Posts Tagged ‘a’

Using Interest Rate Differentials as Fundamental Trading Strategy

July 24th, 2009

As a forex trader, you should be aware of the role played by the interest rate changes in the general economic and investment climate. You should know that interest rates are an essential part of investment decisions and can drive currency markets as well as the stock and commodities markets in either direction. After the unemployment figures, Federal Open Market Committee (FOMC) rate decisions are the second largest currency market moving release.

The impact of interest rate changes is not only short term but also long term on the currency markets. One Central Banks interest rate decision can affect more than a single currency pair in the interconnected forex markets.

In forex trading, an interest rate differential is the difference between the base currency interest rate and the quoted currency interest rate. In the currency pair, EUR/USD, EUR is the base currency and USD is the quoted or counter currency. The interest rate differential for the EUR/USD pair will be the difference between the Euro interest rate and the USD interest rate.

Understanding the relationship between the interest rate differentials and the currency pairs can be very profitable. In addition to the Central Banks overnight interest rate decisions, expected future overnight rates as well the expected timing for the rate changes can be critical to the currency pair movements.

The reason why this is profitable is that international investors like big banks, hedge funds and institutional investors are yield seekers. They actively keep on shifting funds from the low yield assets to high yield assets.

Interest rate differentials are considered to be the leading indicators for currency prices. London Inter Bank Offer Rate and the 10 year government bond yields are usually used as leading indicators of currency movements.

Lets use an example to make it clear. Suppose the Australian 10 year government bond yield is 5.25%. The US 10 year government bond yield is 1.75%. The yield spread between AUD and USD would be 350 basis points in favor of the AUD.

Suppose the Australian government raises its overnight interest rate by 25 basis points. The Australian 10 year government bond yield would appreciate to 5.50%. Now, the new yield spread between AUD and USD is 375 basis points in favor of AUD. The Australian Dollar will also be expected to appreciate against US Dollar.

The general rule of thumb used by professional traders is that when a yield spread increases in favor of a certain currency that currency is expected to appreciate against the other currency in the pair. This is important information for you as a trader. Interest rate data is available on Bloomberg. Keep track of the currencies in the currency pairs that you trade with that data.

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Vacation Rental Marketing – All You Need To Know

July 23rd, 2009

Apartments and apartment buildings or apartment complexes are income properties and business ventures to landlords everywhere in the world. As is true with any other type of business, landlords need customers to sustain them financially.

Customers in the apartment rental type of businesses are called renters or tenants and they are attracted through a variety of apartment marketing strategies which include but are not limited to apartment rental advertising in the printed media as well as through apartment Internet marketing at the countless websites which provide apartment and house rental advertising services to both side of the equation – the landlords and the tenants.

Because rental apartments are a business and in light of the current weak global economy, most landlords go out of their way to cut costs while at the same time attempting to increase their revenues and preserve the value of their properties.

Children may be viewed as miraculous assets to their families and friends but they are considered to be financial liabilities to landlords for a variety of reasonable, although unfair, reasons:

Children tend to be noisy and make their properties less desirable to other “more upstanding” tenants.As babies they cry; as toddlers they run around banging toys; as pubescents (pre-teens) they are prone to fits of vocal anger; and as teens they play loud music, have wild parties, smoke, drink and talk dirty. Children tend to be dirty and so many other tenants may not appreciate the potential stench. Infants produce diapers filled with poop; toddlers play with chalk, crayons and mud; pre-teens toss rubbish; and teens simply don’t bath. Children tend to attract more children and soon their properties are swarming with little urchins. As if tolerating tenant children is not bad enough, children and parents of children tend to invite other children for playtime, parties and dates.

Vacation rental marketing What You Should Know

There may be some or a whole lot of legitimacy and truth to these harsh allegations.However, we all know that tenants are often part of families which include children and they are every bit deserving as anyone else to have a safe and secure place to live, particularly when children are involved.

To protect tenants with children against discrimination, groups with authority and civil rights organizations have been instrumental in instituting laws that are aimed at preventing landlords from baring families with children into their rental properties.These laws are known as Fair Housing Acts in the United States but other nations have equivalent laws called different things.

Most of such laws define children as individuals who are under the age of 18 and they include children whose relationship to the applying tenants is biological, adoptive or through the legal proceedings of guardianship.These shielding laws also protect tenants who are expecting a child whether through natural birth or proceedings for adoption or guardianship.

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Regardless of how they are called, these laws make provisions for strict enforcement and punitive consequences for offending landlords. In spite of that, many landlords still continually dismiss tenants or prospective tenants off their properties because they have children. So, many of them end up being reported, sentenced and charged with heavy fines for breaking the law.

Now, if I may be so bold, I would like to offer a few words of advice to landlords and tenants with children.

To the landlords I would like to say: Get over yourselves and remember that you too were children once.

To tenants with children I’d like first of all extend my congratulations for being so lucky. Secondly, I’d like to remind them to be good neighbors by practicing good renting etiquettes and teaching their children to do the same.

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House Rental Advertising -Some Powerful Tips

July 23rd, 2009

It would be terrifically nice if people in relationships (personal and professional) got along just because.Unfortunately, that isn’t what always happens, especially when money is involved. So, governments and all kinds of official groups come in with rules which tell people how to behave under certain circumstances and how not to. Such lists also provide detailed lists which indicate how those who fail to follow the rules get reprimanded or punished.

Take that little bit of extra time with your Apartment marketing plan, because it should not be rushed.

The fact is that world population has been moving steadily upwards while the global economy has been heading downwards in the last few years. So, there are more people who are looking for more apartment rentals because many of them cannot afford to buy real estate. That is how apartment marketing became such a huge business all over the world (after all, people have to live somewhere).

Sets of guidelines have been written into official books as laws and regulations. These all focus on Tenant / Landlord Relations which are intended to protect both sides – the tenants and the landlords – as fairly and justly as is possible.

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Let’s take a quick peek at the process that leads up to the Tenant / Landlord Relations which involves rental marketing and then advertising rentals which is meant to attract the right tenants who will occupy the vacancy and pay for the privilege.

To advertise a rental property, the landlord can place ads in the local, national or international printed newspapers, magazines or periodicals. The landlord can also apply with agencies as well as post “For Rent” signs in front of the vacant property. But, since the World Wide Web (WWW) and the Internet have been invented, apartment advertising can be handled with much more effective.

Today, the Internet is filled with websites that are quick, easy and convenient as they provide beneficial services to landlords and tenants. For landlords, they provide the ultimate exposure to their vacant apartments by getting them listed in many online sites, search directories, social networks as well as video portals. For tenants, these online services are easy-to-get-to sources for listed vacant apartments.

Although the Internet has become the source for everything for many people, some still prefer taking the old fashioned route and that’s OK because it take all kinds to make the world go around.Don’t forget that we’re talking about Relations here.

Whichever method of advertising the landlord chooses, it is up to him or her to investigate the desirability of the want-to-be tenant. In a similar way, it is the responsibility of the tenant to closely consider what is being offered (the apartment) and who is doing the offering (the landlord).

When the two sides are sure that they have found a good match, the Tenant / Landlord Relations begin with the signing of a written contract (or an agreement) which is legally endorsed by the local authorities. Such a contract must spell out the landlord’s obligations, the tenant’s commitments, and the means by which to resolve disputes between the two entities, if and when disputes arise.

As is true with all other relationships, Tenant / Landlord Relations are all about the rights, the obligations and the commitments of the landlord toward the tenant and vice versa, of the tenant toward the landlord.

Because every tenant deserves to live in a descent place, landlords must:

Provide apartment which comply with the minimum codes for the health and safety of the tenants. Do whatever they have to in order to sustain the rental quarters in conditions that are conducive to safety of their tenants. Ensure that the common areas of the rental property are safe. Keep all facilities, appliances and systems (electrical, plumbing, sanitation, heating, air conditioning, ventilation, and so on) in safe working conditions. Establish a well maintained system for removal of garbage. Supply clean running cold as well as hot water.

Because each and every landlord deserves thier property to be treated respectfully, tenants are obligated to:

Keep their rented spaces in compliance with health and safety. Keep their rented spaces clean and damage-free while occupying it. Leave the rented spaces as clean and damage-free upon vacancy as they found them when occupancy began. Use the system provided for removal of garbage safely. Use all provided facilities, appliances and systems (electrical, plumbing, sanitation, heating, air conditioning, ventilation, and so on) reasonably and safely. Refrain from purposely or carelessly damage, destroy, deface or remove any part of the rented space. Display considerate and peaceful behavior toward other tenants, landlords and/or neighbors. Adhere to all the dos and don’ts spelled out within the signed rental contract.

All quarrel or disagreements between tenants and landlords which cannot be peacefully resolved otherwise, are taken up in courts of law which are authorized to issue verdicts that can include monitory fines, jail sentences and a variety of community services.

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Using Commodity Prices as Leading Indicators

July 23rd, 2009

Commodities, namely gold and oil, have a strong and substantial correlation with forex markets. By understanding this relationship between gold, oil and currency pairs, you as a forex trader can gauge risk, forecast price changes as well as understand exposure.

Gold and oil prices essentially tend to move based on almost similar fundamental forces that affect a few currency pairs. Four major currencies, the New Zealand Dollar, the Australian Dollar, the Canadian Dollar and the Swiss Franc are considered to be commodity currencies.

The NZD, CAD, AUD, and CHF all have strong connection with gold prices. Natural gold reserves and currency laws in these countries result in almost mirror like movements. The CAD also tends to move with the oil prices.

However, the correlation between CAD and oil prices is not that strong. Each one of these currencies has a correlation with gold and oil and the fundamental factors behind doing so.

Knowledge of the fundamental factors behind these movements, their direction and strength could be a good method to discover trends in both the markets. There is a strong correlation between gold prices and US Dollar as well.

During unstable geopolitical times as well as when global recessionary fears become strong like that presently, investors tend to run away from US Dollar and instead turn to gold as a safe haven for their investments and hoard their wealth.

Therefore, as Dollar loses value, gold prices tend to rise as wary investors become afraid of losing their wealth. As US is going to print more and more dollars to finance its budget deficits, USD will depreciate and gold will appreciate. Many countries are trying to hoard gold keeping in view this anticipated depreciation of dollar. AUD/USD, NZD/USD and USD/CHF are currency pairs that tend to mirror gold movements.

Global energy needs are wholly dependent on oil supplies. Oil prices usually tend to have a huge impact on the global economy. Dont forget, the early part of 2008 when oil and commodity prices jumped skyward taking the global economy to the brink of recession. Oil prices did come down due to the stock market crash but it is being forecasted that it will rise again when the global economy comes out of recession and the demand for oil rises again. USD/CAD currency pair tends to show an oil relationship. The major reason for this relationship is the heavy dependence of US and Canadian economies on foreign oil.

Generally speaking, commodity prices are usually considered to be a leading indicator of currency prices. As such, commodity block traders monitor gold and oil prices to forecast movements in currency pairs. The knowledge of this relationship between gold, oil and currencies can help forex traders to diversity their risk exposure using different products. The combination of gold and forex trading can be very profitable.

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How Seasonal Patterns Effect Forex Markets?

July 22nd, 2009

Most forex traders analyze and predict the future direction of currencies using fundamental or technical analysis. The craftier among them use the combination of both to predict direction of forex markets.

Fundamental analysis studies the long term effect of economic forces on currency markets whether financial or socio political using various economic indicators. Technical analysis is based on the premise that all available information is already compounded into the prices and the future prices can be predicted based on past prices.

If you have been trading stocks, you must be familiar with the term: The January Effect. It has been observed over a long period of time that stocks tend to perform very well between the last week of December and the first week of January.

The explanation of the January Effect is simple. During the last few days of the year, many investors are concerned about their tax returns. They try to realize capital gains or losses to file their tax returns. Many corporations also use the end of the year to face lift their balance sheets favorably at the end of the year.

Seasonality is not peculiar to the stock markets. In fact forex markets also tend to exhibit strong seasonal effects. Seasonality can be defined as a pattern that occurs at a particular period of the year.

The January Effect also takes place in forex markets because most of the investors who are liquidating their stock positions try to convert their local currencies into dollars at that time.

However, dollar may show stronger January Effect with some currencies as compared to others. It has also been studied that dollar shows a summer seasonality when it tends to rise in USD/JPY and USD/CAD in the month of July and give back its gains in the month of August.

There are other seasonal patterns that have been studied in other parts of the year. Now, it does not mean that these seasonal effects take place exactly the same way every year.

Seasonality in currency pairs only means that there is a strong probability that during a particular time of the year, the chances of a particular currency pair going up or down are high.

Forex traders should keep these seasonal patterns at the back of their minds while trading during that period.

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Economic Factors That Move the Forex Markets in the Short Term

July 21st, 2009
<div style='font-style:italic;' class='byline'>by Ahmad Hassam

Fundamental traders depend on fundamental analysis in trading forex. Technical traders depend on technical analysis in trading forex. But the importance of economic data cannot be underestimated in shaping trading strategies.

Over 90 percent of currency transactions are done against USD. USD is either the base currency or the counter currency in most of the currency trades.

Since majority of the currency trades involve USD, you as a forex trader will also most probably trade USD most of the time. Release of certain economic data has significant and lasting impact on currencies like USD.

With experience, you will understand that currency markets reaction to the release of different economic data with time also changes. A few years back, US GDP figures used to be important for USD but they dont have much impact now.

EUR/USD is the most liquid pair in the forex market and is heavily traded. The release of Nonfarm Payrolls (NFP) data on the first Friday of each month has become important in recent years. These figures makes EUR/USD and other pairs involving US Dollar highly volatile for some time until the markets digest the importance of these figures.

Similarly, the release of US housing sales number every month has become very significant for USD in the recent years. Previously, forex markets used to give more importance to US Trade Balance.

Range traders like to trade when the currency pair they are trading tends to range. If you are a range trader who wants to scalp for a few pips every time you trade, you should avoid the day NFP data is released for trading. This is a highly volatile day for the markets.

However, if you use breakout trading as your trading strategy, understanding which economic data is expected to be released on a particular day can help you in your trading. You should plan your trading strategy in accordance with the significance of the economic data to be released.

In nutshell, understanding that some economic indicators move the forex markets most is very important for you as a trader. It is also important for you to know which economic data the market deems most important at any point in time.

You should also know which data causes knee jerk reaction in the markets and which pieces of data will have lasting reaction in the forex markets.

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Fundamental Trading Strategies in Currency Markets (Part I)

July 20th, 2009

As a forex trader you should use a combination of trading strategies in developing your forex system. This will hedge your risk and maximize return. There are a few strategies based on fundamental analysis and others are based on technical analysis. You can use a fundamental trading strategy that is based on big macroeconomic events for swing trading that may last from a few weeks to a few months.

Short term forex traders and day traders try to focus only the economic news release of the week and how it will impact their day trading. This works well for many traders. Learn forex nitty gritty, a method based on only 20 minutes trading a day.

Fundamental trading strategy based on macroeconomic events can make few thousand pips for you in a matter of a few weeks or months. You should not lose sight of the big macroeconomic events that may be bubbling in the economy or for that matter in world. Large scale macroeconomic events have the potential and ability of moving the forex markets big time for a long time.

The impact of big macroeconomic events has the ability and potential to change the fundamental perception about a currency not only for a few days but for a long time. Events such as natural disaster, political uncertainty, wars and international meetings have widespread physical and psychological impact on forex markets.

Therefore, by keeping on top of the global developments, understanding the underlying market sentiments before and after these global events and trying to anticipate them could be very profitable for you. At least it can help prevent significant losses in your currency trading.

You may ask what type of big events affects the currency markets in the long term. Important world summits, major central bank meetings, potential changes to the currency regimes, possible default by large countries, G-8 Finance Minister meetings, Presidential and Parliamentary elections in big countries, possible wars, FED Chairman semiannual testimony to the Congress. These are only a few examples of big events that make the currency markets jittery and may have a long term impact.

For example, 2004 and 2008 US Presidential elections were hotly contested. Candidates had different stances on the growing budget deficit and how to deal with the recession engulfing the US economy. This resulted in the overall USD bearishness.

G-8 meetings also tend to leave a long lasting impact on the currency markets. Combined these eight countries account for the two third of the world GDP. So whatever decisions that are taken during these G-8 meetings usually leave a short term as well as a long term impact on the global forex markets.

For example, the US Dollar collapsed after the September 2003, G-8 Finance Minister meeting in which the finance ministers wanted to see more flexibility in the exchange rates of the member countries. This meeting was also important as the US Trade Deficit was ballooning and going out of control at that time.

EUR/USD bore the burnt of the dollar depreciation. China and Japan intervened aggressively to stabilize their currencies. USD had already begun to sell off leading up to the meeting. The trend continued for many months after the meeting.

Therefore, the long term impact of these events is much more significant that the short term impact and the event itself have the ability to change the overall market sentiments.

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Understanding How the Forex Brokers Make Profits

July 18th, 2009

When you open a forex trading account, you will be told by your forex broker that there are no commissions involved in currency trading. Most of the new traders take their broker words as true. They think that the cost of trading is minimal.

Forex brokers also called FCMs (Futures Commission Merchants) make profits through the bid-ask spread they offer to their clients for each currency pair. This bid-ask spread is the trading cost for you and the profit for your FCM.

Lets take a practical example. Bid/ask spreads are usually overlooked by the individual traders as the price they have to pay for trading. So lets calculate what your cost of trading can be in a year.

Suppose you are a day trader. You trade 5 times a day. Taking away the weekends, when you cant trade, there are 250 trading days.

As a day trader, you open and close your position before the end of the day. That means each position is traded 2 times.

Suppose; your start with an account size of $50,000. You are using a leverage of 4 only, you are cautious. So this $50,000 deposit will control (50,000) (4) = $200,000 for you.

Your Annual Turnover will be; (5) (250)(2)(200,000)= $500 M. Huge! Now lets calculate how much your broker will make and what your spread cost is. Spread Cost= (Annual Turnover) (spread)/2.

Suppose further, the bid/offer spread charged by the broker is 3 pips. 3 Pips Spread Cost= (500M) (0.0003)/2= $75,000.

Suppose, the spread offered by the broker is only 2 pips. 2 Pip Spread Cost= (500M) (0.0002)/2= $50,000.

You can see now, the cost of trading with a 3 pips spread versus a 2 pips is $25,000. Huge for you, this is 50% of your account equity. You see now that a 1 pip difference can result in $25,000 more as trading cost for you.

You will need to make a profit of $75,000 in a year simply to breakeven with a 3 pips spread. Trading costs are one of the most important reasons most active traders fail in the long run.

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Single? Find The Perfect Rental Home For You

July 8th, 2009

Are you single and plan on living on your own? Many singles chose to live in rental homes in Utah because it’s affordable and fits their needs the best. The next time you look for the perfect rental, consider the location, space, and where to even look.

When deciding on a location look for near amenities. This includes grocery stores, movie theaters, gyms, and other recreational activities. This is so you can have an active life around you and have something to always do. KeyRenter, a Utah property management company, helps you find the perfect rental and can answer any questions you may have about the property and places to go in the surrounding neighborhood.

Find a place with just the right amount of space for you and your belongings. When living alone, you usually don’t need as much room as those who live with others. Take advantage of this and don’t rent more than you really need. This will be nice for you because it means a smaller space you have to clean and keeps things more organized.

Look for rental homes in Utah that are near other singles. Many singles are still in college, so if you rent a home near a college, you’re more likely to have neighbors that are in the same situation as you are and you’ll be able to make friends who are similar to you. Also, consider advertising for a roommate or two if you decide to move into a large rental home. This can help pay the rent and help you meet more people as well.

KeyRenter provides a detailed listings of all their homes for rent in Utah. Individuals can go on their website and search for a rental that’s in the right location and the right size. All information is on the listing, so there’s no need to call about rental pricing or the address. Some website listings tend to only put one picture up with limited information which forces you to call, but if you have to call dozens of these listings, you are spending a lot of time on the phone when you should be packing up and moving.

When you make a list of all your wants and needs you want to find in a rental home, you are more likely to find what you’re looking for because you have a clear view of what you want. Be sure to consider all factors like surrounding amenities, college areas, space of rental, and where to look. Good luck in your search!

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Finding the Perfect Rental

July 6th, 2009

Finding that perfect rental may feel like trying to find that perfect mate. It can be difficult at times, but with persistence, you’ll find the best one for you. When searching for a rental, it can be stressful if you don’t know where to turn. There are several websites with listing online, but how reliable are those? What other things should keep in mind while searching for that perfect rental home anywhere in the nation including homes for rent in Utah.

KeyRenter has helped many people in your situation find the home they need. As a Utah property management company, they look to find qualified applicants for their clients who are homeowners renting their places out. In essence, KeyRenter is like a matchmaker in the real estate industry. Comprised of professional staff, they are able to ensure applicants and tenants that they are getting the home they want to rent. With several listings in their databank, they can find one that fits the location, price, and needs of a Utah rental home. There are many tips to follow when searching for a rental.

Have the right attitude: You won’t find the right rental home if you don’t have the right attitude for it. You’ll making a lot of phone calls, leaving messages, and setting up appointments to look at rental homes in Utah that you’re interested. You will have to be persistent and prepared to meet your potentially new landlord. Stay positive in your search and you will find what you’re looking for.

Your checkbook should always be with you: Keep your checkbook with you when looking at rentals, just in case you fall in love with a rental home and want to reserve it immediately before anyone else does.

Prepare references and rental background: Have in mind who your references are in their contact information. Landlords tend to ask for these so they can call them to get a better idea of who you are. Also, have your rental history prepared as many applications ask for this information as well. KeyRenter would ask for this information as well.

Dress appropriately at rental appointments: You may find the rental home you want, but you don’t impress the landlord with your sloppy grooming and dress. Be sure to make the best impression when looking at rentals. You never know if that’s going to be the one you are going to apply for. Good first impressions are always the best.

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