Where the Future of Carry Trade Lies?

Global stocks markets calmed by central banks' generous currency interventions last week are doing quite well so far. EUR/USD and other currency pairs influenced by carry trade and subprime lending crisis chain reaction (mostly EUR/JPY and GBP/JPY) also don't jump madly through and out the support and resistance levels anymore. But what will happen next? Will the markets just soak up the liquidity, thrown in by Fed and other countries' financial authorities, and crisis will go on? Or will the carry trade trade go on, feeding credit sector with cheap JPY money and pushing EUR/USD, EUR/JPY and GBP/JPY to the new historical maximums?

Current situation doesn't hint in favor of any possible outcome - both stock markets and currency pairs are slow. In my opinion, the best way to understand the next movement is to look on the Japanese Nikkei market index. So far (today and yesterday), it has been increasing slightly, signaling the normalization of market situation. A sharp fall or rise on Nikkei can mean a faster crisis unveiling (in case of fall) or a return to carry trade dominance markets (in case of rise, not necessarily sharp, strong and long growth signals that too).

Other good method is a GBP/JPY pair, which stabilized in 220-230 range. Breaking this range at 220 level will most probably signalize a continuous bearish trend in EUR/USD, EUR/JPY, GBP/JPY and global stock markets too. Breaking the 230 level can be a sign of the return to bullish trend on those currencies and other financial markets.

Learn Forex Trading - Learn This Essential Fact First To Succeed

In this article we are going to look at one essential fact you need to succeed when trading currencies. If you understand it, you can will be taking your first step to learning forex trading correctly and achieving forex trading success – the fact you must understand is:The ratio of winners to losers hasn’t changed in 50 years - 95% lose and 5% win – So what you may say?Well think about it:The ratio of winners to losers has stayed the same and this is despite the increased power of computers in terms of data analysis and forex analysis programs, data analysis, better and more timely news sources and a huge amount of experts wanting to help you.Doesn’t this fact strike you as odd?All these advantages! Yet the bulk of traders still find their currency trading strategies lose.Well there is a simple reason why and it’s an essential part of your forex education:Forex trading is relatively simple and is as much mindset, as it is a good currency trading system, so learn the points below and you will be able learn forex trading correctly and succeed:1. Simple systems work bestThere is a temptation to devise complicated forex trading systems - after all computers can help you do it easily, but the fact is this will help you lose.A complicated system has more elements to break – a simple system is best as it is more robust.2. News is the enemyToday there is a lot of news and it’s presented well - all those convincing arguments!All great to hear or read but it will simply help you lose - news is discounted in seconds so it wont help you as the market looks to the future.3. Volatility Has IncreasedThe volatility of currency trading has increased with faster communications.This means you have sharper counter trend moves to deal with and the big challenge today is dealing with it – this has actually made currency trading success harder!4. The myth of the expertIn today’s society we consult experts on everything, yet currency trading is one area an expert won’t help you.The fact is success comes from within no one is going to give it you.Many traders buy worthless e-books for hundred dollars or so and believe the hype and these guys can help – dream on.They present great marketing copy and normally claim great success – with no substantiation whatsoever and never have a real track record to back up their claims, just a worthless simulated profit in hindsight.If you want to win, ignore them and find your own way.Trading the truthThe market price is always right, only you can be wrong and it moves as and when it wants to.To win you have to create a set of rules to lead you to currency trading success, have confidence in them and the discipline to execute your trading signals.Most people cant take responsibility for their actions, lose and blame the markets or others for their losses but in reality its their fault.Most people simply dont have the mindset to win and thats as true today as 50 years ago.You just need to learn forex trading the right way and this article has given you something to think about and a valuable bit of forex education.

Trading oil and gas contracts using CFDs

Many traders do not realise that Contracts for Difference can be used not just for stockmarket trading, but also in the forex and commodities markets, and one of the most liquid and exciting markets is crude oil and natural gas. CFDs are usually modelled in the same way as futures contracts, and consequently there are several contracts from which to choose in each category.It is well known that the crude oil market is normally priced either as either Brent crude or US crude. The current spread between the two is about $3.5, Brent being higher, but this varies according to supply and demand, liquidity and other geopolitical issues.Different contractsWithin each market, several expiration months are quoted and at the time of writing (June 2007) July, August and September CFDs are available. The difference in prices between the various contracts reflects the cost of carry and other seasonal factors as it would for all commodities.What this means is that you do not pay financing interest on these CFDs, because all positions are rolled over into expiry and the contract values already price in the cost of carry.What can you trade?It is possible to trade various many different CFDs related to oil prices. These include:Heating oil, for which there is a liquid US-based quote with several expirationsUK Oil and Gas sector CFDsUS Oil and Gas sector CFDsIndividual oil share CFDs including such varied names as Royal Dutch Shell, Statoil, Total-Fina, Exxon Mobil and many smaller oil company stocks around the worldUS Natural Gas CFDs with various expirationsCalculating the margin on a US crude contractAs we analyse the US crude oil market every day in our US report, it is worth looking at this contract to calculate what margin is required on a trade.The current most liquid contract is the July 2007 CFD, priced at $65.86 to $65.92The margin requirement on most commodities is 3% of the total contract value.The tick size is 0.01.The contract value is calculated by this formula:((Quantity) x (Price))/ Point= initial marginTherefore if you were to buy 10 US Crude Oil CFDs at $65.92(10 x 49.50)/ 0.01 x 0.03 = $1,978 initial margin.The exposure per tick is worth $10.For online traders, CFDs are an excellent way to gain exposure to the oil market as a speculative play, for hedging purposes, or when searching for good arbitrage possibilities. The markets are liquid and spreads are very attractive.

Forex Trade

Foreign ExchangeThis short introduction explains the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading Forex online. There are also two scenarios describing the implications of trading in a bear as well as bull market to better acquaint you with some of the and opportunities of the largest and most liquid market in the world.Overview Foreign exchange forex or just FX are all terms used to describe the trading of the world's many currencies. The forex market is the largest market in the world, with trades amounting to more than USD 1.5 trillion every day. This is more than one hundred times the daily trading on the NYSE (New York Stock Exchange). Most forex trading is speculative, with only a few percent of market activity representing governments' and companies' fundamental currency conversion needs.Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market , which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market. Trading ForexA currency trade is the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a cross (for example, the Euro/US Dollar, or the GB Pound/Japanese Yen.). The most commonly traded currencies are the so-called “majors” – EURUSD , USDJPY , USDCHF and GBPUSD .The most important forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days. Forward OutrightsFor forward outrights, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. The interest rate differential varies according to the cross you are trading. On the USDCHF , for example, the interest rate differential is quite small, whereas the differential on NOKJPY is large. This is because if you trade e.g. NOKJPY, you get almost 7% (annual) interest in Norway and close to 0% in Japan. So, if you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential. This differential has to be calculated and added to your account. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade. Trading on MarginTrading on margin means that you can buy and sell assets that represent more value than the capital in your account. Forex trading is usually conducted with relatively small margin deposits. This is useful since it permits investors to exploit currency exchange rate fluctuations which tend to be very small. A margin of 1.0% means you can trade up to USD 1,000,000 even though you only have $10,000 in your account. A margin of 1% corresponds to a 100:1 leverage(or 'gearing'). (Because USD 10,000 is 1% of USD 1,000,000.)