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Starting to Trade FOREX

Starting to Trade FOREX. Risk Warning. High Risk Investment

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Starting to Trade FOREX

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  1. Starting to Trade FOREX

  2. Risk Warning • High Risk Investment • Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

  3. How It Works • Retail: Swaps (leveraged) • Large banks: Flows 1. Need to buy US T-bills for safety 2. Sell Euros to buy Dollars 1. Identify rates/risk 2. Contract written with buyer (BB) 3. Buy US bonds 3. Close contract, repay liquidity provider EURUSD 1.5000 Sell 10k EURUSD EURUSD 1.5000 Sell 10k EURUSD Re-buy 10k EURUSD at 1.4000 Profit 10k*50c = USD5k Wait for next selling opportunity, get some interest

  4. FOREX and Equities Advantages Disadvantages Much higher risk Almost always wrong Easy to buy into losses • Able to long and short market • Large number of correlations • Extremely liquid, good for scalping/algos • RollS/RollB • 5, 6 pairs • Much easier to analyze

  5. Important • Manage risk • Identify macroeconomic patterns • Check opportunities of each pair • Know your stops and limits

  6. What Affects Exchange Rates? • Risk • Rate expectations • Repatriation

  7. Risk on/risk off

  8. Risk currencies Safety Currencies • USD • JPY • (CHF) • Risk Currencies Commodities Bloc • AUD, NZD, CAD Anti-dollar • EUR, GBP

  9. Greece, the Euro and the S&P500

  10. Risk Correlation

  11. Risk Correlation

  12. Liquidity Flows

  13. Rates and rate expectations

  14. USDJPY and Yields

  15. Risk-driven Interest and Exchange Rates

  16. Rate Expectations

  17. During Rate Decisions

  18. Repatriation

  19. Post-Sendai USDJPY

  20. What to Remember • Short term: Risk appetite • Medium term: Rates outlook • Long term: Structural changes/risk

  21. Looking at charts

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