial will have you trading in no time at all.
Saturday, February 6, 2010
Fundamentals Of Forex Trading
Forex Trading just means buying or selling currency pairs with the intention of making a profit through the forex market. Most people know the foreign exchange as a market where currencies are exchanged.
This exchange can be profitable if done in big volumes. It is pretty comparable to the stock market. Always buy low, always sell high. A profit is gained by price movement in or against your favor. Now let us look at ways currencies are traded.
All currencies on the forex market are traded in the form of a currency pair. For illustration, the Euro/Usd pair which is just the Euro Dollar against the American Dollar. Or the Gbp/Jpy pair which is the British Pound versus the Japanese Yen.
Why is this done? In a pair, the value of a currency can be known. This comparison between two currencies allows us to determine if a currency has risen or dropped in value. They can be paired not just with other currencies but with commodities as well such as silver and gold. Let us understand currency pairs a bit more. The In any pair, the currency seperated to the left is called the base currency while the one on the right is known as the quote currency. In the case of the Eur/Usd, the base currency would be Eur while the quote currency would be Usd. What takes place when a trader buys a pair is the buying of the base currency against the selling of the quote currency. The opposite happens should you sell the pair, you sell the base currency and buy the quote currency.
This exchange can be profitable if done in big volumes. It is pretty comparable to the stock market. Always buy low, always sell high. A profit is gained by price movement in or against your favor. Now let us look at ways currencies are traded.
All currencies on the forex market are traded in the form of a currency pair. For illustration, the Euro/Usd pair which is just the Euro Dollar against the American Dollar. Or the Gbp/Jpy pair which is the British Pound versus the Japanese Yen.
Why is this done? In a pair, the value of a currency can be known. This comparison between two currencies allows us to determine if a currency has risen or dropped in value. They can be paired not just with other currencies but with commodities as well such as silver and gold. Let us understand currency pairs a bit more. The In any pair, the currency seperated to the left is called the base currency while the one on the right is known as the quote currency. In the case of the Eur/Usd, the base currency would be Eur while the quote currency would be Usd. What takes place when a trader buys a pair is the buying of the base currency against the selling of the quote currency. The opposite happens should you sell the pair, you sell the base currency and buy the quote currency.
The Importance of Forex Trading Education
It is also good if you can learn about the financial market's history.But you see there is more to predicting the market; you need to educate yourself still.The very first things that you'll learn in forex trading education are the basics.But if you have undergone a forex trading education, you are more capable to handle demands and the stress that comes along with the trade.
Most traders, specially the starters, believe that they can predict what is about to happen in forex trading.You can get a forex education online or in a traditional class.But don't be discouraged; in fact why not use that piece of information to strive hard to get a forex trading education.Since forex trading is a high risk endeavor, it is not wise to instantly jump into the trade.So you see, no matter what we do, education continues.
You should first determine if you have a reasonable return of your capital.And this is especially true with forex trading.Even your daily life requires it because if you're the type of person who is quite lazy and wants to goof around, you'll attain nothing of importance in your life.The financial market changes by the minute, or even by the second.
And lastly, you should learn about trading psychology which can teach you about patience, discipline, and commitment.And knowing the past mistakes made by other traders will teach us how to avoid such circumstances.
It will be easier for you to understand the different reasons behind these shifts, and can greatly help in minimizing the risks that you are going to undertake.It is the best possible route to take before plunging into forex trading.
Most successful forex traders have undergone some sort of education.You must have the proper mindset in order to be a successful forex trader.From your nursery days, until you finally graduate in college, you have dedicated many years to get a good education.
First things first, you must have a forex trading system which contains the key elements, namely: money management, risk, and execution.This is especially helpful for starters, and even for those who have been in trading for some time.Each time you encounter a new endeavor, activity, or thing, the first to come into your mind is to learn about that particular thing or activity.
Aside from that, you can also learn about fundamental and technical analysis.Forex trading is not just about buying low currencies and then selling them when the price is high.But it doesn't end there.It includes margin concepts, order types, rollovers, bids, and leveraging.
If you purely rely on experience and instinct, you may not likely succeed in forex trading.Ask a professional trader to show and guide you how it is done.If you have a well developed system, which gives a lot of weight to money and risk management, over time you can actually carry on draw downs while expecting consistent returns.
Having a forex education is an added advantage compared to those who haven't had any.The FX market is volatile, and you can understand the situation better if you know how to read charts.
When a trader buys the Eur/Usd, the trader is buying the Euro and selling the American dollar. The opposite happens when you sell the Eur/Usd, buy the Us dollar and sell the Euro. In forex trading, this happens with all pairs. Let us look at how we profit from forex trading with pairs. If the price of a currency pair start to rise, what is happening is the rise in value of the base currency over the quote currency. If price drops, the base currency is losing value against the quote currency. Any profits are losses in forex trading are directly linked to the fluctuating value of the two currencies.
Imagine you put a buy order on the Gbp/Jpy when it touched 150.00. This means you are backing the British Pound (Base currency) to rise in value over the Japanese Yen (Quote currency). Let us further assume that the price rises to 150.50. This would mean that you are making a 50 pip profit minus whatever spreads the broker charged you for the trade. Pips are like points in the stock market, they are a way to measure performance. It stands for price index position.
Assume the gbp/jpy went in the opposite direction instead. Lets say it dropped to 149.50. You would now be making an unrealized loss of 50 pips plus the spread. I mention unrealized because your account will not reflect the loss or profit until you close the trade. This is how traders make or lose money in forex trading.
Most traders, specially the starters, believe that they can predict what is about to happen in forex trading.You can get a forex education online or in a traditional class.But don't be discouraged; in fact why not use that piece of information to strive hard to get a forex trading education.Since forex trading is a high risk endeavor, it is not wise to instantly jump into the trade.So you see, no matter what we do, education continues.
You should first determine if you have a reasonable return of your capital.And this is especially true with forex trading.Even your daily life requires it because if you're the type of person who is quite lazy and wants to goof around, you'll attain nothing of importance in your life.The financial market changes by the minute, or even by the second.
And lastly, you should learn about trading psychology which can teach you about patience, discipline, and commitment.And knowing the past mistakes made by other traders will teach us how to avoid such circumstances.
It will be easier for you to understand the different reasons behind these shifts, and can greatly help in minimizing the risks that you are going to undertake.It is the best possible route to take before plunging into forex trading.
Most successful forex traders have undergone some sort of education.You must have the proper mindset in order to be a successful forex trader.From your nursery days, until you finally graduate in college, you have dedicated many years to get a good education.
First things first, you must have a forex trading system which contains the key elements, namely: money management, risk, and execution.This is especially helpful for starters, and even for those who have been in trading for some time.Each time you encounter a new endeavor, activity, or thing, the first to come into your mind is to learn about that particular thing or activity.
Aside from that, you can also learn about fundamental and technical analysis.Forex trading is not just about buying low currencies and then selling them when the price is high.But it doesn't end there.It includes margin concepts, order types, rollovers, bids, and leveraging.
If you purely rely on experience and instinct, you may not likely succeed in forex trading.Ask a professional trader to show and guide you how it is done.If you have a well developed system, which gives a lot of weight to money and risk management, over time you can actually carry on draw downs while expecting consistent returns.
Having a forex education is an added advantage compared to those who haven't had any.The FX market is volatile, and you can understand the situation better if you know how to read charts.
When a trader buys the Eur/Usd, the trader is buying the Euro and selling the American dollar. The opposite happens when you sell the Eur/Usd, buy the Us dollar and sell the Euro. In forex trading, this happens with all pairs. Let us look at how we profit from forex trading with pairs. If the price of a currency pair start to rise, what is happening is the rise in value of the base currency over the quote currency. If price drops, the base currency is losing value against the quote currency. Any profits are losses in forex trading are directly linked to the fluctuating value of the two currencies.
Imagine you put a buy order on the Gbp/Jpy when it touched 150.00. This means you are backing the British Pound (Base currency) to rise in value over the Japanese Yen (Quote currency). Let us further assume that the price rises to 150.50. This would mean that you are making a 50 pip profit minus whatever spreads the broker charged you for the trade. Pips are like points in the stock market, they are a way to measure performance. It stands for price index position.
Assume the gbp/jpy went in the opposite direction instead. Lets say it dropped to 149.50. You would now be making an unrealized loss of 50 pips plus the spread. I mention unrealized because your account will not reflect the loss or profit until you close the trade. This is how traders make or lose money in forex trading.
Trade Like A Professional Forex Trader
"The Quickest & Most Flexible Way to gain Day Trading Liberty In The Foreign exchange Markets & Shield Yourself From Risk.... Particularly If You Are Green & Have Small Time.... GUARANTEED..."
No need to chance a large amount of cash in today's turbulent markets.
While stocks continue to tumble and companies go broke, foreign FOREX trading, particularly forex day trading, can be profitable, whichever way the currencies swing -- so long as you've a trustworthy, proved methodology, and you stick to your 'rules'.
The Currency exchange Revenue Engine is perfect for the trader prepared to chance only a touch at any point -- with as little as $400 in a trading account. That is pretty low-risk for any forex investor!
Forex Revenue Engine was released in December 2008 by Bill & Greg Poulos, publishers of the top selling Currency exchange Profit Accelerator and other training courses for the exchange, is this new day trading course that will work profitably in any timeframe.
All-new Version 2.0 available soon.FIE is different from their successful Currency exchange Profit Accelerator program with 4 separate secrets ( most likely too much to grasp or master by some forex traders ) by teaching a single, but flexible day trading system which can be learned and applied fast.
Differences between FPA and FIE.
Anyone who has studied or traded the Currency exchange markets knows that there's more than a technique to trade these markets. Those preferring to trade on an end-of-day trading basis only may not milk day trading.
Forex Profit Accelerator covers 4 different trading methods, while Foreign exchange Earnings Engine concentrates on the best one for day trading.
FIE can be employed profitably for day trading, even with a $400 trading account. As profits ( and confidence in the system ) build up, traders can safely increase their funds to the more standard $5K or $10K.
A unique feature and benefit of all Bill & Greg Poulos' Profits Run courses, Foreign exchange Earnings Engine is their one year unlimited e-mail support.
Every FIE owner gets his or her support e-mail answered swiftly by one of many highly-trained Profits Run Inc. Staff members.
Currency exchange Earnings Engine is among the most in depth foreign exchange trading courses I have ever seen. This course has two parts to it - the course itself, and all of the student support materials. Each part is similarly crucial and in particular built to maximise your learning experience and earning potential.
The new Currency exchange Revenue Engine 2.0 course includes CDs, a color reference manual, 'blueprint' cards that summarise the 3 FIE trading methods, and a 'Quick Start' guide so you can be successfully running ( and trading ) in a minimum amount of time.
The CDs include:
*Module 2 : Trading Rules *Module 3 : Detailed Trade Examples Review *Module 4 : Foreign exchange Brokers, Charting Software & Trading Platform *Module 5 : Risk Management & Discipline *Bonus Module : Foreign exchange & Trading Basics ( excellent for new or less seasoned traders ).
One of the best things about this system is that Bill Poulos does not vanish after you get the course. With Forex Income Engine you will get one full year of unlimited email support. There also are some great bonuses that come with this course.
Forex day trading Liberty can be yours today if you are taking action. The choice is yours....
Are you ready to triple your profit potential in the Forex markets again and again, at any time of the day, starting with as little as a $500 trading account? If you answered yes then you are in luck because Bill Poulos is releasing his Forex Income Engine 2 on June 16th....
No need to chance a large amount of cash in today's turbulent markets.
While stocks continue to tumble and companies go broke, foreign FOREX trading, particularly forex day trading, can be profitable, whichever way the currencies swing -- so long as you've a trustworthy, proved methodology, and you stick to your 'rules'.
The Currency exchange Revenue Engine is perfect for the trader prepared to chance only a touch at any point -- with as little as $400 in a trading account. That is pretty low-risk for any forex investor!
Forex Revenue Engine was released in December 2008 by Bill & Greg Poulos, publishers of the top selling Currency exchange Profit Accelerator and other training courses for the exchange, is this new day trading course that will work profitably in any timeframe.
All-new Version 2.0 available soon.FIE is different from their successful Currency exchange Profit Accelerator program with 4 separate secrets ( most likely too much to grasp or master by some forex traders ) by teaching a single, but flexible day trading system which can be learned and applied fast.
Differences between FPA and FIE.
Anyone who has studied or traded the Currency exchange markets knows that there's more than a technique to trade these markets. Those preferring to trade on an end-of-day trading basis only may not milk day trading.
Forex Profit Accelerator covers 4 different trading methods, while Foreign exchange Earnings Engine concentrates on the best one for day trading.
FIE can be employed profitably for day trading, even with a $400 trading account. As profits ( and confidence in the system ) build up, traders can safely increase their funds to the more standard $5K or $10K.
A unique feature and benefit of all Bill & Greg Poulos' Profits Run courses, Foreign exchange Earnings Engine is their one year unlimited e-mail support.
Every FIE owner gets his or her support e-mail answered swiftly by one of many highly-trained Profits Run Inc. Staff members.
Currency exchange Earnings Engine is among the most in depth foreign exchange trading courses I have ever seen. This course has two parts to it - the course itself, and all of the student support materials. Each part is similarly crucial and in particular built to maximise your learning experience and earning potential.
The new Currency exchange Revenue Engine 2.0 course includes CDs, a color reference manual, 'blueprint' cards that summarise the 3 FIE trading methods, and a 'Quick Start' guide so you can be successfully running ( and trading ) in a minimum amount of time.
The CDs include:
*Module 2 : Trading Rules *Module 3 : Detailed Trade Examples Review *Module 4 : Foreign exchange Brokers, Charting Software & Trading Platform *Module 5 : Risk Management & Discipline *Bonus Module : Foreign exchange & Trading Basics ( excellent for new or less seasoned traders ).
One of the best things about this system is that Bill Poulos does not vanish after you get the course. With Forex Income Engine you will get one full year of unlimited email support. There also are some great bonuses that come with this course.
Forex day trading Liberty can be yours today if you are taking action. The choice is yours....
Are you ready to triple your profit potential in the Forex markets again and again, at any time of the day, starting with as little as a $500 trading account? If you answered yes then you are in luck because Bill Poulos is releasing his Forex Income Engine 2 on June 16th....
Beginning Basics for Forex Markets
With so many different opinions about what is important in the Forex market, it is no wonder why so many people are confused. Taking the time to create your own investing strategy can help clear up some questions and allow you to focus but in reality, it is only going to be so effective. The best news that you can use is the reality that everyone makes mistakes. The great news is that you can learn from the mistakes of others and protect your money.
The very first thing that you need to do when starting in Forex is learn the language. There are terms and phrases that you need to know in order to successfully manage the trades. Additionally, this will allow you time to study up on charts, maps and all other important details that will help you to better to find the success that you want. Skipping this is of course possible, but it is never recommended. You should always take the time to carefully consider the basics before you get started.
Avoid paying for advice. The best advice and suggestions are usually offered for free. If someone is charging you a huge amount of money to help you improve your investing strategy it simply is not worth it. You would be much better off taking the time to consider all of your choices that are free and easily obtainable rather than paying huge amounts for a learning resource.
It is also a god idea to talk to other investors who have similar goals as yours. This will help offer you some guidance, suggestions and ideas on ways to improve your investment strategy and ultimately increase your profits. The worse situation that could happen is discovering that you have done nothing to improve situations and talked to someone who was not after the same goals as yourself.
Every person has a different intention with the Forex market; you need to find yours before you can really start talking to other people as well. Each decision is typically pretty easy to choose, but you need to have a basic idea of where you are, and where you are going before you get started. Taking just any idea and running with it is not wise and neither is talking to someone who does not share at least similar goals with you.
You should also consistently follow up with your investment strategy. After a few transactions, you might discover that how things are presently working is not acceptable. This is not impossible in the least and can really create some huge headaches if you do not straighten out the problems as they first appear, rather than waiting for them to expand and spread all around.
Making money in Forex is not only possible but also quite enjoyable once you know what you are doing. The small amount of effort that is required is quite worth the effort and you are sure to be really pleased once you start making a profit. Getting things to fall into place is never easy, and because of this, you should expect your plan to be easily adjustable. You are likely to make a lot of changes before you settle upon a good strategy that works for your needs, which will simply help you to modify your needs again when necessary and also keep everything smoothly flowing.
The very first thing that you need to do when starting in Forex is learn the language. There are terms and phrases that you need to know in order to successfully manage the trades. Additionally, this will allow you time to study up on charts, maps and all other important details that will help you to better to find the success that you want. Skipping this is of course possible, but it is never recommended. You should always take the time to carefully consider the basics before you get started.
Avoid paying for advice. The best advice and suggestions are usually offered for free. If someone is charging you a huge amount of money to help you improve your investing strategy it simply is not worth it. You would be much better off taking the time to consider all of your choices that are free and easily obtainable rather than paying huge amounts for a learning resource.
It is also a god idea to talk to other investors who have similar goals as yours. This will help offer you some guidance, suggestions and ideas on ways to improve your investment strategy and ultimately increase your profits. The worse situation that could happen is discovering that you have done nothing to improve situations and talked to someone who was not after the same goals as yourself.
Every person has a different intention with the Forex market; you need to find yours before you can really start talking to other people as well. Each decision is typically pretty easy to choose, but you need to have a basic idea of where you are, and where you are going before you get started. Taking just any idea and running with it is not wise and neither is talking to someone who does not share at least similar goals with you.
You should also consistently follow up with your investment strategy. After a few transactions, you might discover that how things are presently working is not acceptable. This is not impossible in the least and can really create some huge headaches if you do not straighten out the problems as they first appear, rather than waiting for them to expand and spread all around.
Making money in Forex is not only possible but also quite enjoyable once you know what you are doing. The small amount of effort that is required is quite worth the effort and you are sure to be really pleased once you start making a profit. Getting things to fall into place is never easy, and because of this, you should expect your plan to be easily adjustable. You are likely to make a lot of changes before you settle upon a good strategy that works for your needs, which will simply help you to modify your needs again when necessary and also keep everything smoothly flowing.
Importance Of Good Forex Training
Trading in financial markets is a great way to make an income online. If you have interest in making money from these marketers, then you may have heard of the Forex market trading system. People who are looking into the financial marketers have no idea what the Forex system is, which is a shame, because it is a very profitable system if you know how to utilize the system to make a profit in the market. If you understand the system, and know how it works you will be able to make money from trading online. The reason Forex is so popular is that it is accessible from online which means you can use it from the comfort of your own home.
So what is the Forex trading system exactly? Well Forex is a market where you exchange foreign currencies from different countries around the world. Currency is used instead of shares because currency isn't affected by the factors that can affect shares (weather, politics, reputation of a business etc...).
Trading in the Forex market isn't going to be easy especially for a new trader. It is recommended that you get extensive training to help understand how the market works, and how you can create your own strategy to making money through the trading system. Here are a few eye-popping statistics that you need to be aware of before you jump into the Forex market:
• 90% - Lose money • 5% - manage to break even • 5% - manage to create themselves a good income online
With these results it is obvious why training is needed and, also why new traders are at risk of losing LOTS of money.
With such a small success rate, how do the traders make it big? Why? because they are well educated in the Forex trading system. They know everything about the system, and how to analyse the market to see when to trade to make profits.
These traders are in a league of their own... because of the training which they received. If you want to be successful in the Forex system you must learn everything about the system, and by getting the proper training, joining forums and communities, this will reduce your risk of loss and increase your chance of profits.
When thinking about training you need to make sure that the training you choose will include money management, the basics of Forex, and how to develop a strategy. There are some things that you will only learn by actually jumping into the market (after training), and learn for yourself. Things such as discipline, and having a successful mindset.
So if you are looking for an alternative income, and looking to make money from the comfort of your own home instead of working that 9 to 5, then check out the Forex market.
Learn more about Forex at http://www.learnforexonline.net. Download a free guide entitled "Forex Fundamentals" just for stopping by.
You can also visit http://www.squidoo.com/Forex-trading-overview for an overview of the Forex Trading system, and sign up for a FREE Forex account which you can access real time Forex rates, access to free charting features, innovative trading tools, and an online trading community that you can communicate with to achieve GREAT saccess with Forex.
So what is the Forex trading system exactly? Well Forex is a market where you exchange foreign currencies from different countries around the world. Currency is used instead of shares because currency isn't affected by the factors that can affect shares (weather, politics, reputation of a business etc...).
Trading in the Forex market isn't going to be easy especially for a new trader. It is recommended that you get extensive training to help understand how the market works, and how you can create your own strategy to making money through the trading system. Here are a few eye-popping statistics that you need to be aware of before you jump into the Forex market:
• 90% - Lose money • 5% - manage to break even • 5% - manage to create themselves a good income online
With these results it is obvious why training is needed and, also why new traders are at risk of losing LOTS of money.
With such a small success rate, how do the traders make it big? Why? because they are well educated in the Forex trading system. They know everything about the system, and how to analyse the market to see when to trade to make profits.
These traders are in a league of their own... because of the training which they received. If you want to be successful in the Forex system you must learn everything about the system, and by getting the proper training, joining forums and communities, this will reduce your risk of loss and increase your chance of profits.
When thinking about training you need to make sure that the training you choose will include money management, the basics of Forex, and how to develop a strategy. There are some things that you will only learn by actually jumping into the market (after training), and learn for yourself. Things such as discipline, and having a successful mindset.
So if you are looking for an alternative income, and looking to make money from the comfort of your own home instead of working that 9 to 5, then check out the Forex market.
Learn more about Forex at http://www.learnforexonline.net. Download a free guide entitled "Forex Fundamentals" just for stopping by.
You can also visit http://www.squidoo.com/Forex-trading-overview for an overview of the Forex Trading system, and sign up for a FREE Forex account which you can access real time Forex rates, access to free charting features, innovative trading tools, and an online trading community that you can communicate with to achieve GREAT saccess with Forex.
Winning the Battle at Forex Trading one day at a time
You need the right attitude to succeed in Forex trading. If you are looking to create a substantial fortune from your ventures in Forex Trading, then you should treat each and every transaction as a mini battle that requires skill, determination and experience in order to win. Major successes are built by smaller successes stacked one on top another. This principle also holds true for Forex trading. Essentially, the resulting structure will be just as good as the individual bricks that make it up.
The Building Blocks of Success
If want to generate large amounts of profit by Learning Forex Trading, then you have to think about what needs to be done to start making your daily transactions a success. Now, how do you achieve this goal? The first step is relatively simple. Remember, previous successes in an area usually leave clues. To be a success in Forex trading you have to learn from your predecessors, those who have made it big and are creating fortunes for themselves.
By leveraging as much of the experience and knowledge of those who have gone before you as possible, you are spared at least some of the pain from going through what would be a steeper learning curve of trial and error. You will still require strength of character and high levels of patience to get through, but at least you won't be traveling completely in the dark.
Learning from experience
No one goes through a new venture without making some errors and facing unpleasant experiences. The earlier you meet these experiences, the better it is for you. You learn from these and make better choices in the future. This is an important point. There needs to be progression. Take notes if you have to, so you don't repeat previous mistakes. If you find that the same negative thing is happening over and over again, then you need to stop. Draw up a plan. Look at it before you place any trade to keep yourself in check. This will help reduce any bad habits or impulses that might impair your ability to trade profitably.
Overcoming greed and temptation
Sometimes, greed takes you over and gains better control of your logical mind. You will be tempted to get into or out of the market prematurely while you are trading. This temptation will increase because you will often see examples of situations when you would have made some money if you had plunged in. This sort of haphazard approach will eventually get you into trouble. Living in fear of losing money is another challenge that needs to be met with when participating in Forex trading. Fear is never a good companion for this sort of endeavor. You can allay this a little by trading with small amounts at first or expendable income. The rest is up to you to find a way to overcome your fear of loss. Some of it will come with time. Remember, if you do your homework and prepare properly, you will perform better. You will also be able to notice your high level of performance.
You want to ensure that luck has a reduced impact on your trades. Therefore, watch carefully and make sure you keep your emotions in check. If it feels like a dice throw, you are doing it wrong.
Strike when the iron is hot
Seize he opportunity when it arises, but never invest blindly without doing all the research to ensure you are trading in the right direction. Research need not take a long time for every trade. It might be a look at your charts, a minute's investigation, or longer. You will get better at reading the signs as time goes on. By keeping up to date with the latest news is in the industry and the global economy you can increase your general awareness and use the information to help you trade better and more accurately. When the time comes, you must act. Failing to take action when the time is ripe will not do you any good. While not losing money is important, making money is also important. Strike when the iron is hot and you could be a success story.
In your quest to making it trading Forex, you will undoubtedly face some challenges and losses along the way, but that should not be an excuse to quit.
The Building Blocks of Success
If want to generate large amounts of profit by Learning Forex Trading, then you have to think about what needs to be done to start making your daily transactions a success. Now, how do you achieve this goal? The first step is relatively simple. Remember, previous successes in an area usually leave clues. To be a success in Forex trading you have to learn from your predecessors, those who have made it big and are creating fortunes for themselves.
By leveraging as much of the experience and knowledge of those who have gone before you as possible, you are spared at least some of the pain from going through what would be a steeper learning curve of trial and error. You will still require strength of character and high levels of patience to get through, but at least you won't be traveling completely in the dark.
Learning from experience
No one goes through a new venture without making some errors and facing unpleasant experiences. The earlier you meet these experiences, the better it is for you. You learn from these and make better choices in the future. This is an important point. There needs to be progression. Take notes if you have to, so you don't repeat previous mistakes. If you find that the same negative thing is happening over and over again, then you need to stop. Draw up a plan. Look at it before you place any trade to keep yourself in check. This will help reduce any bad habits or impulses that might impair your ability to trade profitably.
Overcoming greed and temptation
Sometimes, greed takes you over and gains better control of your logical mind. You will be tempted to get into or out of the market prematurely while you are trading. This temptation will increase because you will often see examples of situations when you would have made some money if you had plunged in. This sort of haphazard approach will eventually get you into trouble. Living in fear of losing money is another challenge that needs to be met with when participating in Forex trading. Fear is never a good companion for this sort of endeavor. You can allay this a little by trading with small amounts at first or expendable income. The rest is up to you to find a way to overcome your fear of loss. Some of it will come with time. Remember, if you do your homework and prepare properly, you will perform better. You will also be able to notice your high level of performance.
You want to ensure that luck has a reduced impact on your trades. Therefore, watch carefully and make sure you keep your emotions in check. If it feels like a dice throw, you are doing it wrong.
Strike when the iron is hot
Seize he opportunity when it arises, but never invest blindly without doing all the research to ensure you are trading in the right direction. Research need not take a long time for every trade. It might be a look at your charts, a minute's investigation, or longer. You will get better at reading the signs as time goes on. By keeping up to date with the latest news is in the industry and the global economy you can increase your general awareness and use the information to help you trade better and more accurately. When the time comes, you must act. Failing to take action when the time is ripe will not do you any good. While not losing money is important, making money is also important. Strike when the iron is hot and you could be a success story.
In your quest to making it trading Forex, you will undoubtedly face some challenges and losses along the way, but that should not be an excuse to quit.
Why Should you Invest in Learning to Trade Forex
What would you feel if you can earn more for less time spent? You will learn in this article why Forex will be the future in trading. People can get rich by buying and selling currencies. Banks, companies and individuals are now turning heads to learn forex and getting the forex trading they need, because they know already that it is the largest market, the fastest and safer way to earn unlimited income than Stocks and Futures.
People can get rich by buying and selling currencies. Banks, companies and individuals are now turning heads on how to learn forex exchange and getting the forex trading they need, because they know already that it is the largest market, the fastest and safer way to earn unlimited income than Stocks and Futures.
Before Forex was not even available to individuals like you and me. But due to the age of the internet, Forex trading is now an option to people who want to earn a lot of money. Depending on how much they are willing to risk, this is the best way to start earning from home and enjoying life.
Learn why this is the future of potential earning unlimited money in less time than usual. Here are some of the reasons why:
Transaction Duration: In a good opportunity of trade, you can turn a little amount of $200 into $2000, assuming you have devoted time to learn the craft.
Operation Cost vs. others : You don't need to pay taxes, commissions and rent in trading currencies.
Liquidity or Flexibility : It is always open, as long as you have seen an opportunity to place a great trade, you can earn any time and any where internet is available.
Security: Bad news does not affect the trade, you can earn even in a down or up market. It does not have a physical address and cannot be controlled by anyone so you can be sure everybody has the chance to get rich in Forex.
People can get rich by buying and selling currencies. Banks, companies and individuals are now turning heads on how to learn forex exchange and getting the forex trading they need, because they know already that it is the largest market, the fastest and safer way to earn unlimited income than Stocks and Futures.
Before Forex was not even available to individuals like you and me. But due to the age of the internet, Forex trading is now an option to people who want to earn a lot of money. Depending on how much they are willing to risk, this is the best way to start earning from home and enjoying life.
Learn why this is the future of potential earning unlimited money in less time than usual. Here are some of the reasons why:
Transaction Duration: In a good opportunity of trade, you can turn a little amount of $200 into $2000, assuming you have devoted time to learn the craft.
Operation Cost vs. others : You don't need to pay taxes, commissions and rent in trading currencies.
Liquidity or Flexibility : It is always open, as long as you have seen an opportunity to place a great trade, you can earn any time and any where internet is available.
Security: Bad news does not affect the trade, you can earn even in a down or up market. It does not have a physical address and cannot be controlled by anyone so you can be sure everybody has the chance to get rich in Forex.
Forex Trading Tips
Although anyone can start trading currency, and yes, even it is easy money, not all people who venture into this is rich. If you really want to earn money week after week, you must take time to learn properly how to learn forex exchange. With all the forex trading courses offered, some are good, some are just there for the money. Choose a Forex course that can give you:
quality forex training : and I mean not just the basics, but the forex strategies needed to become an elite trader. Courses made by a forex mentor can help you do just that.
quality support : anyt trader needs all the help he/she can get in trading. Forex Courses that are worth your money and time are the ones that has a great support group.
flexibilty : you have a job, and learning Forex does not have to make you quit now and just sustain yourself with Forex. A great Forex Course has materials available online and lets you learn at your own pace.
After getting the quality education, you can get a great currency trading software platform to help you practice in a forex demo account and have the broker that would give you the best forex trade signals possible .
How much money you would want to make? What would you feel about it if you had that money week after week, in less time that you spend having lunch? Forex is the future of investments, with manageable risks and higher earning potential than any market to date. Invest time in learning to trade forex with now and enjoy life.
quality forex training : and I mean not just the basics, but the forex strategies needed to become an elite trader. Courses made by a forex mentor can help you do just that.
quality support : anyt trader needs all the help he/she can get in trading. Forex Courses that are worth your money and time are the ones that has a great support group.
flexibilty : you have a job, and learning Forex does not have to make you quit now and just sustain yourself with Forex. A great Forex Course has materials available online and lets you learn at your own pace.
After getting the quality education, you can get a great currency trading software platform to help you practice in a forex demo account and have the broker that would give you the best forex trade signals possible .
How much money you would want to make? What would you feel about it if you had that money week after week, in less time that you spend having lunch? Forex is the future of investments, with manageable risks and higher earning potential than any market to date. Invest time in learning to trade forex with now and enjoy life.
Basics You Should Know About Online Forex Trading
What are the basic of online Forex trading? Because of its ease and accessibility for anyone to just jump in and start trading, I would say that one of the first things anyone should know is that the world of online Forex trading can be deceivingly simple - so simple in fact, that the real difficulties of the situation, when they do show up will leave you in a disillusionment as well as spurring the notion for you to give up.
This article points certain basics that you should know about before you start your online Forex trading journey - tenets you should keep in mind the entire time you make any investment decisions or see a threshold in the market you want to explore. One of the points that you should note that online Forex trading requires the same amount of attention as the physical alternative - and there is an added catch of Forex software systems and platforms which you have to tackle if you want to succeed in the investment game.
Forex is a true 24 hour investment market, with different day trade times which means there will be a currency in the world for you to invest in at all times. You can take the short term option of day trading or the long view of sitting on your decisions with the eventual hope that market patterns will bend to your predictions and you can cash out in an instant. The market is also extremely liquid, which is a good thing, meaning that you can pull out your cash and investments within moments and save yourself from losing money as the market goes on a downward spiral. This is why you have to be careful of online companies that add a a lot of red tape that makes even the most basic of operations; like filling out orders and completing transactions slower then they should be.
The entire reason of digitizing the system is so that speed is no longer a factor. Brokerage companies that make things slower then they should be should be avoided - it normally takes a mere few seconds to fill out orders and complete transactions and it takes less than a few minutes to pull out of the market when you see the warning signs on the horizon.
Most of the time, online brokerages also offer the end user Forex systems software that help you initiate contact with the market and plays a crucial role with your investment options. From live price feeds, market watching, calculating forecasts and even warning you if your decision goes against market psychology, a good piece of system software can mean the difference between success and failure.
Do your research before you plunge in and there a number of high quality Forex books you should consult before doing anything. Education is the cornerstone of success and if you shy away from paying a minute amount for information that could make you a millionaire - then that is the most basic, and fundamental mistake of beginners I can think of.
This article points certain basics that you should know about before you start your online Forex trading journey - tenets you should keep in mind the entire time you make any investment decisions or see a threshold in the market you want to explore. One of the points that you should note that online Forex trading requires the same amount of attention as the physical alternative - and there is an added catch of Forex software systems and platforms which you have to tackle if you want to succeed in the investment game.
Forex is a true 24 hour investment market, with different day trade times which means there will be a currency in the world for you to invest in at all times. You can take the short term option of day trading or the long view of sitting on your decisions with the eventual hope that market patterns will bend to your predictions and you can cash out in an instant. The market is also extremely liquid, which is a good thing, meaning that you can pull out your cash and investments within moments and save yourself from losing money as the market goes on a downward spiral. This is why you have to be careful of online companies that add a a lot of red tape that makes even the most basic of operations; like filling out orders and completing transactions slower then they should be.
The entire reason of digitizing the system is so that speed is no longer a factor. Brokerage companies that make things slower then they should be should be avoided - it normally takes a mere few seconds to fill out orders and complete transactions and it takes less than a few minutes to pull out of the market when you see the warning signs on the horizon.
Most of the time, online brokerages also offer the end user Forex systems software that help you initiate contact with the market and plays a crucial role with your investment options. From live price feeds, market watching, calculating forecasts and even warning you if your decision goes against market psychology, a good piece of system software can mean the difference between success and failure.
Do your research before you plunge in and there a number of high quality Forex books you should consult before doing anything. Education is the cornerstone of success and if you shy away from paying a minute amount for information that could make you a millionaire - then that is the most basic, and fundamental mistake of beginners I can think of.
A Tutorial in Forex Trading Concepts
It is without a doubt that Forex Trading has already presented itself as a good opportunity as a profitable business that can be done by anyone who really wants to learn it. It has become a way out of the 9-to-5 corporate lifestyle and way in to a work-at-home way of life, without sacrificing the current standard of living and at times even making it better.
Most veteran traders believe that the best and most profitable of the capital markets is the Forex market. For a long time, forex trading has been dominated by large major banking institutions, major financial establishments, and central banks of each country; for example the U.S. Federal Reserve Bank. But today, thanks to the World Wide Web, the market has been opened to all people willing to learn the best methods in forex trading and with the target of making significant gains as the organizations mentioned above that annually and consistently make very high revenues from trading in the Foreign Exchange market.
There are many benefits when trading the forex markets, for example; you don't have to worry about fees you may have to pay to your broker; there are also none of the usual fees to which futures and equity traders are accustomed to pay always; no exchange or clearing fees, no NFA or SEC fees.
The most common currencies traded in the forex market are: US Dollar, Japanese Yen, British Poud, Euro, and the Swiss Franc. It is the exposure of these countries to the global commerce industry that these five currencies are responsible for over 70% of North American trading. Not to mention other currencies such as the Canadian, Australian, and New Zealand Dollars that account for 4%-7% of the total market volume. Together, all this five majors and minors currencies constitute the base of the Forex market.
Now let's go to the concept of "buying" and "selling" in the Forex market. Buying is described as the purchase of a "currency pair" to start a trade, while "selling short" is the opposite - disposing the currency pair for a particular price. So when you start a purchase of a currency pair, you are expecting that in time, the price of the currency pair will shoot up. In layman terms - you buy cheap to sell high; which is easy to understand. In the case of selling short, it becomes a little more complex. To make a profit by selling short, you sell a currency pair that you believe will decrease in worth. And then after selling, as soon the price dips down, you will buy it back at the new price, but now you can demand for a higher selling price when you opened the trade, so you earn the difference in prices. It may seem complex specially if you are a beginner, but once you are in front of your trading station it will be much simpler.To help you get accustomed to the Forex market and minimize your risk of loss, you need to get for yourself a forex trading expert adviser or f orex trading EA. The minimum investment that you will have to pay will be miniscule once you have gotten into the groove of trading.
Most veteran traders believe that the best and most profitable of the capital markets is the Forex market. For a long time, forex trading has been dominated by large major banking institutions, major financial establishments, and central banks of each country; for example the U.S. Federal Reserve Bank. But today, thanks to the World Wide Web, the market has been opened to all people willing to learn the best methods in forex trading and with the target of making significant gains as the organizations mentioned above that annually and consistently make very high revenues from trading in the Foreign Exchange market.
There are many benefits when trading the forex markets, for example; you don't have to worry about fees you may have to pay to your broker; there are also none of the usual fees to which futures and equity traders are accustomed to pay always; no exchange or clearing fees, no NFA or SEC fees.
The most common currencies traded in the forex market are: US Dollar, Japanese Yen, British Poud, Euro, and the Swiss Franc. It is the exposure of these countries to the global commerce industry that these five currencies are responsible for over 70% of North American trading. Not to mention other currencies such as the Canadian, Australian, and New Zealand Dollars that account for 4%-7% of the total market volume. Together, all this five majors and minors currencies constitute the base of the Forex market.
Now let's go to the concept of "buying" and "selling" in the Forex market. Buying is described as the purchase of a "currency pair" to start a trade, while "selling short" is the opposite - disposing the currency pair for a particular price. So when you start a purchase of a currency pair, you are expecting that in time, the price of the currency pair will shoot up. In layman terms - you buy cheap to sell high; which is easy to understand. In the case of selling short, it becomes a little more complex. To make a profit by selling short, you sell a currency pair that you believe will decrease in worth. And then after selling, as soon the price dips down, you will buy it back at the new price, but now you can demand for a higher selling price when you opened the trade, so you earn the difference in prices. It may seem complex specially if you are a beginner, but once you are in front of your trading station it will be much simpler.To help you get accustomed to the Forex market and minimize your risk of loss, you need to get for yourself a forex trading expert adviser or f orex trading EA. The minimum investment that you will have to pay will be miniscule once you have gotten into the groove of trading.
Tokyo Stock Exchange
A Brief Overview of the Tokyo Stock Exchange
The Tokyo Stock Exchange (TSE), located in Tokyo, Japan, is the second largest stock exchange in the world based on monetary volume, just behind the New York Stock Exchange. Under the authorization of the Japanese Prime Minister, Junichiro Koizumi, the TSE provides a market for securities exchange. The major functions of the exchange are to provide a market place, monitor trading, list securities, monitor listed securities, and supervise trading participants. Top management is comprised of nine directors, four auditors, and nine executive officers, headed by acting Chairman and CEO Taizo Nishimuro.
The exchange was established on May 15, 1878 and issued government bonds to former samurai. By the 1920s, when Japan experienced rampant growth in their economy, trading stocks over bonds, gold, and silver currencies became the norm. The exchange was shut down in 1945 and reopened in 1949 under the guidance of American authorities after World War II. Today, the TSE currently lists 2,375 domestic companies and 27 foreign companies. The TSE accounts for 90.6% of all securities transactions in Japan, dwarfing its rivals, The Osaka Stock Exchange (4.2%) and The Nagoya Stock Exchange (0.1%).
Standard trading hours are from 9:00 a.m. to 11:00 a.m. and 12:30 p.m. to 3:00 p.m. Stocks listed on the exchange are divided into three sections: the First Section, for large companies; the Second Section, for mid-sized companies; and the Mothers Section, for high-growth startup companies. As of June 2006, there are 1,724 companies listed in the First Section, 494 in the Second Section, and 157 in the Mothers Section, proclaimed as the fairest, most liquid, and fastest growing market in Japan.
The main indices tracking the Tokyo Stock Exchange are the Nikkei 225 and the TOPIX. The Nikkei average is an index of companies selected and calculated by the Nihon Keizai Shimbun, Japan’s largest business newspaper. It is a price-weighted average and is the most watched index for Asian stocks. The TOPIX measures all First Section listed companies and the J30 index of large industrial companies. According to TSE, the TOPIX is considered as the most appropriate benchmark for evaluating portfolio management.
Recently, the TSE has been under scrutiny for system failures and insufficient system capacity. In November 2005, the exchange was only able to operate for 90 minutes due to technical issues with a newly installed transactions system. It was the longest interruption in the history of the exchange. A month later, on December 8, a typing error at Mizuho Financial Group, Japan’s second-biggest bank, to sell shares of J-Com resulted in a net loss of $347 million which is to be shared between the exchange and the bank. And most recently on January 17, 2006, after a raid by prosecutors on the internet company Livedoor, the TSE was forced to close early as trade volume nearly exceeded the system’s capacity of 4.5 million trades per day. Consequently, the Nikkei fell 2.8% and the exchange increased its order capacity to five million trades per day. Livedoor is now delisted.
Chairman Nishimuro recognizes that these failures are “a grave situation which could shake the confidence of investors at home and abroad.” TSE is working to improve its infrastructure to reduce the number of system failures and is continuing to increase system capacity.
Source: TSE Website,
www.tse.or.jp/english/
realated articles:
Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
The Tokyo Stock Exchange (TSE), located in Tokyo, Japan, is the second largest stock exchange in the world based on monetary volume, just behind the New York Stock Exchange. Under the authorization of the Japanese Prime Minister, Junichiro Koizumi, the TSE provides a market for securities exchange. The major functions of the exchange are to provide a market place, monitor trading, list securities, monitor listed securities, and supervise trading participants. Top management is comprised of nine directors, four auditors, and nine executive officers, headed by acting Chairman and CEO Taizo Nishimuro.
The exchange was established on May 15, 1878 and issued government bonds to former samurai. By the 1920s, when Japan experienced rampant growth in their economy, trading stocks over bonds, gold, and silver currencies became the norm. The exchange was shut down in 1945 and reopened in 1949 under the guidance of American authorities after World War II. Today, the TSE currently lists 2,375 domestic companies and 27 foreign companies. The TSE accounts for 90.6% of all securities transactions in Japan, dwarfing its rivals, The Osaka Stock Exchange (4.2%) and The Nagoya Stock Exchange (0.1%).
Standard trading hours are from 9:00 a.m. to 11:00 a.m. and 12:30 p.m. to 3:00 p.m. Stocks listed on the exchange are divided into three sections: the First Section, for large companies; the Second Section, for mid-sized companies; and the Mothers Section, for high-growth startup companies. As of June 2006, there are 1,724 companies listed in the First Section, 494 in the Second Section, and 157 in the Mothers Section, proclaimed as the fairest, most liquid, and fastest growing market in Japan.
The main indices tracking the Tokyo Stock Exchange are the Nikkei 225 and the TOPIX. The Nikkei average is an index of companies selected and calculated by the Nihon Keizai Shimbun, Japan’s largest business newspaper. It is a price-weighted average and is the most watched index for Asian stocks. The TOPIX measures all First Section listed companies and the J30 index of large industrial companies. According to TSE, the TOPIX is considered as the most appropriate benchmark for evaluating portfolio management.
Recently, the TSE has been under scrutiny for system failures and insufficient system capacity. In November 2005, the exchange was only able to operate for 90 minutes due to technical issues with a newly installed transactions system. It was the longest interruption in the history of the exchange. A month later, on December 8, a typing error at Mizuho Financial Group, Japan’s second-biggest bank, to sell shares of J-Com resulted in a net loss of $347 million which is to be shared between the exchange and the bank. And most recently on January 17, 2006, after a raid by prosecutors on the internet company Livedoor, the TSE was forced to close early as trade volume nearly exceeded the system’s capacity of 4.5 million trades per day. Consequently, the Nikkei fell 2.8% and the exchange increased its order capacity to five million trades per day. Livedoor is now delisted.
Chairman Nishimuro recognizes that these failures are “a grave situation which could shake the confidence of investors at home and abroad.” TSE is working to improve its infrastructure to reduce the number of system failures and is continuing to increase system capacity.
Source: TSE Website,
www.tse.or.jp/english/
realated articles:
Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
Day Trading: Profitable But Risky
Day Trading: Profitable, but Risky
Only a few years ago the phrase "day trading" used to be looked down upon by Wall Street big shots, however now it is common practice among people of all ages and experience. Day trading is the practice of buying and selling financial instruments during the day with the hope that throughout the day the price will continue to climb or fall in value, allowing quick profits to be made. Some of the more commonly day traded financial instruments include stocks, options, futures contracts and currencies. The primary motivation for this strategy of trading is to reduce the risk of holding a position overnight, when the open price may have significantly changed from the previous day's closing price. Traders that practice this form of trading are called "day traders" and are becoming more and more prevalent in the industry.
Day trading may be extremely profitable; however it carries a significant risk. Most individual investors are not suited to be day traders as they lack the capital, time, and character to sustain devastating losses that can occur. The use of borrowing money (trading on margin) is common amongst day traders hoping that profits will be amplified through this leverage; however leveraging yourself also exposes you to a much higher risk of substantial losses. Day traders need to understand how margin works, how much time they'll have to meet a margin call and the potential for getting in over their heads. Unfortunately many do not fully understand these concepts or simply do not pay attention to them.
In addition to the high risk factor, day trading can be extremely expensive in comparison to the "buy and hold" strategy, with the trader incurring multiple commissions and paying the spread multiple times a day. It is commonly stated that 80-90% of day traders lose money. Therefore traders should never use money they will need for daily living expenses or retirement to fund their accounts. Like any other type of trading, regardless of your level of experience, trading is a gamble and a trader needs to know exactly what they are gambling. All traders should know up front how much they need to cover expenses and break even.
realated articles:
Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
Only a few years ago the phrase "day trading" used to be looked down upon by Wall Street big shots, however now it is common practice among people of all ages and experience. Day trading is the practice of buying and selling financial instruments during the day with the hope that throughout the day the price will continue to climb or fall in value, allowing quick profits to be made. Some of the more commonly day traded financial instruments include stocks, options, futures contracts and currencies. The primary motivation for this strategy of trading is to reduce the risk of holding a position overnight, when the open price may have significantly changed from the previous day's closing price. Traders that practice this form of trading are called "day traders" and are becoming more and more prevalent in the industry.
Day trading may be extremely profitable; however it carries a significant risk. Most individual investors are not suited to be day traders as they lack the capital, time, and character to sustain devastating losses that can occur. The use of borrowing money (trading on margin) is common amongst day traders hoping that profits will be amplified through this leverage; however leveraging yourself also exposes you to a much higher risk of substantial losses. Day traders need to understand how margin works, how much time they'll have to meet a margin call and the potential for getting in over their heads. Unfortunately many do not fully understand these concepts or simply do not pay attention to them.
In addition to the high risk factor, day trading can be extremely expensive in comparison to the "buy and hold" strategy, with the trader incurring multiple commissions and paying the spread multiple times a day. It is commonly stated that 80-90% of day traders lose money. Therefore traders should never use money they will need for daily living expenses or retirement to fund their accounts. Like any other type of trading, regardless of your level of experience, trading is a gamble and a trader needs to know exactly what they are gambling. All traders should know up front how much they need to cover expenses and break even.
realated articles:
Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
The Bank Of Japan
The Bank of Japan
With the passing of the Bank of Japan Act in 1882, the Bank of Japan (BOJ) was officially established as the nation’s first central bank and is one of the world’s oldest central banks. The bank’s headquarters are located in Tokyo, however the face of the bank is considered to be the Osaka branch. In the midst of World War II, the Bank of Japan Law (the Law of 1942) replaced the aforementioned act and set new guidelines for the bank. Although several changes were subsequently made to the Bank of Japan Law (many by Allied occupiers), it was only heavily revised in 1997 due to the changes of the global economy. The new law emphasized transparency and increased independence of the bank from the government.
Previously, the lack of independence from the Government was one of the marked differences between the Bank of Japan and other central banks like the Federal Reserve and the European Central Bank. In Japan, the government does have an effect on policy and the Governor of the bank must work together with the Prime Minister in order to be effective, which will ensure that the nation’s monetary policy will fit with the government’s economic policy. While the new legislation provided some separation between the two institutions, they are still linked. For instance, the Bank of Japan’s budget must still be approved by the government. Regardless of the new laws, in order for the bank to achieve its goals, collaboration between the Governor of the bank and the Prime Minister is required. Failure to do so could lead to an ineffective administration, such as the one held by previous Governor Masaru Hayami, who often bickered with the Prime Minister.
The Bank of Japan’s decision making body is known as the Policy Board, which consists of the governor, two deputy governors and six other members. All nine members are appointed by the Cabinet, Japan’s executive branch, and approved by the Diet (the legislature) for a term of five years. The Policy Board meets frequently, but two meetings per month are solely dedicated to discussing monetary policy. Decisions on monetary policy and on how to achieve the bank’s goals are made through a majority vote of the Policy Board.
The BOJ’s first mission is to maintain price stability. In other words the goal is to create a situation where there is neither inflation nor deflation. In order to achieve this, the bank conducts monetary policy by buying or selling securities on the open market and altering the interest rate. Recently, Japan was suffering from deflation and was maintaining a Zero Interest Rate Policy (“ZIRP”) in order to spur the economy, which is still in effect today. Although ZIRP is a valid method to restore economic health, once implemented it severely hampers the BOJ’s future monetary policy efforts because it can not lower the interest rate from 0%.
The second mission of the BOJ is to ensure the stability of the financial system and to develop the economy. In order to achieve this, the bank engages in the following activities: issuing banknotes, providing settlement services, international activities, government securities operations, and compiling economic data.
How the Bank of Japan Affects the Foreign Exchange Market
The Japanese economy is very dependent on importing and exporting goods and services. Nearly all of their natural resources, such as oil are imported and a large portion of their businesses’ products/services are exported. As a result, the Bank of Japan used to peg the Yen to the U.S. Dollar at a fixed rate in order to remain competitive in their exporting operations. Eventually, they allowed the Yen to float, but are still known to occasionally intervene in the Foreign Exchange Market and artificially manipulate the price of the USD/JPY. In the past, traders have taken advantage of their intervention and reaped tremendous profits, so it is important to follow the press releases of the BOJ for any hint of intervention.
Also, the BOJ’s interest rate decisions have a profound effect on the Yen’s exchange rate. For example, if the BOJ decides to raise the interest rate, then returns on Yen assets will appear more favorable to investors and the Yen will appreciate in value. This will create a situation where imports are cheaper for Japanese citizens and their exports become more expensive to the rest of the world. Currently with interest rates at 0%, Japanese investors are some of the largest investors in foreign securities (in a recent quarter they purchased $84 billion worth), but if returns in Japan were to increase, then investors will be more inclined to sell their foreign assets and purchase domestic ones. On the other hand, if the BOJ chooses to lower the interest rate, then Yen assets will not be as appealing to investors and the Yen will depreciate in value. This scenario causes imports to be more expensive for Japanese citizens, but their exports become more appealing to other nations. Currently, this scenario is impossible because interest rates are at 0%.
Current Governor: Toshihiko Fukui
Toshihiko Fukui’s road to leadership has been bumpy, but on March 20, 2003 he took over the reins of the Bank of Japan from Masaru Hayami. Born in the commercial city of Osaka to an umbrella exporter, Mr. Fukui followed the ‘traditional’ path early in his career. He received a prestigious law degree from the University of Tokyo and eventually joined the Bank in 1958. He served in many different positions before being appointed a deputy governor in 1994. In fact, he was so successful that he was nicknamed ‘the prince’, implying that he was the heir to the throne of the bank. Unfortunately, in 1998 a scandal involving one of his underlings at the bank surfaced and he was forced to resign as a sign of taking responsibility even though he was not directly involved. After leaving the bank, he became the Vice Chairman of the Keizai Doyukai (the Japan Association of Corporate Executives) and served on the Board of Directors of several large companies. Just five years after leaving the bank he returned and was anointed the leader of one of the world’s largest economies.
Despite feeling elated about his new position, Mr. Fukui inherited an extremely difficult position. One reason it was so challenging was that the reputation of the Bank was tarnished due to the previous administrations’ blunders. In the late 1980’s the bank tightened rates too late and were unable to prevent the ensuing crash in the stock and real estate market. Then in the 1990’s, the BOJ was criticized for not doing enough to revive a slumping economy. The most recent blunder occurred in 2000 when the Bank believed that the economy had recovered and it chose to raise interest rates. At the time many politicians and economists urged the Bank to reconsider this move and eventually it gave in, but only after the economy had resumed its decline.
Another reason that becoming Governor at this time was very difficult was the poor state of the Japanese economy. The country was suffering from multiple years of deflation and both stock and land prices were extremely low. The entire country was mired in a deep recession. Normally, the response of a central bank would be to lower rates however, Japan’s interest rate was already at 0% making this impossible. Therefore, Mr. Fukui was forced to use more unconventional methods to resuscitate the economy such as flooding the nation’s banks with Yen to promote lending.
After several trying years during which he withstood criticisms from both then Federal Reserve Chairman Alan Greenspan and Federal Reserve Governor Ben Bernanke, Mr. Fukui’s methods began to yield results. Recently, Japan has had several periods of rising prices, potentially signifying the end of deflation. In March 2006 Mr. Fukui indicated that the era of ZIRP could be over and a future rate increase could be forthcoming within a year. This news sent the Yen skyrocketing, illustrating one of the tough challenges facing Mr. Fukui. Now that the economy is strengthening, he must be careful that the Yen does not appreciate too much in value otherwise the nation’s exporting business will be crippled. While Mr. Fukui has certainly proven that he can bring the bank out of the doldrums and has earned sorely needed respect for the bank, he must now prove that he can successfully guide the economy into a period of growth and maintain it.
Unfortunately, the new era did not begin as Mr. Fukui had imagined it would. Recently, news sources reported that during his time away from the bank, Mr. Fukui invested 10 million yen in a fund run by a trader accused of insider trading. This information caused the Nikkei (Japanese stock market) to fall over 600 points. Several political leaders even called for Mr. Fukui’s termination and some economic analysts wonder whether this will affect his ability to change the ZIRP. Based on his recent history, Mr. Fukui should be able to weather the storm, but whether or not he can guide the economy of Japan into an era of prosperity remains to be seen.
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With the passing of the Bank of Japan Act in 1882, the Bank of Japan (BOJ) was officially established as the nation’s first central bank and is one of the world’s oldest central banks. The bank’s headquarters are located in Tokyo, however the face of the bank is considered to be the Osaka branch. In the midst of World War II, the Bank of Japan Law (the Law of 1942) replaced the aforementioned act and set new guidelines for the bank. Although several changes were subsequently made to the Bank of Japan Law (many by Allied occupiers), it was only heavily revised in 1997 due to the changes of the global economy. The new law emphasized transparency and increased independence of the bank from the government.
Previously, the lack of independence from the Government was one of the marked differences between the Bank of Japan and other central banks like the Federal Reserve and the European Central Bank. In Japan, the government does have an effect on policy and the Governor of the bank must work together with the Prime Minister in order to be effective, which will ensure that the nation’s monetary policy will fit with the government’s economic policy. While the new legislation provided some separation between the two institutions, they are still linked. For instance, the Bank of Japan’s budget must still be approved by the government. Regardless of the new laws, in order for the bank to achieve its goals, collaboration between the Governor of the bank and the Prime Minister is required. Failure to do so could lead to an ineffective administration, such as the one held by previous Governor Masaru Hayami, who often bickered with the Prime Minister.
The Bank of Japan’s decision making body is known as the Policy Board, which consists of the governor, two deputy governors and six other members. All nine members are appointed by the Cabinet, Japan’s executive branch, and approved by the Diet (the legislature) for a term of five years. The Policy Board meets frequently, but two meetings per month are solely dedicated to discussing monetary policy. Decisions on monetary policy and on how to achieve the bank’s goals are made through a majority vote of the Policy Board.
The BOJ’s first mission is to maintain price stability. In other words the goal is to create a situation where there is neither inflation nor deflation. In order to achieve this, the bank conducts monetary policy by buying or selling securities on the open market and altering the interest rate. Recently, Japan was suffering from deflation and was maintaining a Zero Interest Rate Policy (“ZIRP”) in order to spur the economy, which is still in effect today. Although ZIRP is a valid method to restore economic health, once implemented it severely hampers the BOJ’s future monetary policy efforts because it can not lower the interest rate from 0%.
The second mission of the BOJ is to ensure the stability of the financial system and to develop the economy. In order to achieve this, the bank engages in the following activities: issuing banknotes, providing settlement services, international activities, government securities operations, and compiling economic data.
How the Bank of Japan Affects the Foreign Exchange Market
The Japanese economy is very dependent on importing and exporting goods and services. Nearly all of their natural resources, such as oil are imported and a large portion of their businesses’ products/services are exported. As a result, the Bank of Japan used to peg the Yen to the U.S. Dollar at a fixed rate in order to remain competitive in their exporting operations. Eventually, they allowed the Yen to float, but are still known to occasionally intervene in the Foreign Exchange Market and artificially manipulate the price of the USD/JPY. In the past, traders have taken advantage of their intervention and reaped tremendous profits, so it is important to follow the press releases of the BOJ for any hint of intervention.
Also, the BOJ’s interest rate decisions have a profound effect on the Yen’s exchange rate. For example, if the BOJ decides to raise the interest rate, then returns on Yen assets will appear more favorable to investors and the Yen will appreciate in value. This will create a situation where imports are cheaper for Japanese citizens and their exports become more expensive to the rest of the world. Currently with interest rates at 0%, Japanese investors are some of the largest investors in foreign securities (in a recent quarter they purchased $84 billion worth), but if returns in Japan were to increase, then investors will be more inclined to sell their foreign assets and purchase domestic ones. On the other hand, if the BOJ chooses to lower the interest rate, then Yen assets will not be as appealing to investors and the Yen will depreciate in value. This scenario causes imports to be more expensive for Japanese citizens, but their exports become more appealing to other nations. Currently, this scenario is impossible because interest rates are at 0%.
Current Governor: Toshihiko Fukui
Toshihiko Fukui’s road to leadership has been bumpy, but on March 20, 2003 he took over the reins of the Bank of Japan from Masaru Hayami. Born in the commercial city of Osaka to an umbrella exporter, Mr. Fukui followed the ‘traditional’ path early in his career. He received a prestigious law degree from the University of Tokyo and eventually joined the Bank in 1958. He served in many different positions before being appointed a deputy governor in 1994. In fact, he was so successful that he was nicknamed ‘the prince’, implying that he was the heir to the throne of the bank. Unfortunately, in 1998 a scandal involving one of his underlings at the bank surfaced and he was forced to resign as a sign of taking responsibility even though he was not directly involved. After leaving the bank, he became the Vice Chairman of the Keizai Doyukai (the Japan Association of Corporate Executives) and served on the Board of Directors of several large companies. Just five years after leaving the bank he returned and was anointed the leader of one of the world’s largest economies.
Despite feeling elated about his new position, Mr. Fukui inherited an extremely difficult position. One reason it was so challenging was that the reputation of the Bank was tarnished due to the previous administrations’ blunders. In the late 1980’s the bank tightened rates too late and were unable to prevent the ensuing crash in the stock and real estate market. Then in the 1990’s, the BOJ was criticized for not doing enough to revive a slumping economy. The most recent blunder occurred in 2000 when the Bank believed that the economy had recovered and it chose to raise interest rates. At the time many politicians and economists urged the Bank to reconsider this move and eventually it gave in, but only after the economy had resumed its decline.
Another reason that becoming Governor at this time was very difficult was the poor state of the Japanese economy. The country was suffering from multiple years of deflation and both stock and land prices were extremely low. The entire country was mired in a deep recession. Normally, the response of a central bank would be to lower rates however, Japan’s interest rate was already at 0% making this impossible. Therefore, Mr. Fukui was forced to use more unconventional methods to resuscitate the economy such as flooding the nation’s banks with Yen to promote lending.
After several trying years during which he withstood criticisms from both then Federal Reserve Chairman Alan Greenspan and Federal Reserve Governor Ben Bernanke, Mr. Fukui’s methods began to yield results. Recently, Japan has had several periods of rising prices, potentially signifying the end of deflation. In March 2006 Mr. Fukui indicated that the era of ZIRP could be over and a future rate increase could be forthcoming within a year. This news sent the Yen skyrocketing, illustrating one of the tough challenges facing Mr. Fukui. Now that the economy is strengthening, he must be careful that the Yen does not appreciate too much in value otherwise the nation’s exporting business will be crippled. While Mr. Fukui has certainly proven that he can bring the bank out of the doldrums and has earned sorely needed respect for the bank, he must now prove that he can successfully guide the economy into a period of growth and maintain it.
Unfortunately, the new era did not begin as Mr. Fukui had imagined it would. Recently, news sources reported that during his time away from the bank, Mr. Fukui invested 10 million yen in a fund run by a trader accused of insider trading. This information caused the Nikkei (Japanese stock market) to fall over 600 points. Several political leaders even called for Mr. Fukui’s termination and some economic analysts wonder whether this will affect his ability to change the ZIRP. Based on his recent history, Mr. Fukui should be able to weather the storm, but whether or not he can guide the economy of Japan into an era of prosperity remains to be seen.
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The European Central Bank
The European Central Bank (ECB) was created in 1999 and overnight became the central bank for the Euro area. The Euro area is currently defined as the 12 countries that have adopted the Euro as their currency. In order to become a member, every country was required (and future members will be required) to meet certain criteria, such as having stable inflation rates and meeting specific GDP levels. The bank’s headquarters, the ECB Eurotower, are currently located in Frankfurt, Germany. It is important to note that not every member of the European Union (EU) has adopted the Euro as their currency and therefore, are not decision-makers in the ECB. They are members of the European System of Central Banks (ESCB) and serve on the General Council in the ECB.
The ECB is very similar to the United States Federal Reserve. One such similarity is the tenet of the separation of politics from the forming of monetary policy. This is especially crucial for the ECB which represents multiple countries, as it does not allow one government to manipulate the bank for its own selfish purposes. Another similarity to the Federal Reserve is that it is not fully autonomous. Just as the Federal Reserve is reviewed by Congress, so to the ECB is accountable to the European Parliament and the council of ministers. In addition to reviewing the ECB, Parliament appoints the President (to a term of eight years), Vice President and the other four members of the bank’s executive board who then must be approved by the council of ministers. Also, the President of the ECB must present an annual report to Parliament.
The ECB is run by a governing council, which consists of a six-member executive board and the governors of the national central banks of countries within the Euro area. Each member of the governing council has equal voting rights. The governing council controls the monetary policy and sets the interest rate in order to meet their objectives. In addition, there is a General Council whose members include the President and Vice President of the ECB, and the governors of all national central banks in the European Union. The General Council mainly acts as an advisor to the governing council and does not implement any policy.
The ECB has two objectives, but the primary one above all is to use monetary policy in order to maintain price stability. They have a set target for an acceptable inflation rate which is below 2% per year. This is one way the ECB differs from the United States Federal Reserve, which is more flexible in establishing an acceptable inflation rate. Another difference between the two banks is that the ECB places a greater emphasis on transparency, or letting investors know its intentions. The fact that the inflation target is the only main goal of the ECB is a major source of criticism. Many believe that this primary goal is too narrow and should include other objectives of equal importance such as achieving full employment.
The lesser objective of the ECB, yielding to inflation, is to support the general economic policies in the Euro area. In other words, the bank tries to contribute to the achievement of the stated objectives of the overall European community, such as meeting a high level of employment and maintaining sustainable and non-inflationary growth. Other tasks of the ECB include: conducting foreign exchange operations, operating payment systems, issuing bank notes and supervising credit institutions.
How the ECB Affects the Foreign Exchange Market
The ECB’s interest rate decisions have a profound effect on the euro’s exchange rate. For example, if the ECB decided to raise the interest rate, then returns on Euro assets will appear more favorable to investors and the Euro will appreciate in value. This will create a situation where imports are cheaper for Euro area citizens and their exports become more expensive to the rest of the world. On the other hand, if the ECB chose to lower the interest rate, then Euro assets will not be as appealing to investors and the Euro will depreciate in value. This scenario causes imports to be more expensive for Euro area citizens, but their exports become more appealing to other nations.
Distinct Challenges of the ECB
Every central bank deals with many difficulties, as balancing an entire economy can be rather tricky. Nevertheless, the ECB faces several unique problems which other banks do not have. The first issue is effective communication. Bank leaders occupy a position where every word and phrase they use is scrutinized for some hint at future policy decisions. However, every release and speech given by members of the ECB and especially current president Jean-Claude Trichet is translated into at least nine languages. Every language contains nuances and meanings that can get lost or even misinterpreted across translations, which could potentially be disastrous. This is one reason that the ECB stresses transparency because it is important to make their intentions very clear in spite of language barriers.
Another difficulty exclusive to the ECB is that its decisions are not tailored to a single economy, but they affect 12 different economies. Therefore, making decisions can become extremely tricky as they try to improve the Euro area economy as a whole, even at the expense of a single country. For example, recently the GDP growth rate of Ireland was an overheated 4.5% while Italy was a lagging 1.2%. Ireland could potentially use a tightening cycle with increased interest rates, while Italy potentially needed a cut in the rate in order to stimulate growth. Another recent example demonstrating this issue occurred when the ECB hiked their interest rates in order to curb inflation. Several larger economies in the Euro area (Germany, for example) that were recently coming out of an economic slump were unhappy as the higher rates would stunt their growth. These problems make decision making very difficult at the ECB and, therefore, the need for strong leadership is critical, which led to the appointment of Jean-Claude Trichet as President.
Current President: Jean-Claude Trichet
Jean-Claude Trichet was born in Lyon, France in 1942. He began his career with a degree in mining engineering from the Ecole nationale supérieure des Mines de Nancy. After working in mines for several years, he left the field and received a degree in economics. Following countless years of civil service in France, he became the President of the European Central Bank in 2003. Trichet served as Governor of the Bank of France for 10 years and was well liked by France’s President Jacques Chirac, who pressed for Trichet to be the first president of the ECB in 1999. Although he was passed over in favor of the first President of the ECB Wim Duisenberg, he was guaranteed to become the next President once Mr. Duisenberg stepped down. However, after being implicated in an accounting scandal at the state-run Credit Lyonnais, his future as a financial leader became murkier. Following a long trial in which he was acquitted of all charges, he received tremendous support in his bid to become the leader of the world’s second largest economy.
One factor that influenced the decision to appoint Trichet was his political background. Unlike the Federal Reserve, where the Chairman has the final say, the President of the ECB has only one vote out of a total of 18. Therefore, the belief was that an effective President would need strong negotiating and brokering skills - both of which Trichet demonstrated during his years as a civil servant. Early in his career these talents were sorely challenged. Several of Europe’s major countries, France and Germany, had deficits that were well above the levels allowed by the Euro area. This problem persisted for several years and threatened the overall economy and the integrity of the ECB. In order to overcome this problem, Trichet had to use his skills as a negotiator to get them to cut their government spending and bring newfound respect to the institution.
Despite proving his mettle in the verbal arena, some of the harshest critics of Trichet accuse him of being a poor communicator. Once, after supposedly signaling rates would increase, he kept them stable which affected the markets negatively. Also, he is charged with being verbose, using too many words without giving a clear answer and not being transparent. Overall, in a short period of time Trichet has successfully guided the Euro area out of recession and the Euro has recently been trading at all-time highs against the dollar, reflecting its strength. He has continued the legacy of Mr. Duisenberg and has met the strict demands and targets set by the ECB, despite the recent recession and surging oil prices. As the head of the world’s second largest economy, he is an important and powerful figure to keep tabs on due to his effect on the Euro economy and the Euro itself.
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The European Central Bank (ECB) was created in 1999 and overnight became the central bank for the Euro area. The Euro area is currently defined as the 12 countries that have adopted the Euro as their currency. In order to become a member, every country was required (and future members will be required) to meet certain criteria, such as having stable inflation rates and meeting specific GDP levels. The bank’s headquarters, the ECB Eurotower, are currently located in Frankfurt, Germany. It is important to note that not every member of the European Union (EU) has adopted the Euro as their currency and therefore, are not decision-makers in the ECB. They are members of the European System of Central Banks (ESCB) and serve on the General Council in the ECB.
The ECB is very similar to the United States Federal Reserve. One such similarity is the tenet of the separation of politics from the forming of monetary policy. This is especially crucial for the ECB which represents multiple countries, as it does not allow one government to manipulate the bank for its own selfish purposes. Another similarity to the Federal Reserve is that it is not fully autonomous. Just as the Federal Reserve is reviewed by Congress, so to the ECB is accountable to the European Parliament and the council of ministers. In addition to reviewing the ECB, Parliament appoints the President (to a term of eight years), Vice President and the other four members of the bank’s executive board who then must be approved by the council of ministers. Also, the President of the ECB must present an annual report to Parliament.
The ECB is run by a governing council, which consists of a six-member executive board and the governors of the national central banks of countries within the Euro area. Each member of the governing council has equal voting rights. The governing council controls the monetary policy and sets the interest rate in order to meet their objectives. In addition, there is a General Council whose members include the President and Vice President of the ECB, and the governors of all national central banks in the European Union. The General Council mainly acts as an advisor to the governing council and does not implement any policy.
The ECB has two objectives, but the primary one above all is to use monetary policy in order to maintain price stability. They have a set target for an acceptable inflation rate which is below 2% per year. This is one way the ECB differs from the United States Federal Reserve, which is more flexible in establishing an acceptable inflation rate. Another difference between the two banks is that the ECB places a greater emphasis on transparency, or letting investors know its intentions. The fact that the inflation target is the only main goal of the ECB is a major source of criticism. Many believe that this primary goal is too narrow and should include other objectives of equal importance such as achieving full employment.
The lesser objective of the ECB, yielding to inflation, is to support the general economic policies in the Euro area. In other words, the bank tries to contribute to the achievement of the stated objectives of the overall European community, such as meeting a high level of employment and maintaining sustainable and non-inflationary growth. Other tasks of the ECB include: conducting foreign exchange operations, operating payment systems, issuing bank notes and supervising credit institutions.
How the ECB Affects the Foreign Exchange Market
The ECB’s interest rate decisions have a profound effect on the euro’s exchange rate. For example, if the ECB decided to raise the interest rate, then returns on Euro assets will appear more favorable to investors and the Euro will appreciate in value. This will create a situation where imports are cheaper for Euro area citizens and their exports become more expensive to the rest of the world. On the other hand, if the ECB chose to lower the interest rate, then Euro assets will not be as appealing to investors and the Euro will depreciate in value. This scenario causes imports to be more expensive for Euro area citizens, but their exports become more appealing to other nations.
Distinct Challenges of the ECB
Every central bank deals with many difficulties, as balancing an entire economy can be rather tricky. Nevertheless, the ECB faces several unique problems which other banks do not have. The first issue is effective communication. Bank leaders occupy a position where every word and phrase they use is scrutinized for some hint at future policy decisions. However, every release and speech given by members of the ECB and especially current president Jean-Claude Trichet is translated into at least nine languages. Every language contains nuances and meanings that can get lost or even misinterpreted across translations, which could potentially be disastrous. This is one reason that the ECB stresses transparency because it is important to make their intentions very clear in spite of language barriers.
Another difficulty exclusive to the ECB is that its decisions are not tailored to a single economy, but they affect 12 different economies. Therefore, making decisions can become extremely tricky as they try to improve the Euro area economy as a whole, even at the expense of a single country. For example, recently the GDP growth rate of Ireland was an overheated 4.5% while Italy was a lagging 1.2%. Ireland could potentially use a tightening cycle with increased interest rates, while Italy potentially needed a cut in the rate in order to stimulate growth. Another recent example demonstrating this issue occurred when the ECB hiked their interest rates in order to curb inflation. Several larger economies in the Euro area (Germany, for example) that were recently coming out of an economic slump were unhappy as the higher rates would stunt their growth. These problems make decision making very difficult at the ECB and, therefore, the need for strong leadership is critical, which led to the appointment of Jean-Claude Trichet as President.
Current President: Jean-Claude Trichet
Jean-Claude Trichet was born in Lyon, France in 1942. He began his career with a degree in mining engineering from the Ecole nationale supérieure des Mines de Nancy. After working in mines for several years, he left the field and received a degree in economics. Following countless years of civil service in France, he became the President of the European Central Bank in 2003. Trichet served as Governor of the Bank of France for 10 years and was well liked by France’s President Jacques Chirac, who pressed for Trichet to be the first president of the ECB in 1999. Although he was passed over in favor of the first President of the ECB Wim Duisenberg, he was guaranteed to become the next President once Mr. Duisenberg stepped down. However, after being implicated in an accounting scandal at the state-run Credit Lyonnais, his future as a financial leader became murkier. Following a long trial in which he was acquitted of all charges, he received tremendous support in his bid to become the leader of the world’s second largest economy.
One factor that influenced the decision to appoint Trichet was his political background. Unlike the Federal Reserve, where the Chairman has the final say, the President of the ECB has only one vote out of a total of 18. Therefore, the belief was that an effective President would need strong negotiating and brokering skills - both of which Trichet demonstrated during his years as a civil servant. Early in his career these talents were sorely challenged. Several of Europe’s major countries, France and Germany, had deficits that were well above the levels allowed by the Euro area. This problem persisted for several years and threatened the overall economy and the integrity of the ECB. In order to overcome this problem, Trichet had to use his skills as a negotiator to get them to cut their government spending and bring newfound respect to the institution.
Despite proving his mettle in the verbal arena, some of the harshest critics of Trichet accuse him of being a poor communicator. Once, after supposedly signaling rates would increase, he kept them stable which affected the markets negatively. Also, he is charged with being verbose, using too many words without giving a clear answer and not being transparent. Overall, in a short period of time Trichet has successfully guided the Euro area out of recession and the Euro has recently been trading at all-time highs against the dollar, reflecting its strength. He has continued the legacy of Mr. Duisenberg and has met the strict demands and targets set by the ECB, despite the recent recession and surging oil prices. As the head of the world’s second largest economy, he is an important and powerful figure to keep tabs on due to his effect on the Euro economy and the Euro itself.
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The Bank Of England
The Bank of England (BOE) was founded in 1694, and despite its name is the central bank of the entire United Kingdom. It is the second oldest central bank in the world, behind only Sweden's Riksbank, which was founded in 1654. Commonly referred to as "The Old Lady of Threadneedle Street," the bank's original functions were to act as the government's banker and its debt manager. The bank has evolved over its long and rich history and with it so have its responsibilities. At some point during its existence the BOE's duties have included being the government's bank and debt manager, serving as a commercial bank and other bank's bank, issuing currency, regulating banks, and storing the nation's gold and foreign exchange reserves. The bank had strong ties to the government even when it was privately owned and in the 1940's the BOE was nationalized and fell under the umbrella of the treasury department. However, in 1997 the newly elected Labour Party leaders, Tony Blair and Gordon Brown, granted the bank independence from the government and for the first time empowered it with control of the nation's interest rate.
In addition to controlling the interest rate, the bank currently controls the foreign exchange reserves, acts as the banker's bank and issues notes and coins. Concurrent with assuming control of the interest rate in 1997, the bank transferred the duty of managing the government's debt to the Treasury Department and its regulatory functions were assumed by the Financial Services Authority ("FSA"). Although the bank is essentially independent, Parliament reviews the bank's accounts and annual report because its policies affect the public. Additionally, it has a close relationship with the Treasury, whose Treasury Committee conducts regular hearings on inflation with members of the Bank's Monetary Policy Committee ("MPC"). Furthermore, the government sets the unemployment and growth objectives as well as an inflation target for the economy (currently 2%), which the bank attempts to meet. If the actual inflation rate is 1% (or more) off target, then the Governor of the bank must submit an explanation to the Chancellor of the Exchequer.
Meeting the government's inflation target is the final component of the bank's objective to achieve monetary stability. In order to keep prices stable and maintain non-inflationary growth, the bank controls the short term interest rate. Monetary policy decisions are all made by the MPC. The MPC has nine members and consists of the Governor, two Deputy Governors, two executive directors of the bank and four appointees by the Chancellor of the Exchequer. The Governor and the Deputy Governors are all appointed by the Crown to a term of five years, although the Chancellor wields a strong influence over the selections. MPC members often travel throughout the country in order to get a better feel for the country's overall economy. Additionally, the MPC is committed to transparent operations and, therefore, releases the voting results of their meetings after just two weeks, which is far quicker than the other central banks. Also, they frequently publish inflation predictions, which are available to the public.
The BOE's second objective is to maintain financial stability. This refers to the detection and elimination of threats to the overall financial system. The bank closely observes the markets and continuously strengthens the financial infrastructure. Until 1997, this included the supervision and the regulation of individual banks and exchanges, however these tasks are now the FSA's responsibility. Other activities used by the bank to maintain financial stability include acting as the banker's bank and issuing notes and coins.
Most of these operations are conducted by the executive team, which includes the executive directors of the bank and their subordinates. The governor and the deputy governors are also part of the executive team and supervise the executive directors. Only two executive directors serve on the MPC. Additionally, the bank has a Court of Directors consisting of the governor, two deputy governors, and 16 non-executive board directors. The non-executive directors are appointed by the crown to a term of three years. The Court's main function is to ensure that the bank runs smoothly and efficiently. The bank is reviewed and monitored by NedCo, a sub-committee consisting of all the non-executive directors.
Current Governor: Mervyn A. King
Mervyn Allister King succeeded Sir Eddie George as the Governor of the Bank of England on June 30, 2003. He grew up in the small city of Wolverhampton and is an avid fan of the nearby soccer (football) team Aston Villa. Considered by many to be an academic and a phenomenal economist, he studied at Kings College, Cambridge and Harvard University. He also taught at the London School of Economics, MIT, and Harvard among other universities.
Mr. King joined the BOE in 1991 and played a key role in transforming Britain's monetary policy after the 'Black Wednesday' of September 1992. This refers to the extreme devaluation of the pound caused by George Soros, and which earned Soros the moniker "the man who broke the Bank of England." The Bank of England had been artificially maintaining their exchange rate with the Deutschmark despite the fact that the pound was overvalued. They did this because they were members of Europe's exchange rate mechanism ("ERM"), whose goal was to maintain a tight trading band between the many European countries' exchange rates. However, as the U.K's economy worsened and Germany's improved, the Pound became overvalued and the BOE was forced to intercede in order to maintain the rate. Soros and many other investors took advantage of intervention and placed enormous selling pressure on the Pound and the Bank of England was forced to accept a devalued Pound, earning Soros billions. As a result of 'Black Wednesday', the United Kingdom was promptly kicked out of the ERM, ultimately leading to the current system of a floating currency and an inflation target set by the government for the bank to meet by influencing interest rates.
Around that time, the United Kingdom's inflation rate and unemployment level were the highest among the G-7 members. However, since then it has been an entirely different story. The economy that Mr. King inherited from Sir George (Mr. King was his deputy governor) in 2003 was healthy and flush from over 40 straight quarters of GDP growth. The U.K. had the lowest unemployment rate among the G-8 nations and was one of the only large economies to avoid a recession in the early 21st century. Unfortunately, the future of the economy was not as bright, as sluggish economic data began to emerge from nearly every sector. Eventually in August 2005, the MPC decided to cut the interest rate for the first time in six years to the current 4.50% in order to stimulate the economy.
One of the main concerns about the appointment of Mr. King as governor was his strong personality. During Sir George's administration he often disagreed with the other members of the MPC and was frequently on the losing side of votes. Many people felt that as governor this could potentially be disastrous and the bank would become ineffective. Since taking over as governor he has eased those fears and for the most part has managed the bank efficiently. Another concern about Mr. King becoming governor was that his stance on the U.K. adopting the Euro might create undue tension with the government. Prime Minister Tony Blair has indicated that he would eventually like to adopt the currency and Mr. King is generally perceived as opposing the move. As of today the U.K. has still not adopted the Euro and Mr. King's beliefs have not been an issue.
Recently, tension has sparked between the Bank and the government regarding the appointment of members to the MPC. While officially the Governor and the two deputy governors are appointed by the crown, in reality it is the Chancellor of the Exchequer who makes the decision. Therefore, the Chancellor essentially controls seven out of the nine appointments (the governors and the four outside members) and the Bank would prefer more input in the selection of its candidates. Overall, the bank's relationship with the government is strong and Mr. King has continued the legacy of excellence at the bank despite the slowing economy. Regardless of his many critics, he has gained world-wide respect by demonstrating a savvy understanding of the economy and as a result the Bank of England remains one of the most respected central banks in the world.
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The Bank of England (BOE) was founded in 1694, and despite its name is the central bank of the entire United Kingdom. It is the second oldest central bank in the world, behind only Sweden's Riksbank, which was founded in 1654. Commonly referred to as "The Old Lady of Threadneedle Street," the bank's original functions were to act as the government's banker and its debt manager. The bank has evolved over its long and rich history and with it so have its responsibilities. At some point during its existence the BOE's duties have included being the government's bank and debt manager, serving as a commercial bank and other bank's bank, issuing currency, regulating banks, and storing the nation's gold and foreign exchange reserves. The bank had strong ties to the government even when it was privately owned and in the 1940's the BOE was nationalized and fell under the umbrella of the treasury department. However, in 1997 the newly elected Labour Party leaders, Tony Blair and Gordon Brown, granted the bank independence from the government and for the first time empowered it with control of the nation's interest rate.
In addition to controlling the interest rate, the bank currently controls the foreign exchange reserves, acts as the banker's bank and issues notes and coins. Concurrent with assuming control of the interest rate in 1997, the bank transferred the duty of managing the government's debt to the Treasury Department and its regulatory functions were assumed by the Financial Services Authority ("FSA"). Although the bank is essentially independent, Parliament reviews the bank's accounts and annual report because its policies affect the public. Additionally, it has a close relationship with the Treasury, whose Treasury Committee conducts regular hearings on inflation with members of the Bank's Monetary Policy Committee ("MPC"). Furthermore, the government sets the unemployment and growth objectives as well as an inflation target for the economy (currently 2%), which the bank attempts to meet. If the actual inflation rate is 1% (or more) off target, then the Governor of the bank must submit an explanation to the Chancellor of the Exchequer.
Meeting the government's inflation target is the final component of the bank's objective to achieve monetary stability. In order to keep prices stable and maintain non-inflationary growth, the bank controls the short term interest rate. Monetary policy decisions are all made by the MPC. The MPC has nine members and consists of the Governor, two Deputy Governors, two executive directors of the bank and four appointees by the Chancellor of the Exchequer. The Governor and the Deputy Governors are all appointed by the Crown to a term of five years, although the Chancellor wields a strong influence over the selections. MPC members often travel throughout the country in order to get a better feel for the country's overall economy. Additionally, the MPC is committed to transparent operations and, therefore, releases the voting results of their meetings after just two weeks, which is far quicker than the other central banks. Also, they frequently publish inflation predictions, which are available to the public.
The BOE's second objective is to maintain financial stability. This refers to the detection and elimination of threats to the overall financial system. The bank closely observes the markets and continuously strengthens the financial infrastructure. Until 1997, this included the supervision and the regulation of individual banks and exchanges, however these tasks are now the FSA's responsibility. Other activities used by the bank to maintain financial stability include acting as the banker's bank and issuing notes and coins.
Most of these operations are conducted by the executive team, which includes the executive directors of the bank and their subordinates. The governor and the deputy governors are also part of the executive team and supervise the executive directors. Only two executive directors serve on the MPC. Additionally, the bank has a Court of Directors consisting of the governor, two deputy governors, and 16 non-executive board directors. The non-executive directors are appointed by the crown to a term of three years. The Court's main function is to ensure that the bank runs smoothly and efficiently. The bank is reviewed and monitored by NedCo, a sub-committee consisting of all the non-executive directors.
Current Governor: Mervyn A. King
Mervyn Allister King succeeded Sir Eddie George as the Governor of the Bank of England on June 30, 2003. He grew up in the small city of Wolverhampton and is an avid fan of the nearby soccer (football) team Aston Villa. Considered by many to be an academic and a phenomenal economist, he studied at Kings College, Cambridge and Harvard University. He also taught at the London School of Economics, MIT, and Harvard among other universities.
Mr. King joined the BOE in 1991 and played a key role in transforming Britain's monetary policy after the 'Black Wednesday' of September 1992. This refers to the extreme devaluation of the pound caused by George Soros, and which earned Soros the moniker "the man who broke the Bank of England." The Bank of England had been artificially maintaining their exchange rate with the Deutschmark despite the fact that the pound was overvalued. They did this because they were members of Europe's exchange rate mechanism ("ERM"), whose goal was to maintain a tight trading band between the many European countries' exchange rates. However, as the U.K's economy worsened and Germany's improved, the Pound became overvalued and the BOE was forced to intercede in order to maintain the rate. Soros and many other investors took advantage of intervention and placed enormous selling pressure on the Pound and the Bank of England was forced to accept a devalued Pound, earning Soros billions. As a result of 'Black Wednesday', the United Kingdom was promptly kicked out of the ERM, ultimately leading to the current system of a floating currency and an inflation target set by the government for the bank to meet by influencing interest rates.
Around that time, the United Kingdom's inflation rate and unemployment level were the highest among the G-7 members. However, since then it has been an entirely different story. The economy that Mr. King inherited from Sir George (Mr. King was his deputy governor) in 2003 was healthy and flush from over 40 straight quarters of GDP growth. The U.K. had the lowest unemployment rate among the G-8 nations and was one of the only large economies to avoid a recession in the early 21st century. Unfortunately, the future of the economy was not as bright, as sluggish economic data began to emerge from nearly every sector. Eventually in August 2005, the MPC decided to cut the interest rate for the first time in six years to the current 4.50% in order to stimulate the economy.
One of the main concerns about the appointment of Mr. King as governor was his strong personality. During Sir George's administration he often disagreed with the other members of the MPC and was frequently on the losing side of votes. Many people felt that as governor this could potentially be disastrous and the bank would become ineffective. Since taking over as governor he has eased those fears and for the most part has managed the bank efficiently. Another concern about Mr. King becoming governor was that his stance on the U.K. adopting the Euro might create undue tension with the government. Prime Minister Tony Blair has indicated that he would eventually like to adopt the currency and Mr. King is generally perceived as opposing the move. As of today the U.K. has still not adopted the Euro and Mr. King's beliefs have not been an issue.
Recently, tension has sparked between the Bank and the government regarding the appointment of members to the MPC. While officially the Governor and the two deputy governors are appointed by the crown, in reality it is the Chancellor of the Exchequer who makes the decision. Therefore, the Chancellor essentially controls seven out of the nine appointments (the governors and the four outside members) and the Bank would prefer more input in the selection of its candidates. Overall, the bank's relationship with the government is strong and Mr. King has continued the legacy of excellence at the bank despite the slowing economy. Regardless of his many critics, he has gained world-wide respect by demonstrating a savvy understanding of the economy and as a result the Bank of England remains one of the most respected central banks in the world.
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Gifts From England
Gifts From England
With some of the most sophisticated shopping opportunities in Europe, the quality of both the purchases and the experiences in England, centered in London, are sure to satisfy the most refined tastes. Gifts may be found to suit a variety of different types of people, from adults to children, athletes to fashionistas.
Gifts for Tots
Children will be delighted with a gift from Hamley's, of London. Founded in 1760, Hamley's is both a long-standing tradition and a trendsetter in the toy industry. They only hire the experts as well, with a panel of consultants between the ages of five and eleven that assure the 40,000 varieties of toys offered at the store address all the needs and desires a child could have.
Gifts for the Athlete
Representing over 45 different sports, Lillywhites provides Piccadilly Circus's most complete stock of athletic equipment. Additionally, Lillywhites boasts a Royal Warrant, deeming them the official supplier of sporting goods to the royal family. Niketown, by contrast, provides a flashier version of the athletic industry, adding paraphernalia and multi-media images to its vast collection of equipment. Whatever the style of the athlete, a suitable gift can surely be found in London.
Musical Selections
For the music enthusiast there is no way to beat the oldest music store in the world, HMV. With a wide array of posters, t-shirts, DVDs, video games, electronics and more in addition to over 200,000 albums, there is something for every kind of musical taste. Headphone terminals allow customers to listen to any CD in the store before buying, to assure that it is the right gift. DVDs may be previewed as well. While not the oldest, Virgin Megastore is the largest music store in London, with an equally varied selection.
English Literature
With no shortage of bookstores, London is a great place to find a gift for avid readers as well. Charing Cross Road offers several shops, some even dedicated to specific genres. For a wider variety Foyles is more desirable, as one of the biggest bookstores in London. Waterstone's is also a good choice, as the largest bookstore in Europe with over a million titles.
Fashion Fit For a Queen
Home to the likes of Stella McCartney and Thomas Burberry, London is at the forefront of fashion. Regent Street is particularly known for its designer boutiques. Aquascutum has been selling clothes made famous by movie stars since 1851, and Austin Reed offers made-to-measure service for men's suits. Several high-end retailers can also be found on Bond Street, such as Gieves & Hawkes and Rigby & Peller, whose customers include Queen Elizabeth and international royalty, stage and movie stars, and media and fashion personalities. Though catering to discriminating tastes, you need not be a celebrity to shop there. Oxford Street offers Benetton and Topshop and Topman, selling hip but affordable fashion for young people. Shellys is the place to go for a wide variety of shoes, including those at the leading edge of fashion.
When to Shop
Outside of London, England also provides a variety of gifts such as china, porcelain, luxury food and chocolates, and antiques. Many places offer a tax-free shopping system for overseas shoppers, by which taxes are repaid through vouchers presented to Customs. In major cities throughout the country shops are open generally on Monday through Saturday between 9:00/9:30am and 5:30pm. Many London and local stores stay open until 7:00pm or 8:00pm, and most other cities have a late night once a week, usually Thursday. Many local or larger shops hold Sunday hours as well.
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Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
With some of the most sophisticated shopping opportunities in Europe, the quality of both the purchases and the experiences in England, centered in London, are sure to satisfy the most refined tastes. Gifts may be found to suit a variety of different types of people, from adults to children, athletes to fashionistas.
Gifts for Tots
Children will be delighted with a gift from Hamley's, of London. Founded in 1760, Hamley's is both a long-standing tradition and a trendsetter in the toy industry. They only hire the experts as well, with a panel of consultants between the ages of five and eleven that assure the 40,000 varieties of toys offered at the store address all the needs and desires a child could have.
Gifts for the Athlete
Representing over 45 different sports, Lillywhites provides Piccadilly Circus's most complete stock of athletic equipment. Additionally, Lillywhites boasts a Royal Warrant, deeming them the official supplier of sporting goods to the royal family. Niketown, by contrast, provides a flashier version of the athletic industry, adding paraphernalia and multi-media images to its vast collection of equipment. Whatever the style of the athlete, a suitable gift can surely be found in London.
Musical Selections
For the music enthusiast there is no way to beat the oldest music store in the world, HMV. With a wide array of posters, t-shirts, DVDs, video games, electronics and more in addition to over 200,000 albums, there is something for every kind of musical taste. Headphone terminals allow customers to listen to any CD in the store before buying, to assure that it is the right gift. DVDs may be previewed as well. While not the oldest, Virgin Megastore is the largest music store in London, with an equally varied selection.
English Literature
With no shortage of bookstores, London is a great place to find a gift for avid readers as well. Charing Cross Road offers several shops, some even dedicated to specific genres. For a wider variety Foyles is more desirable, as one of the biggest bookstores in London. Waterstone's is also a good choice, as the largest bookstore in Europe with over a million titles.
Fashion Fit For a Queen
Home to the likes of Stella McCartney and Thomas Burberry, London is at the forefront of fashion. Regent Street is particularly known for its designer boutiques. Aquascutum has been selling clothes made famous by movie stars since 1851, and Austin Reed offers made-to-measure service for men's suits. Several high-end retailers can also be found on Bond Street, such as Gieves & Hawkes and Rigby & Peller, whose customers include Queen Elizabeth and international royalty, stage and movie stars, and media and fashion personalities. Though catering to discriminating tastes, you need not be a celebrity to shop there. Oxford Street offers Benetton and Topshop and Topman, selling hip but affordable fashion for young people. Shellys is the place to go for a wide variety of shoes, including those at the leading edge of fashion.
When to Shop
Outside of London, England also provides a variety of gifts such as china, porcelain, luxury food and chocolates, and antiques. Many places offer a tax-free shopping system for overseas shoppers, by which taxes are repaid through vouchers presented to Customs. In major cities throughout the country shops are open generally on Monday through Saturday between 9:00/9:30am and 5:30pm. Many London and local stores stay open until 7:00pm or 8:00pm, and most other cities have a late night once a week, usually Thursday. Many local or larger shops hold Sunday hours as well.
realated articles:
Tokyo Stock Exchange
Day Trading: Profitable But Risky
The Bank Of Japan
The European Central Bank
The Bank Of England
Gifts From England
BUSINESS
&
FINANCE
Increased regulation for US banks?
January 22, 2010
Plans To Reform The Financial System
US President Barack Obama recently announced several plans to reform the financial system, leaving investors to worry about potential negative impacts on financial stocks.
* Major US banks turned in mixed performances for 4Q 09; accuracy of estimates were made more difficult by the TARP repayments by several banks
* Positive outperformance of bank profits overshadowed by concerns of an Obama-led clampdown on the sector
* The “Financial Crisis Responsibility Fee” has already met strong opposition from banking sector
* Sample calculations suggest a double digit percentage hit to annual net income for the largest financial institutions
* Further measures to reform the financial sector include clamping down on proprietary trading, as well as preventing further consolidation in the sector
* Stricter regulation to hurt banks, but likely to be milder-than-expected
Financial stocks were recently under pressure as investors digested a slew of earnings reports from the US banking sector. Unlike previous quarters where profits exceeded forecasts by huge margins, earnings were more mixed for 4Q 09. Citigroup, Bank of America and Morgan Stanley reported lower-than-expected earnings, while Wells Fargo, Goldman Sachs and JP Morgan surprised on the upside. Forecasts for 4Q 09 were made more difficult by the repayment of TARP (Troubled Asset Relief Programme) money by several banks, a one-off charge to the quarter’s earnings. read full story...
Plans To Reform The Financial System
Increased regulation for US banks?
January 22, 2010
US President Barack Obama recently announced several plans to reform the financial system, leaving investors to worry about potential negative impacts on financial stocks.
* Major US banks turned in mixed performances for 4Q 09; accuracy of estimates were made more difficult by the TARP repayments by several banks
* Positive outperformance of bank profits overshadowed by concerns of an Obama-led clampdown on the sector
* The “Financial Crisis Responsibility Fee” has already met strong opposition from banking sector
* Sample calculations suggest a double digit percentage hit to annual net income for the largest financial institutions
* Further measures to reform the financial sector include clamping down on proprietary trading, as well as preventing further consolidation in the sector
* Stricter regulation to hurt banks, but likely to be milder-than-expected
Financial stocks were recently under pressure as investors digested a slew of earnings reports from the US banking sector. Unlike previous quarters where profits exceeded forecasts by huge margins, earnings were more mixed for 4Q 09. Citigroup, Bank of America and Morgan Stanley reported lower-than-expected earnings, while Wells Fargo, Goldman Sachs and JP Morgan surprised on the upside. Forecasts for 4Q 09 were made more difficult by the repayment of TARP (Troubled Asset Relief Programme) money by several banks, a one-off charge to the quarter’s earnings.
Bank earnings surprise somewhat, but overshadowed by Obama’s financial reform plans
Several banks suggested that loan losses would peak this year, bringing an end to escalating provisions which have been eroding profits since 2007. Also, huge outperformance of market expectations was seen in the case of Goldman Sachs, which reported 4Q 09 earnings per share of US$8.20, shattering the consensus forecast of US$5.20. Wells Fargo managed to eke out a small profit for the quarter, against expectations of a loss while JP Morgan’s US$3.3 billion quarterly profit was significantly higher than the expected US$2.46 billion.
Despite the positive surprises, the Obama administration’s recent move to reform the financial sector has left investors in a sea of uncertainty. On 14 January 2010, President Barack Obama announced plans for the implementation of a “Financial Crisis Responsibility Fee”, which would be paid by the largest banks with assets larger than US$50 billion. According to the President’s statement, the intention is to use this tax to recover the anticipated cost of the TARP programme, currently estimated at US$117 billion.
Impact of bank levy on net income
The proposed levy involves a 15 basis point (0.15%) fee assessed against the financial institution’s covered liabilities (assets minus Tier 1 capital minus FDIC assessed deposits). Key executives in some of the largest US banks have already expressed their displeasure, indicating that the tax does not take into account the early repayment of TARP money by several institutions, and that TARP beneficiaries like smaller banks and the automobile financing units of General Motors and Chrysler are not subjected to the tax. Also, legendary investor Warren Buffett sarcastically suggested that members of Congress should be slapped with a special tax for their mishandling of mortgage lenders Fannie Mae and Freddie Mac.
While most of the large financial institutions impacted by this new “responsibility fee” are unlikely to have any trouble paying it, the tax would negatively impact net income for at least the next ten years (officials have indicated a minimum tax period of ten years). Using Bloomberg data, we calculated the potential annual tax based on the guidelines issued so far for the eight largest financial institutions in the US (by assets, see Table 1). If the Obama administration gets its way, net income of the largest US financial institutions could see a double digit percentage impact. 2009 net profit for Citigroup, Morgan Stanley and Bank of America are probably not reflective of actual earnings power and the impact of the tax may be a smaller percentage of normalised net income.
“Financial Reform” Bombshell
In addition to the proposed tax, the Obama administration has also dropped a “financial reform” bombshell on the banking sector. In his remarks on 21 January 2010, President Obama laid out a proposal which will see a clampdown on proprietary trading by commercial banks. In the exact wording in Obama’s statement, “Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers”. Also, limits will be placed on bank size to prevent the creation of “too big to fail” institutions.
Proprietary trading clampdown
The announcement was met with much disappointment by investors, as US financial stocks (as represented by the S&P 500 Financials Index) fell 3% in the trading session. This was not surprising as proprietary trading has already become embedded within the banking sector’s operations and in certain institutions, is a key driver for profitability.
The key to Obama’s announcement lies in the administration’s definition of “proprietary trading”. Many financial institutions use their proprietary trading desk to offset risk in other parts of the bank’s operations, and it would be very difficult to draw the line between “risk management” and “trading for profit”. A complete clampdown on trading activity would be akin to a move back to the Glass-Steagall Act, which required the separation of commercial banking operations and investment banking operations. On the other hand, if banks themselves are given the leeway to distinguish between the two, they could very well carry on operations as usual under the guise of hedging risk.
Limits on size
In addition to the existing 10% market share limit on US bank deposits, Obama has suggested expanding the existing regulation to cover non-deposit liabilities to ensure that banks do not grow too large, making them “too big to fail”. The details on this aspect of regulatory change are sketchier, making it impossible to assess the potential impact on the various financial institutions at this juncture.
Regulatory changes to hurt banks, but to be milder-than-expected
There has been much prior discussion on regulatory scrutiny, but until the Obama’s latest announcements, there was nothing concrete. Recent measures threaten the profitability of the US banking sector, and there may be curbs on growth and expansion. However, we believe that the impact of these increased regulatory measures will be milder-than-expected for a few reasons.
First, the measures described so far are rather sketchy and there will be extreme difficulty in implementation. As described earlier, a clampdown on proprietary bank trading may be taking away the risk management arm of modernised commercial banking operations, leaving the institutions exposed to even greater risk. It will be incredibly difficult to regulate operations which are already integrated in the bank’s operation process, and we expect this regulatory change to face substantial opposition when it goes to Congress.
Secondly, even if a milder form of the regulation is passed, banks will be allowed sufficient time to unwind their trading positions which regulators deem to fall under the category of “hedge funds” or “private equity funds”, perhaps over a period of many years. A quick demand to “deleverage” would have potential to cause a repeat of 2008, where financial markets would be sent into a tailspin yet again. This could allow financial institutions time to spin off trading operations, as if the Glass-Steagall Act was in force, and concentrate on commercial banking operations.
Thirdly, even the bank tax suggested last week has already met with strong opposition from most industry experts, and the reception to the latest set of announcements will be less-than-lukewarm. Though a highly debatable point, financial institutions represent some of the largest employers in the US and their corporate well-being has given Congress much to ponder over. There is still much potential for modification of the Obama administration’s financial reform plans, and a watered-down version (the recent healthcare reform bill comes to mind) could be the likely result.
What does this mean for investors in financial stocks?
We do not deny that increasing regulation presents strong headwinds for financial institutions and their earnings. Also, we accept that there must be certain changes made to ensure that excessive risk-taking by banks in the future does not occur to precipitate another financial crisis. However, we believe that current ideas for reform are rather sketchy still, and a rush to push out these new regulations without considering the feasibility of implementation will render them less useful. We expect some form of regulatory rulings to be passed, but will result in less harm to the financial sector than is currently being perceived by the market.
At this juncture, we think that the bank tax is a key consideration in terms of a direct impact to corporate earnings, while rules on consolidation may ultimately require a few of the largest US financial institutions to divest non-core portions of their banking operations in select states. We also remain sceptical that the “proprietary trading” clampdown can be passed in its current form.
As of 21 January 2010, the global financial sector (as represented by the MSCI World Finance index) trades at a PB ratio of just 0.93X, while the S&P 500 Financials index trades at a PB ratio of 1.1X. Earnings for the largest US financial companies may be impacted by the bank tax, but as of 21 January, the consensus expects earnings of US financial companies to jump 111.8% in 2010, and 48.1% more in 2011.
The sector continues to trade at undemanding valuations on a price-to-book basis, while the anticipated recovery in earnings means that US financials are currently valued at just 10.2X 2011 earnings. Despite the recent headwinds faced by the financial sector, we maintain that the sector remains an attractive investment proposition with substantial potential upside.
source: fundsupermart .com
Author : Terence Lin
January 22, 2010
US President Barack Obama recently announced several plans to reform the financial system, leaving investors to worry about potential negative impacts on financial stocks.
* Major US banks turned in mixed performances for 4Q 09; accuracy of estimates were made more difficult by the TARP repayments by several banks
* Positive outperformance of bank profits overshadowed by concerns of an Obama-led clampdown on the sector
* The “Financial Crisis Responsibility Fee” has already met strong opposition from banking sector
* Sample calculations suggest a double digit percentage hit to annual net income for the largest financial institutions
* Further measures to reform the financial sector include clamping down on proprietary trading, as well as preventing further consolidation in the sector
* Stricter regulation to hurt banks, but likely to be milder-than-expected
Financial stocks were recently under pressure as investors digested a slew of earnings reports from the US banking sector. Unlike previous quarters where profits exceeded forecasts by huge margins, earnings were more mixed for 4Q 09. Citigroup, Bank of America and Morgan Stanley reported lower-than-expected earnings, while Wells Fargo, Goldman Sachs and JP Morgan surprised on the upside. Forecasts for 4Q 09 were made more difficult by the repayment of TARP (Troubled Asset Relief Programme) money by several banks, a one-off charge to the quarter’s earnings.
Bank earnings surprise somewhat, but overshadowed by Obama’s financial reform plans
Several banks suggested that loan losses would peak this year, bringing an end to escalating provisions which have been eroding profits since 2007. Also, huge outperformance of market expectations was seen in the case of Goldman Sachs, which reported 4Q 09 earnings per share of US$8.20, shattering the consensus forecast of US$5.20. Wells Fargo managed to eke out a small profit for the quarter, against expectations of a loss while JP Morgan’s US$3.3 billion quarterly profit was significantly higher than the expected US$2.46 billion.
Despite the positive surprises, the Obama administration’s recent move to reform the financial sector has left investors in a sea of uncertainty. On 14 January 2010, President Barack Obama announced plans for the implementation of a “Financial Crisis Responsibility Fee”, which would be paid by the largest banks with assets larger than US$50 billion. According to the President’s statement, the intention is to use this tax to recover the anticipated cost of the TARP programme, currently estimated at US$117 billion.
Impact of bank levy on net income
The proposed levy involves a 15 basis point (0.15%) fee assessed against the financial institution’s covered liabilities (assets minus Tier 1 capital minus FDIC assessed deposits). Key executives in some of the largest US banks have already expressed their displeasure, indicating that the tax does not take into account the early repayment of TARP money by several institutions, and that TARP beneficiaries like smaller banks and the automobile financing units of General Motors and Chrysler are not subjected to the tax. Also, legendary investor Warren Buffett sarcastically suggested that members of Congress should be slapped with a special tax for their mishandling of mortgage lenders Fannie Mae and Freddie Mac.
While most of the large financial institutions impacted by this new “responsibility fee” are unlikely to have any trouble paying it, the tax would negatively impact net income for at least the next ten years (officials have indicated a minimum tax period of ten years). Using Bloomberg data, we calculated the potential annual tax based on the guidelines issued so far for the eight largest financial institutions in the US (by assets, see Table 1). If the Obama administration gets its way, net income of the largest US financial institutions could see a double digit percentage impact. 2009 net profit for Citigroup, Morgan Stanley and Bank of America are probably not reflective of actual earnings power and the impact of the tax may be a smaller percentage of normalised net income.
“Financial Reform” Bombshell
In addition to the proposed tax, the Obama administration has also dropped a “financial reform” bombshell on the banking sector. In his remarks on 21 January 2010, President Obama laid out a proposal which will see a clampdown on proprietary trading by commercial banks. In the exact wording in Obama’s statement, “Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers”. Also, limits will be placed on bank size to prevent the creation of “too big to fail” institutions.
Proprietary trading clampdown
The announcement was met with much disappointment by investors, as US financial stocks (as represented by the S&P 500 Financials Index) fell 3% in the trading session. This was not surprising as proprietary trading has already become embedded within the banking sector’s operations and in certain institutions, is a key driver for profitability.
The key to Obama’s announcement lies in the administration’s definition of “proprietary trading”. Many financial institutions use their proprietary trading desk to offset risk in other parts of the bank’s operations, and it would be very difficult to draw the line between “risk management” and “trading for profit”. A complete clampdown on trading activity would be akin to a move back to the Glass-Steagall Act, which required the separation of commercial banking operations and investment banking operations. On the other hand, if banks themselves are given the leeway to distinguish between the two, they could very well carry on operations as usual under the guise of hedging risk.
Limits on size
In addition to the existing 10% market share limit on US bank deposits, Obama has suggested expanding the existing regulation to cover non-deposit liabilities to ensure that banks do not grow too large, making them “too big to fail”. The details on this aspect of regulatory change are sketchier, making it impossible to assess the potential impact on the various financial institutions at this juncture.
Regulatory changes to hurt banks, but to be milder-than-expected
There has been much prior discussion on regulatory scrutiny, but until the Obama’s latest announcements, there was nothing concrete. Recent measures threaten the profitability of the US banking sector, and there may be curbs on growth and expansion. However, we believe that the impact of these increased regulatory measures will be milder-than-expected for a few reasons.
First, the measures described so far are rather sketchy and there will be extreme difficulty in implementation. As described earlier, a clampdown on proprietary bank trading may be taking away the risk management arm of modernised commercial banking operations, leaving the institutions exposed to even greater risk. It will be incredibly difficult to regulate operations which are already integrated in the bank’s operation process, and we expect this regulatory change to face substantial opposition when it goes to Congress.
Secondly, even if a milder form of the regulation is passed, banks will be allowed sufficient time to unwind their trading positions which regulators deem to fall under the category of “hedge funds” or “private equity funds”, perhaps over a period of many years. A quick demand to “deleverage” would have potential to cause a repeat of 2008, where financial markets would be sent into a tailspin yet again. This could allow financial institutions time to spin off trading operations, as if the Glass-Steagall Act was in force, and concentrate on commercial banking operations.
Thirdly, even the bank tax suggested last week has already met with strong opposition from most industry experts, and the reception to the latest set of announcements will be less-than-lukewarm. Though a highly debatable point, financial institutions represent some of the largest employers in the US and their corporate well-being has given Congress much to ponder over. There is still much potential for modification of the Obama administration’s financial reform plans, and a watered-down version (the recent healthcare reform bill comes to mind) could be the likely result.
What does this mean for investors in financial stocks?
We do not deny that increasing regulation presents strong headwinds for financial institutions and their earnings. Also, we accept that there must be certain changes made to ensure that excessive risk-taking by banks in the future does not occur to precipitate another financial crisis. However, we believe that current ideas for reform are rather sketchy still, and a rush to push out these new regulations without considering the feasibility of implementation will render them less useful. We expect some form of regulatory rulings to be passed, but will result in less harm to the financial sector than is currently being perceived by the market.
At this juncture, we think that the bank tax is a key consideration in terms of a direct impact to corporate earnings, while rules on consolidation may ultimately require a few of the largest US financial institutions to divest non-core portions of their banking operations in select states. We also remain sceptical that the “proprietary trading” clampdown can be passed in its current form.
As of 21 January 2010, the global financial sector (as represented by the MSCI World Finance index) trades at a PB ratio of just 0.93X, while the S&P 500 Financials index trades at a PB ratio of 1.1X. Earnings for the largest US financial companies may be impacted by the bank tax, but as of 21 January, the consensus expects earnings of US financial companies to jump 111.8% in 2010, and 48.1% more in 2011.
The sector continues to trade at undemanding valuations on a price-to-book basis, while the anticipated recovery in earnings means that US financials are currently valued at just 10.2X 2011 earnings. Despite the recent headwinds faced by the financial sector, we maintain that the sector remains an attractive investment proposition with substantial potential upside.
source: fundsupermart .com
Author : Terence Lin
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Philippines Light Rail Transit Public Transportation
The Manila Light Rail Transit System (Filipino: Sistema ng Magaan na Riles Panlulan ng Maynila),[citation needed] popularly known as the LRT, is a metropolitan rail system serving the Metro Manila area in the Philippines. Its twenty-nine stations over 28.8 kilometers (17.9 mi) of mostly elevated track form two lines. LRT Line 1, also called the Yellow Line, opened in 1984 and travels a north–south route. LRT Line 2, the Purple Line, was completed in 2004 and runs east–west.
The LRT is operated by the Light Rail Transit Authority (LRTA), a government-owned and controlled corporation under the authority of the Department of Transportation and Communications (DOTC). Along with the Manila Metro Rail Transit System (MRT, also called the Blue Line), and the Philippine National Railways (PNR), the LRT is part of Metro Manila's rail transportation infrastructure known as the Strong Republic Transit System (SRTS)
Stations
Santolan
Recto
Baclaran
Monumento
Cubao
The People Power Revolution was a series of nonviolent and prayerful mass street demonstrations in the Philippines that occurred in 1986. It was the inspiration for subsequent non-violent demonstrations around the world including those that ended the communist dictatorships of Eastern Europe.
A glimpse of Philippine culture through traditional dances and songs performed by some of the country's best dance groups.
In 1990, it was voted by the BMW Tropical Beach Handbook as one of the best beaches in the world
Barasoain Church (also known as Our Lady of Mt. Carmel Parish) is a Roman Catholic church built in 1630 in Malolos City, Bulacan.
Laguna de Bay (Filipino: Lawa ng Bay; English: Laguna de Bay is the largest lake in the Philippines and the third largest freshwater lake in Southeast Asia
Malacañan Palace, is the official residence of the President of the Philippines.
