What is the FOREX

market?

Largest and most liquid market

in the world
– Market never sleeps

– Starting
– Max. intensity
– Min. intensity
– Important centers
 The Foreign Exchange Market

• Foreign exchange means

• Foreign exchange transaction

• Every hour of every business day, Open

and Close throughout the day
 Measuring Foreign Exchange Market Activity:
Average Electronic Conversations Per Hour
25,000

20,000

15,000

10,000

5,000
Greenwich Mean
Time
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

10 AM Lunch Europe Asia Americas London Afternoon 6 pm Tokyo

In Tokyo In Tokyo opening closing open closing in America In NY opens
Two components to Forex

Forex has two components

1. Over-the-counter (OTC)
2. Organized exchanges
 Example of a FOREX trade

• Suppose you feel that the EUR is undervalued against the

dollar. To execute this strategy, you would buy Euros
(simultaneously selling Dollars) and then wait for the
exchange rate to rise.

• Wait for the right time

• Earn profit
 Functions of the Foreign
Exchange Market
• The foreign exchange Market is the mechanism
by which participants:

– Transfer purchasing power

– Obtain or provides credit
– Minimize exposure to the risks
 Market Participants
• The foreign exchange market consists of
two tiers:
– The Inter bank or wholesale market
– The client or retail market
 Five broad categories

1. Bank and Non bank foreign exchange

dealers
2. Speculators and Arbitragers
3. Individuals and firms,
4. Central banks Treasuries,
5. Foreign exchange brokers.
 Transactions
in the Interbank Market

• A Spot transaction in the Inter bank

market is the purchase of foreign
exchange, with delivery and payment
between banks to take place, normally, on
the second following business day.
• Value date
To ensure success in this industry, there are basic things that a
would-be trader should know to arm him with the strengths that
would prevent him from failing.

• Scalping
• Day trading
• Swing trading
• Position trading
 Advantages of currency trading
• Superior liquidity
• No insider information
• 24-hour trading
• Lower transaction costs
• Equal profit potential in both rising and
falling markets
 Most traded currencies

• US dollar: USD
• Euro: EUR
• Japanese Yen: JPY
• British pound: GBP
• Swiss franc: CHF
• Australian dollar: AUD
 Currencies are traded in pairs

• The most heavily traded pairs:

• EUR/USD - 28 %
• USD/JPY - 18 %
• GBP/USD - 14 %
 Tools for determining future
movements in Money Market

• Fundamental Analysis

• Technical Analysis
.
Forex is the largest market in the world

• Global Average daily volume

• 2004: $1.77 trillion

• 2005: $2.0 trillion
• 2006: $2.6 trillion
• 2007: $3.6 trillion
• 2008: $3.8 trillion
• 2009: $4 + trillion (projected)
 Foreign Exchange Rates
and Quotations
Direct or indirect.
In this pair of definitions, the home or base
country of the currencies being discussed
is critical.
• Direct
• Indirect
 Foreign Exchange Rates
and Quotations
• Most foreign exchange transactions involve the
US dollar.
• Professional dealers and brokers may state
foreign exchange quotations in one of two ways:
– The foreign currency price of one dollar
– The dollar price of a unit of foreign currency
• Most foreign currencies in the world are stated in
terms of the number of units of foreign currency
needed to buy one dollar.
 How to Read a Currency
Quote
• Currency pair
• Base currency
• Quote currency
• Bid price
• Ask Price

SIMPLE !!
 Dealing with a Forex
Provider
• Terms you may encounter:

– Broker: no dealing desk

– Broker: dealing desk

– Bank

Let’s take the mystery out of these terms

and look at what they really mean
What does “no dealing desk”
mean
Bank Liquidity Forex Broker Trader
Provider

Price from Bank A

1. Determines best price Price Display

Price from Bank B 2. Adds Markup to Price
3. Send Price to client
Decides
Price from Bank C to make a
trade

1. Finds the best price

Accepts the Trade Request a Trade
2. Request a Trade

1. Trade is booked
Trade Accept Message 2. Collateral account
Trade Accept Message debit or credited
 What does “dealing desk” mean
Bank Liquidity
Forex Provider Trader
Provider

Price from Bank A

1. Determines best price

Price from Bank B 2. Adds Markup to Price Price Display
3. Send Price to client
Decides
Price from Bank C to make a
trade

Dealing Desk will

2. Accepts the client trade
3. Decided to offset the
trade or not with a bank Request a Trade
4. Offset trades with banks

Trade Accept Message 1. Trade is booked

2. Collateral account
debit or credited

Accepts the Trade Request a Trade from

a bank
What does dealing with a
Bank mean
Bank Trader

Price from Bank Price Display

Decides
to make a
trade

Bank will
2. Accepts the client trade
3. Manage the currency Request a Trade
Risk

1. Trade is booked
Trade Accept Message 2. Collateral account
debit or credited
 Factors affecting exchange
rates
• Exchange rates are driven by supply & demand
Factors affecting supply & demand
- Interest rate
- Inflation
- Trade balance
- Employment
- Politics
 How to get started
• Go to www.dbfxarabic.com

• Sign up for a demo and PRACTICE

• Applications are on-line

• Accounts are funded with cash

• Fund with as little as $5,000 USD or the

equivalent in GBP, EUR or JPY.
Questions to ask yourself
• How much are you investing ?
• What is your trading style ?
• What level of risk or leverage are you comfortable
with ?
• What are the different regulatory environments
and how does that effect you ?

• A look at the terms regarding how the Forex

provider manage their currency risk
The fundamentals and the perception of the trader
would be equal to the future price movement in the
market. With this knowledge in hand, the trader can
then be able to improve his or her odds of making the
right decision.
Trading in the foreign exchange would require a lot of
decision making. You cannot simply put your
investment in the hands of luck and simply purchase
any currency, you have to be very careful and know
what exactly what you are doing. The most common
mistake any trader can do is to trade wildly, without
proper strategies which were carefully formulated by
using technical analysis.
 Conclusion
Forex market volume of transactions remains high during the whole day, but
peaks highest when the Asian market (including Australia & New Zealand), the
European market and the U.S. market are open simultaneously.

In particular, there are two times when two of the major markets overlap during
trading hours - between 2am and 4am EST (Asian/European) and between 8am
to 12pm EST (European/N. American).

If you want to find a great number of profitable trades, focus on the hours when
the markets tend to make their biggest moves, i.e., during these big markets
overlaps, which therefore, are usually the Best Times to Trade.