Here you will find the Forex e-books that contain more advanced information than the average popular book about financial trading. In some cases, understanding these books is impossible without a lot of experience in Forex and sometimes the extended knowledge of mathematics.
Almost all Forex e-books are in .pdf format. You'll need Adobe Acrobat Reader to open these e-books. Some of the e-books (those that are in parts) are zipped.
If you are the copyright owner of any of these e-books and don't want me to share them, please, contact me and I will gladly remove them.
A New Interpretation of Information Rate — by J. L. Kelly Jr.
CCI Manual — by James L. O'Connell.
Nicktrader and Jeff Explaining Reverse and Regular Divers — from Woodies CCI Club Discussion From January 15,16 2004.
NickTrader on No Price CCI Divergence Trading — by Nicktrader.
Are Supply and Demand Driving Stock Prices? — by Carl Hopman.
The Sharpe Ratio — by William F. Sharpe
Sunday, March 15, 2009
All about Forex
FOREX - the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.
Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.
Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.
This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).
Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.
Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.
In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.
Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.
Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study.
Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.
This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).
Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.
Asian Stocks Tumble - Dollar Recovers early losses
Dollar was mildly lower as the week starts but regains ground quickly as Asian stock markets fall amid concern of deepening recessions. The World Bank said over the weekend that the global economy is likely to shrink for the first time since WW II and predicts that growth will be at least 5% below potential. Industrial production will be lowered by 15% by middle of 2009 than a year ago. World trade is expected to have the largest decline in 80 years with sharpest losses in East Asia. Developing countries are facing a financing short fall of $270-700b in 2009 and only 1/4 of the most vulnerable countries have resources to prevent a rise in poverty. Asia stocks are mostly down with Nikkei dropping over 1.2% to 7086 while Hong Kong HSI is dropping more than 2.5%.
Released in Asia, Japan's current account turned to a deficit of 172.8B yen in January, the first deficit since 1996 and significantly lower than a deficit of 15.3B yen as market expected, compared with a surplus of 125.4B yen in the previous month. Exports slumped 46.3% yoy (December: -35.1%) in January while imports declined 31.7% yoy (December: -21.2%) during month. Japan's economic watch DI improved slightly to 17.3 in February from 17.1 in December and the trough of 15.9 in December. Although still in very low level, the reading indicated signs of stabilization.
From Europe, Switzerland's unemployment rate climbed from 3.3% to 3.4% in Feb as expected. Market's focus will remain on SNB's meeting this week. While the upper band of Libor is expected to be lowered somewhat, focus will also be on any announcement os quantitative easing programs. Eurozone's Sentix Investor confidence is expected to slide to -37.8 in March from -36.1 in February
The US calendar is empty today. Canada's housing starts in February is anticipated to have plummeted further to 148.5K in February after falling to 8-year low in January. Rising unemployment rate and looming recession made buyers stay away from the property market.
Dollar index recovers mildly after drawing support from 4 hours 55 EMA. But as discussed before, a short term top is likely in place at 89.62 on bearish divergence condition in 4 hours MACD. The dollar index should have completed a five wave impulsive sequence (81.62, 79.63, 88.24, 85.64, 89.62) and some correction should now be seen in near term, targeting support zone of 83.58 and 86.81. But after all, downside should be contained by 83.58 cluster support (50% retracement of 77.69 to 89.62 at 86.65) and bring up trend resumption. Meanwhile, a break of 89.62 high will invalidate this case and indicates that recent up trend is still in progress to 90 psychological level and above.
Released in Asia, Japan's current account turned to a deficit of 172.8B yen in January, the first deficit since 1996 and significantly lower than a deficit of 15.3B yen as market expected, compared with a surplus of 125.4B yen in the previous month. Exports slumped 46.3% yoy (December: -35.1%) in January while imports declined 31.7% yoy (December: -21.2%) during month. Japan's economic watch DI improved slightly to 17.3 in February from 17.1 in December and the trough of 15.9 in December. Although still in very low level, the reading indicated signs of stabilization.
From Europe, Switzerland's unemployment rate climbed from 3.3% to 3.4% in Feb as expected. Market's focus will remain on SNB's meeting this week. While the upper band of Libor is expected to be lowered somewhat, focus will also be on any announcement os quantitative easing programs. Eurozone's Sentix Investor confidence is expected to slide to -37.8 in March from -36.1 in February
The US calendar is empty today. Canada's housing starts in February is anticipated to have plummeted further to 148.5K in February after falling to 8-year low in January. Rising unemployment rate and looming recession made buyers stay away from the property market.
Dollar index recovers mildly after drawing support from 4 hours 55 EMA. But as discussed before, a short term top is likely in place at 89.62 on bearish divergence condition in 4 hours MACD. The dollar index should have completed a five wave impulsive sequence (81.62, 79.63, 88.24, 85.64, 89.62) and some correction should now be seen in near term, targeting support zone of 83.58 and 86.81. But after all, downside should be contained by 83.58 cluster support (50% retracement of 77.69 to 89.62 at 86.65) and bring up trend resumption. Meanwhile, a break of 89.62 high will invalidate this case and indicates that recent up trend is still in progress to 90 psychological level and above.
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