10 Things You Wanted To Know

About The Currency Market But Were

Afraid To Ask

www.bkforexadvisors.com

*Past performance is not indicative of future results. 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.   Kathy Lien and Boris Schlossberg are employed as Director of Currency Research for Global Forex Trading, a division of Global Futures & Forex, Ltd. (GFT). However,  BKForex Advisor, which is a company owned and operated by Kathy and Boris separately and independently from their employment with GFT. GFT does not control the content of the BKTraderFX.com web site, and opinions expressed by Boris and Kathy on the BKTraderFX.com web site are not necessarily the opinions of GFT. FX 360® is either a registered trademark or a trademark of Global Futures & Forex, Ltd., in the United States and/or other countries. This information should not be relied on as a substitute for extensive independent research before making your investment decisions. BKForexAdvisor is merely providing this for your general information. The views of this author are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. In addition, any projections or views of the market provided may not prove to be accurate. Global Forex Trading will not be responsible for any losses incurred on investments made as a result of any information contained in this presentation. Global Forex Trading and BKForexAdvisor do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

What Makes FX Different From All Other

Markets? 1. FX is Truly 24 Hours/Day

2. FX Spot is Decentralized

3. FX – Pay Spread Not Commission

4. FX – Highly Levered

Trade The World1. FX Trades Continuously From

5PM ET Sunday – 5PM ET Friday

2. Session Hours (in ET)

Asia: 5PM-3AM

Europe: 3AM-12Noon

North America: 8AM-5PM

3. Most Active Time to Trade (ET) 4AM-12PM

FX Has No Central Market

1. Every Dealer Makes Their Own Quotes

2. Markets Are OTC Not Exchange Based

3. There is No Global Best Bid/Best Ask

4. Most Traders Have Several Accounts

Pay Spread Not Commission

1. Spread = Buy at Offer Sell on Bid

2. You Cannot Join Bid or Offer

3. Spreads Are Quoted to 5th Decimal Point

4. Cost of Trade ~ 1-3bp of Notional Value

Leverage To The Max

1. Stocks = 2:1 or 4:1

2. Futures = 10:1

3. FX? 50:1 !!!!!!!!!

4. 2% Move Against You Wipes You Out

FX Trading Platforms

1. Direct Dealer

2. Pass Through

3. ECN

5 Things To Consider In Choosing FX Platform 1. Spread

2. Slippage

3. Ease of Order Entry

4. Charting

5. Reporting

NEWS Sources

2 Types of News

1. Economic Calendar - Scheduled

2. Headline News – Unscheduled

Economic Calendar

Economic Calendar

Headline News

Headline News Alternatives

@Fxflow/Macro-fx Subscribing to/Following Other People's Lists

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5 Things That Move The Currency Market

1. Central Bank Decisions

2. Equity Risk On/Off

3. Political Uncertainty

4. Trade/Capital Flows

5. M&A Activity

What are double Bollinger Bands?

20 Period, 2 Standard Deviation20 Period, 1 Standard Deviation

2 BB = Outer Lines1 BB = Inner Lines

1. Using BB to determine trend or range

Source: DealBook® 360

2. Using BB to pick tops and bottoms

Source: DealBook® 360

FX Money Management

B

#7 - Does Seasonality Matter?

http://contently.com/blog/wp-content/uploads/2012/01/calendar_icon3.png

B

Seasonality in Stocks

Source: GFT

B

Seasonality in Forex

Source: GFT

B

Does Seasonality Matter?

Source: GFT

B

Does Seasonality Matter?

Source: GFT

B

Does Seasonality Matter?

Source: GFT

B

Seasonality in March

Source: GFT

B

Election Year Price Patterns

Source: GFT

B

#8 - How Do Carry Trades Work?

http://babypips.cachefly.net/school/images/fresman/summary-carry-trade.png

B

How Do Carry Trades Work?

Australian Dollar / Japanese Yen 4.25% 0.10%

http://swap.semanticweb.org/

B

3 Conditions for Carry Trades

- Low Volatility- Risk Appetite- Bias to Tighten Monetary Policy

B

AUD/USD

B

B

#9 - Why Do We Care About Central Bank Intervention?

B

Why Do We Care About Central Bank Intervention?

B

How Does Central Bank Intervention Work?

http://cdn.physorg.com/newman/gfx/news/hires/abusinessman.jpghttp://www.artremis.com/article/pics/ubs_trading_floor08.jpg

B

How Does Central Bank Intervention Work?

http://a1.twimg.com/profile_images/264728980/jpy_usd.png

SELL

Buy

B

Foreign Exchange Reserves

http://cache.gawkerassets.com/assets/images/17/2010/09/500x_pile-of-cash.jpg

B

More Yen in Circulation

http://cache.gawkerassets.com/assets/images/17/2010/09/500x_pile-of-cash.jpg

Yen =

Money Supply (avail of Yen)=

Inflation=

Interest Rates&

Competitiveness

B

2 Choices for the Central Bank

1) Sterilize the Intervention

- Sell Bonds Domestically > Soak Up the New Cash

http://y.e-static.net/file-pic/handing-over-cash/handing-over-cash.jpg

Japanese Government

Investor Paying

for Bonds

Pros-Achieves psychological shock of intervention- Mitigates prior effects

Cons- Rarely Lasts

B

2 Choices for the Central Bank

2) Leave Intervention Unsterilized

- No Additional Action to Change Monetary Base

Can Work if Problems are Domestic in Origin and Monetary in Nature

Japanese Government

B

USD/JPY Chart

B

#10 - How Does China Peg the Yuan?

http://drpinna.com/wp-content/uploads/2010/07/yuan-USdollar.jpg

B

Will China Ever Float the Yuan?

Source: KAL’s cartoon From The Economist print edition - Aug 9th 2007 - Illustration by Kevin Kallaugher

Questions

*Past performance is not indicative of future results. 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.   Kathy Lien and Boris Schlossberg are employed as Director of Currency Research for Global Forex Trading, a division of Global Futures & Forex, Ltd. (GFT). However,  BKForex Advisor, which is a company owned and operated by Kathy and Boris separately and independently from their employment with GFT. GFT does not control the content of the BKTraderFX.com web site, and opinions expressed by Boris and Kathy on the BKTraderFX.com web site are not necessarily the opinions of GFT. FX 360® is either a registered trademark or a trademark of Global Futures & Forex, Ltd., in the United States and/or other countries. This information should not be relied on as a substitute for extensive independent research before making your investment decisions. BKForexAdvisor is merely providing this for your general information. The views of this author are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. In addition, any projections or views of the market provided may not prove to be accurate. Global Forex Trading will not be responsible for any losses incurred on investments made as a result of any information contained in this presentation. Global Forex Trading and BKForexAdvisor do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.