Lesson 12. Continuation about the stock market

By the beginning of this chapter you receive an overview of the stock market, and know that conduct securities transactions can be through a broker. But where do you start? First you need to choose the right broker. Currently on the site there is a list of FFMS brokers who operate in the stock market.
When choosing a broker to assess its financial viability. For this purpose there are various ratings agencies. Naturally, it is better to choose a brokerage company, which occupy the top positions in such ratings, which indicates a high level of reliability. It is advisable to make a list of the most trusted brokers and through its already choose the company with the appropriate terms of trade for you.

On top of that it is important and the physical location of the brokerage company. The fact is that you will need about once a month or quarter (depending on the conditions that offer certain brokerage companies) to come to the broker to the office to sign some reports. Naturally, it is desirable to choose a broker of your city. Some brokerage firms have offices in many cities, for a list of which can be on their Internet sites.

Speaking of the terms of trade offered by brokers, it must be said that they are offering different tariff plans, with a complex system of fines and fees, interest on depository services and rate loan for margin lending. All of this should be carefully considered, because the smaller the interest charges, the more money you can save. You also need to know about the existence of the minimum monthly payment and the amount thereof.

The most popular at the moment form of work with a broker - through the Internet. In this case, you set the application from your home computer or laptop from any location where there is a connection to the World Wide Web. Internet trading service provides almost all brokers. And there is a common way for applications - on the phone. Such orders are made using a password that will give you a broker. For reliability of the transactions in this way, all telephone calls are recorded.

To all this, you have to verify the contact information for customer support in place to provide advice, as on the specifics of the broker and the use of software for Internet commerce. Will be important for trade and margin lending conditions. By this term is meant making deals "with the shoulder," during which the possible purchase of securities with borrowed money or sale of securities, provided broker (open short positions). In carrying out the operation "with the shoulder," you can buy or sell the securities at a substantial amount than the one that is on your brokerage account. Therefore it is necessary to know how much will be paid for the use of leverage, and which securities will be able to provide you with a loan broker.

It will be useful to know about the additional services provided by the broker. This may be a free consultation and analysis, as well as news feeds. They can provide substantial assistance, important for beginners. You also need to consider the size of the minimum deposit is enough to participate in the bidding. Typically, brokers allow operations with deposits of 10-50 thousand rubles. After gathering all the information you need to analyze it and to choose a broker with the most appropriate for you conditions.

With tips for choosing a broker for currency trading in the Forex market, as well as a number of other trade finance instruments the stock market can be found in the relevant section of our news portal.

After choosing a broker with him now have to sign a package of documents for the provision of brokerage services for which it is necessary to take your passport and come to the office broker. As a result, your name will open a brokerage account and a custody account, which will be considered and you acquired the securities.

In addition you will be given the keys of electronic digital signature (EDS), used by the Internet trading and the password for transactions over the phone. Now you just need to put the money into the account. The money made as a cashier, and with the help of non-cash payments, depending on the conditions of the broker. Some brokers, for example, does not require a personal meeting for the contract - enough for them to sign your contract offer and then send a scanned copy by e-mail or fax.

And that's enough! Now you need to select and install the program to access the exchange. It will provide you with the broker. Once the software is installed, you can connect via the Internet to the server broker, and get the opportunity to carry out transactions on the stock exchange.

What kind of software will provide you with the broker? This may be the software of its own design, and versatile, with which will be able to trade through other brokers. To do this, brokers in the contract specify the list of programs that you can use.

We will not consider their own software development of individual brokers, since it is specific to each broker. We would not be advised to open an account with a broker who is a trader exclusively proprietary trading platform. Traders often change their brokers because of the differences, and re-re-learn to use the trading platform at each change of broker - not a pleasant pastime. Moreover, sales terminals, usually have a built-in programming language for writing scripts, indicators and expert advisors. It is better to learn a language in a universal trading platform than to relearn every time a new one.

Let's look at one of the most common by far trading platform - MetaTrader4 (MT4). It should be noted that on the Internet sites of brokers application to be installed on your computer may have different names, but be based on a single trading platform MT4.

MT4 Trading Terminal is a program through which you can gain access to the exchange trading system. MT4 software will allow you to send an application for the purchase and sale of securities, currencies, contracts for difference (CFD), futures broker's server, as well as track the status of their own funds. In the trading system is automatic execution of applications. MT4 trading terminal supports margin lending, and provides a range of other possibilities. The program interface is simple and intuitive. MT4 Client Terminal is the fourth generation of online trading platforms on the developer - the company MetaQuotes Software Corp. Due to the high level of automation of many processes and increase convenience and speed of the trader, the terminal is recommended for novice investors. All transactions (issuance and withdrawal of applications, transactions, etc.) occur in real time using real market data, all the delays are minimal. With the functions of the terminal MT4 is quick to read and proceed directly to the performance of operations.

To summarize, we say that a variety of programs for Internet trading, though have small functional differences in general are simple and functional, so the trade will suit any of them.
                                                       

                                                              Exchange trading scheme
For operations with securities broker you need to give an instruction to make the transaction on the exchange. In the past, orders were given over the phone, and now all the orders you can give the program through Internet trading. In such programs, the order is the application form, which contains the action, the number of lots and the asking price sale.


Let us see what is the mechanism of trading on the stock exchange. So, traders (investors) will give the application (do errands broker) to sell or purchase a variety of investment instruments (securities, etc.) of the selected value. The very sight of applications in different software varies, but the essence of all and one by reading a single interface, you can easily do the same in the other.

Trading on the stock market, you have to select the trading platform FORTS (special section RTS) or MICEX, the instrument (in the form of so-called ticker) that you as an investor want to sell or buy, the number of items selected tool and the purchase price and sales tool.

After setting the application on the stock exchange will be made automatically checks all the competing demands that are specified or better price (thus, for example, to sell searched counter orders with a price equal to or greater than specified in your application). Transaction occurs when such a counter claim is found. If no suitable bids, then your application will remain on the exchange, and will expect the appropriate counter orders well, or until you cancel.

During trading, at any time, the database is the exchange of all outstanding applications for sale (offers) and to buy (bids). It has the following form: offers are above (while not wishing to buy them so expensive), and below are bids (which was not wishing to sell so cheap). Typically, the interval between them is (spread). At the upper boundary of the spread is the best application for the sale, at the bottom - the best buy order. These requests, a so-called exchange nozzle having a shape shown in the figure.


As we said - are located at the bottom of a glass of exchange bids, starting with the highest price are issued to customers (in this figure bids for shares "RAO UES" have a maximum price equal to 10.985 rubles) to the lowest (10,971 rubles). Figures exchange glasses standing close by, indicate the number of lots that buyers are willing to purchase at the designated price.
At the top of a glass of fruitful exchange applications for sale (offers), starting with a low (below 10,986 it) to the highest price (11,005 rubles in our example), in which investors are willing to sell. Just as with bids - in front of the glass in the stock price indicates the number of lots.

On admission to the stock exchange sale application, in which the price higher than the maximum sales price, she immediately met by "eating" the appropriate volume of a piece of the application offers. Well, if the application is sent for sale at the best price with the purchase price, "eaten", respectively, the upper part of the bids.

In his exchange terminal, you can see the same exchange for a glass of selected tools. In the MetaTrader4 trading platform as a tool of exchange glass is not provided, since the platform was originally developed for trading in the Forex market, where, because of the high volatility, demand always meets proposal. However, the recently released Version 5 of the trading platform (MT5), where in addition to other improvements present and exchange the glass.

Lesson 11. Stock market 2

So, in the previous chapters, we learned what the exchange and met with leaders of the world's stock exchanges. Now we will discuss the main participants of the Stock Exchange. You already know that the activities of the stock exchange can be carried out only by its members. So you know that to participate in the exchange they have to comply with the established laws and stock exchange requirements. The presence of a special license - one of these requirements. License issued by the Federal Financial Markets Service (FFMS). She is licensed implementation of operations on the stock exchanges. Dealers and brokers are the only members who can trade on the stock exchange. Let's see how they differ and what are their functions?


Dealers - professional participants of the stock exchange, which include banks and investment firms who trade securities. They do business on their own behalf, for my money and do not engage in brokering. Transactions they enter into with clients, brokers, and each other. On the difference between bid and ask prices, as well as on changes in securities prices and currency they make their profit.

Brokers - professional participants of the stock exchange, which have the right to make transactions with securities on behalf of the customer and at his expense. It intermediaries asking for transactions between buyers and sellers of currencies, securities and other financial assets. Do you know on what they earn? Simple! Their income - a commission for brokering activities, which they receive when making transactions with securities. Depends on the volume of transactions amount to be received by the broker as a reward. At the moment, the bulk of brokerage operations performed by large brokerage firms that have a large network of branches and links with the banking institutions.

Job broker is simple: the client gives him an order to buy or sell securities and the broker shall make this request in the market, which sought a counter claim, after which they both performed. In the broker's obligation is fair and accurate execution of client orders.

We found that the participants of the Stock Exchange are the dealers and brokers. Now accentuate the main difference from the broker dealer: dealer does business on its own behalf and at its own expense, while working as a broker on behalf of the client, and is, in fact, an intermediary. The dealer operates independently on the stock exchange and is not engaged in brokering activities - all invested in securities, metals and currency of the money belongs to him.

Along with the dealers and brokers, discussed in the previous chapter, the following members Stock Exchange: receptionist, clearing company and depository to ensure its functioning. Their activities are also subject to licensing by the Federal Exchange Commission. Let's see what are the main functions of these institutions and how they differ among themselves.

Registrar (or Registrar) - is party to the Stock Exchange, the activity of which is reduced to maintaining a register of all the owners of the securities. This activity is an exclusive, which means that the registrar can not provide other services and combine their activities. The collection, storage and transmission of documents and information about the personal accounts is the main function of the registrar. On the stock exchange through these accounts and keep records of the securities. Registrar shall:
provide information from the registry;
open personal accounts and perform operations on them;
check the authority of the persons signing the documents;
inform registrants about their rights and about the procedure and how to implement them.

Clearing Company - is a member of the stock exchange, which provides non-cash payments for sold and delivered goods and securities, as well as for services rendered, which are realized by mutual offset.

Clearing is the collection, verification, correction of information on market transactions and the preparation of the relevant accounting documents. So determined by the mutual obligations of the parties. Just clearing setoff and supply estimated.

The Registrar and the clearing company formed and exist to protect the interests of members of the exchange and their clients, and to ensure the financial integrity of the stock markets as a whole. Clearing Company reserves the buyer and seller of a free and independent of each other, as if breaking the direct link between them formed in the process of buying and selling. Thus, a single buyer or seller can be replaced with another, who also made a deal on the exchange, and was in contact only with the clearing company. You do not need any permission from the original partner in the transaction is made. Clearing Company is the guarantor of transactions and bears full responsibility.

Clearing companies prevent default by companies in various economic shocks or increased volume of speculative transactions, which may lead to termination of the stock market and the bankruptcy of its members.
The depositary is a legal person, a stock exchange that is based on the license of the professional leads depository activities. The activities of the Depositary shall:
in implementing the settlement of transactions by conducting operations in the exchange and over the counter market;
in the calculation and payment of dividends, the payment of taxes on income;
in accounting and storage of securities that may be in store as the depositary, and exist in the form of records;
in securities lending, as well as providing other services.

The responsibility of the depositary is to ensure the safety of securities or rights to them, and actions solely to the depositor (the person who has entered into an agreement with the depositary). The Depositary has no right to carry out transactions in securities, to dispose of or control them. Because the securities are not owned by the depositary, they can not be presented for collection by its obligations. At this point in our country's largest depositories are: Depository Clearing Company and the National Depository Center.

Taking into account the possibility of combining several types of professional activities, the organizational structure of each exchange is unique and quite complex. For example, the depositary may exercise at the same time dealer, clearing and brokerage activities.

We have examined the activities of professional participants of the stock market. We must not forget that the law governs all relations between them, and assigned to duty on the exchange only experienced, reliable and qualified participants allows licensing activities.

Along with the dealers and brokers, discussed in the previous chapter, the following members Stock Exchange: receptionist, clearing company and depository to ensure its functioning. Their activities are also subject to licensing by the Federal Exchange Commission. Let's see what are the main functions of these institutions and how they differ among themselves.

Registrar (or Registrar) - is party to the Stock Exchange, the activity of which is reduced to maintaining a register of all the owners of the securities. This activity is an exclusive, which means that the registrar can not provide other services and combine their activities. The collection, storage and transmission of documents and information about the personal accounts is the main function of the registrar. On the stock exchange through these accounts and keep records of the securities. Registrar shall:
provide information from the registry;
open personal accounts and perform operations on them;
check the authority of the persons signing the documents;
inform registrants about their rights and about the procedure and how to implement them.

Clearing Company - is a member of the stock exchange, which provides non-cash payments for sold and delivered goods and securities, as well as for services rendered, which are realized by mutual offset.

Clearing is the collection, verification, correction of information on market transactions and the preparation of the relevant accounting documents. So determined by the mutual obligations of the parties. Just clearing setoff and supply estimated.

The Registrar and the clearing company formed and exist to protect the interests of members of the exchange and their clients, and to ensure the financial integrity of the stock markets as a whole. Clearing Company reserves the buyer and seller of a free and independent of each other, as if breaking the direct link between them formed in the process of buying and selling. Thus, a single buyer or seller can be replaced with another, who also made a deal on the exchange, and was in contact only with the clearing company. You do not need any permission from the original partner in the transaction is made. Clearing Company is the guarantor of transactions and bears full responsibility.

Clearing companies prevent default by companies in various economic shocks or increased volume of speculative transactions, which may lead to termination of the stock market and the bankruptcy of its members.
The depositary is a legal person, a stock exchange that is based on the license of the professional leads depository activities. The activities of the Depositary shall:
in implementing the settlement of transactions by conducting operations in the exchange and over the counter market;
in the calculation and payment of dividends, the payment of taxes on income;
in accounting and storage of securities that may be in store as the depositary, and exist in the form of records;
in securities lending, as well as providing other services.

The responsibility of the depositary is to ensure the safety of securities or rights to them, and actions solely to the depositor (the person who has entered into an agreement with the depositary). The Depositary has no right to carry out transactions in securities, to dispose of or control them. Because the securities are not owned by the depositary, they can not be presented for collection by its obligations. At this point in our country's largest depositories are: Depository Clearing Company and the National Depository Center.

Taking into account the possibility of combining several types of professional activities, the organizational structure of each exchange is unique and quite complex. For example, the depositary may exercise at the same time dealer, clearing and brokerage activities.

We have examined the activities of professional participants of the stock market. We must not forget that the law governs all relations between them, and assigned to duty on the exchange only experienced, reliable and qualified participants allows licensing activities.

Lesson 10.Stock market.

In this part of our financial training institute is considered the stock market and its theoretical foundations. We learn the story of the appearance of the stock exchange, faced with its basic terms and definitions will study the global stock indices and their role in investment decisions. Will be considered separately Russian stock indexes and features of the realities of Russian trade fondomvom market.

We get a basic idea of ​​the Institute of the stock market by learning basic types of securities and investment features of each of them. We have studied the equity and debt securities, as well as their derivatives, will find out what their difference from each other. We have an exciting journey into the world of financial knowledge, as well davayzhe start right now.


The study of the stock market, like any other field of knowledge, we begin with a description of the main terms and concepts. The time has come to settle a series of new definitions that will help in the study of the rules of the stock market. For a start made a small excursion into the past. Once in Italy, came to the Belgian merchant Van der Burse, to found a profitable business. Over time, he has earned the respect of other merchants and bankers, and they began to hold meetings in the square in front of his house, and sometimes at his home. From the name of the merchant (Burse) and there was the word "exchange". But this "friendly" exchange lasted not long. Very quickly it turned into a separate entity called the Antwerp market, and its building is adorned with the inscription: "For the benefit of merchants all languages ​​and nations." At this point originates history of the stock exchanges. Antwerp market functioning in order to facilitate transactions, familiarize visiting merchants with an assortment of goods and facilitate the negotiations. Its excellent location, great communication of its members and the rules under which trade relations were all equal, it quickly gained worldwide popularity.

Continuing acquainted with the history of the stock exchanges, it should be noted that the word "exchange" can have several different definitions, such as:
a set of concluded transactions on the site (in the phrase: "tomorrow's market will be quiet");
set of traders who regularly appear in the same place for mutual trade relations ("crowded market");
specific place where traders gather ("St. Petersburg Stock Exchange on the Avenue").

Today associated with the exchange last two definitions that are understood by the exchange or the place where the trade or merchants themselves meeting at which the transaction set and builds mutual trade relations. To say briefly, the market promotes contact of supply and demand, just like fairs and markets. Identify the similarities with the exchange fairs can be an example of wholesale trade. Between them, there are only three differences:
Fair participants are the people to move out from different cities and countries, while focusing on the exchange patrons tend to live near her location;
Fair is a big market where you can find a variety of goods of varying quality. And on the commodity or stock exchange goods, as such, no. It is stored in the warehouses, and appear only on the exchange of its characteristics;
Fair from time to time brings together supply and demand, while the market contributes to their constant contact.

There exists the following exchanges: securities and commodities, depending on the subject of transactions entered into by them. They have their own specific and particular properties. In this chapter, we will look at the stock exchanges.

The stock exchange is used for trading stocks and bonds of private organizations, public debt, bills, currencies and precious metals. The stock exchange is an intermediary in the securities market. She regularly participates in the auction, implementing activities for trade. In the following chapters, we will consider in more detail the meaning of "professional participant of the securities market." And now let's go ahead and get acquainted with the features we are considering type of exchanges.

The stock markets are closed to the SEC. This means that they can only trade participants in these exchanges. Russian law indicates that the stock exchange members can only be members of a professional securities market. The participants of the Stock Exchange are requirements: both the stock exchange and the law. Often, the law provides general requirements and regulations of their exchanges detail, exposing additional requirements. It also provides penalties carried out in violation of the rules and procedures of collection. But the fees levied by the stock exchange for the parties to transactions remain at their sole discretion. Exchange is the responsibility of the approval of the procedure and rules for admission to trading and, in fact, holding these trades.
The participants of the Stock Exchange have the following features:
serve as a dealer by trading on their own behalf and for their money, or on behalf of the customer and at his expense (performing brokerage functions);
participate in the management of the Stock Exchange and its meetings;
participate in the electoral process controls and exchange controls, as well as to be elected to any of the available positions.

On top of that stock market participants should be provided with information about the places and the time of the auction, and the list of quotations of securities that would be involved in trading on the exchange. The stock exchange must also ensure publicity of the results of trading sessions.

The following types of exchanges: securities and commodities that depend on the subject of transactions entered into by them. They have their own specific and particular properties. In this chapter we look at commodity exchanges.
Commodity exchange is designed to trade in food, raw materials and energy, as well as other products of mass consumption. Traded commodity exchange can use a wide range of goods, and may specialize in certain types of, for example, on oil, grain or fur. Commodity exchanges are of great importance in international trade relations. With them is the establishment of a market price for the goods.

Today, commodity exchanges remain in some countries, and their turnover is quite low. Usually they are a way of wholesale products of local importance, which is characterized by low concentrations of consumption, distribution and production. The largest commodity exchanges operate in Malaysia, India and Indonesia.

Commodity exchange is determined by the laws of the Russian Federation as an organization with a legal personality, which forms the wholesale market, regulating and organizing exchange trading, which is conducted as a public auction held by certain rules in a certain place.

Many functioning commodity exchanges operate in a continuous auction, taking place throughout the day. At this time, the sellers make offers, and buyers submit bids. The deal is when the interests of both sides are the same.

Money for some goods are paid at the same time with their delivery. But, increasingly on commodity exchanges are pending transaction on the terms of delivery when the goods are bought at a price set at the time of the transaction, but it comes after a certain time. It's - futures trading. In today's world, where market relations are developing with rapid speed, commodity exchanges have not lost their significance, their institution was transformed into the market to the goods.

Here we are familiar with the concept of exchange and learned about two kinds of exchanges, their features and basic functions. The other concepts with which we will introduce in the future will be associated only with the stock exchanges, the more common and comfortable. In the next chapter we look at the largest participants in the stock exchange.

Currently the world there are about 200 exchanges. The leading role in the global exchange turnover belongs to them. Major stock exchanges are also an indicator of the regulator and the state of the global economy. The appearance of species due to the presence of stock exchanges formed and developed commercial and consumer or industrial structure. Therefore, it is in countries that have had a great development in middle age and retained their potential, and are the most famous and largest stock exchange. Returning to the subject of consideration, we consider the most famous in our time, the types of stock exchanges.

In the U.S. there are 13 stock exchanges, among them are the largest in the world - the New York Stock Exchange (New York Stock Exchange, NYSE). At its turnover accounted for about half of the total turnover of foreign stock exchanges. New York Stock Exchange is located in Manhattan at Wall Street, 11. For several decades, it is a symbol of financial power of the United States and throughout the financial industry. It is in terms of its shares traded on industrial companies and is defined by well-known Dow Jones (Dow Jones Industrial Average) and the equally well-known index NYSE Composite.

An important role in the stock market in the U.S. has created in 1911, the American Stock Exchange (American Stock Exchange, AMEX). Since the nineties of the last century it began to be the world's first electronic trading using wireless terminals.

Also worth mentioning, and NASDAQ (National Association of Securities Dealers Automated Quotation) - OTC market, which specializes in high-tech stocks of companies (the sphere of the production of software, electronics, etc.).

22 stock exchanges operate in major UK cities such as London, Birmingham, Liverpool and Glasgow. We can single out the LSE (London Stock Exchange, LSE), which is the most international of all stock exchanges UK. LSE - one of the world's leading financial centers.

In Japan, is now 9 stock exchanges, among which the largest is the Tokyo Stock Exchange (Tokyo Stock Exchange). This is the old stock exchange (founded in 1878), with its own rules and traditions. Its main specialization - trade in shares of corporations and financial institutions.

In all of these countries have their own national system of exchanges based on the historical features that define a specific place in the stock exchange system and the functioning of the system as a whole. Well, what happens to the stock exchanges views with us? Currently in Russia there are more than 10 stock exchanges, but the main trades are conducted on only two of them:

The Russian Trading System (RTS) was founded in 1995 and is currently one of the largest stock exchanges in Russia. It RTS is recognized center of pricing of bonds and stocks a wide range of issuers. This site is served by a large proportion of foreign portfolio investment in the country, so that information about trading on the Russian Trading System is the source of the condition of the Russian securities market. But now the main trading volume gradually moving other leading Russian exchanges - MICEX.

Moscow Interbank Currency Exchange (MICEX) - the oldest (founded in 1992) and at the moment the main stock exchange in Russia. It is a universal trading platform on which operations are carried out in the stock and foreign exchange markets. It is the largest exchange in Russia, the CIS and Eastern Europe, on the basis of its national systems of trading in all major segments of the Russian financial market, namely the foreign exchange, equities and derivatives. MICEX also provides depository and settlement and clearing services to more than a thousand organizations that are members of the exchange market.

We have examined the basic concepts associated with stock exchanges. In the following chapters, you will be able to find out who exactly can make transactions on the Stock Exchange. In addition, we will touch upon the important question for us as an individual (the Internet trader) may carry out transactions on the stock exchange, and who it can help.

Lesson 9. Secrets of Money Management

This part of the Forex training is about how to manage capital in the Forex market. Trading currencies is not enough just to learn the basics of technical and fundamental analysis - should also be a clear pattern of management of funds on your deposit. Only together, these tools can lead you to a stable earnings in Forex.


In addition, we should not forget the material preceding sections - to build a profitable trading system requires a mechanism predictions based on historical data and a good psychological preparation. Thus, the secrets of successful trading include four components:
methods of analysis (technical and fundamental);
prediction system on historical data;
psychological training;
scheme management.

You can add to this list as intuition - it is not superfluous in any case. But in this part of the emphasis will be placed precisely on the schemes of capital management.


Martingale strategy has come to us from the world of gambling. Its essence is so trivial, it will be clear even to a child. For simplicity, the "Move" in the casino and "play" in the most common of his game - roulette. For those who are not familiar with a tape measure to clarify that betting on roulette, you can do both on the numbers and the odds. By chance here means loss of even and odd numbers of black and red numbers, numbers, certain sectors, a certain number, etc. In the context of our example, we are interested in a 50/50 chance.

Suppose that the minimum rate at roulette - $ 1. The essence of the martingale strategy is the following. We set the minimum bid for any of the 50/50 chance, suppose on black. If the outcome of throwing the ball has the opposite result (fallen red number), then double the bet and then bet on black. And so on until all the same not want us to fall color. In this case we have a profit again and reset the rate to the original value of $ 1.

It is easy to calculate that profit from such a series of bets will be only $ 1, regardless of the number of unsuccessful outcomes, and the rates for unsuccessful outcome are increasing exponentially. That is, if the red number fell to 6 times in a row, which is quite a common phenomenon in the casino, then to win $ 1 you will have to risk $ 64, but if it fell row 10 times, then $ 1024. As you can see, in this case, the rate commensurate with the size of the payout, but the essence of the martingale strategy is precisely this approach.

Casino is insured against loss due to fans of the strategy, limiting the maximum bet. Therefore, if the maximum bet on the roulette wheel is set at $ 1024, then the following unsuccessful outcome of rotation roulette destroy algorithm martingale strategy and will lead to the inevitable large losses.

An interesting fact is that the martingale strategy can be with no less successfully applied in the Forex market. Its essence is not changed - with each failed transaction we are increasing twice the current size of the lot and re-open the position. This approach is convenient to apply for micro accounts when increasing the size of the lot in geometric progression can not quickly lead to a lack of funds on deposit for your next transaction. By the way, one of the drawbacks of the martingale strategy is precisely the lack of money to cover the wagering. If the size of your deposit will not allow you after yet another failed deal to increase the size of the lot in half, then you will incur huge losses.

The more you make losing trades in a row, the less will be your gain relative to investment, ie percent return on equity (ROI, Return on Investment). With a very large number of failed transactions the process reaches the point of absurdity - to win a few cents, you need to risk a few hundred or even thousands of dollars. It should be noted that the use martingale strategy in its pure form in Forex is not necessary - it will lead to inevitable losses. After all, if it were that simple, then all traders would be millionaires. But to implement this strategy in the already developed a trading system is possible, and sometimes even necessary.

In conclusion, it is worth noting that there is a variety of the above strategy - the strategy of "soft" martingale. The gist of it is that when each failed transaction we increase rate is not twice, but on a number of interest, and at each profitable trade in proportion to its decline. This strategy insures the rapid emptying of the deposit, but not as fast as it returns losses classic version.

In addition to that described in the previous chapter martingale strategy, there is also a strategy "antimartingeyl", the essence of which is as follows. We are increasing at twice the rate (lot size) for each successful transaction and throw it in the minimum allowable bid for each failed.

Consider a simple example. We open position 8th mini lots and close the warrant at a loss. Then, following a strategy "antimartingeyl", we reset the "bid" and open the deal 1st mini lot. When a failed transaction we remain all the same 1st mini lot, and when you close the deal with a profit doubled lot of the open position and continue to trade under this scheme.

An interesting fact is that the strategy "antimartingeyl" gets its common name applied to the financial markets. Many traders embed this strategy in the current trade system in order to organize a competent scheme management. This approach often leads to a significant improvement in the trading system.

For the beginners it is recommended to use this strategy only after the creation of its own mechanical trading system. Otherwise, follow the rules of the strategy is quite difficult, because the emotional component of trading often outweighs the predetermined mathematical algorithm.

No serious organization does not allow itself to waste money right and left. One means of achieving the goal of the organization is the maximum possible reduction in production costs. In other words, any organization in some way produce for themselves the rules of money management. As you know, a lot of capital of large companies is more protected from losses than small private equity investor. Therefore, Internet trader like no other has to work out for themselves the postulates of money management and follow without questions.

Such is human psychology that, having the specific amount of money they want to spend either quickly or rapidly multiply. Neither one nor the other, they cause an increase in capital as the mismanagement of funds can only lead to ruin. Living without money from paycheck to paycheck and can, in fact, so do most Russians. But, reading material of this website, you are most likely looking for an answer to the question of how to break out of the vicious circle of the working week. Therefore, the first postulate in this way it should stand normally follow the postulates listed below:
Trading on the Forex market, do not use open positions more than 10-15% of the free equity. Opening the position of a large amount, you run the risk of margin call before the price will be developed in the desired direction.
When you open a position is always expose the stop-loss level and, if possible, take-profit. This approach in itself reflects a systematic and disciplined trading, which is the key to success in the financial markets. The level of stop-loss should not exceed 5% available to the trader's capital.
It is not recommended to open positions more than 5 different currency pairs, it is known that a person's attention can not simultaneously hold more than 4-6 objects.
Diversify risks and at the same time, do not open positions in currencies that have a high degree of correlation. This approach can be detrimental affect on your deposit.
With the proper level of training is desirable to trade in several financial markets at the same time, performing operations not only with the currency, but also equities, futures, options and precious metals. This will further diversify your risks, because, as you know, "do not put all your eggs in one basket."
Currencies of some countries are heavily dependent on the export of certain types of raw materials, ie, are trademarks, trade should therefore take this into account and use it to their advantage. It is not necessary to open the same position on the correlated trading tools.

We have listed the basic tenets of money management, but each of you has the right to develop its own inherent in his character and temperament. Regardless of the set of postulates you use in trade fair is one - it is their importance to trade in the Forex market.

Taxation on Forex

Every trader sooner or later begins to excite the question of taxation received forex income, because as they say in the famous quote - "Pay taxes and live peacefully." Unfortunately, with the payment of taxes on the Forex is not that easy as we would like, so this part of our study we will examine this issue in detail.

At first glance, Forex refers to the financial markets, even as the stock market (stock market). At first glance it may seem that the principle of taxation is the same in both markets. In fact this is not true. Security - a financial asset and the Russian law very strictly prescribed all the nuances of working with this type of asset.

From the point of view of taxation of securities transactions should note the following. The tax is paid only when the security is sold, and if the bid price of the security to the tax agent is unknown, the seller is obliged itself to pay tax on the income of natural persons (PIT) and submit an income tax return. If the tax agent known purchase price of the securities prior to the sale, then he shall pay for the income tax and the client is obliged to provide him with a form 2-PIT on demand.

When it comes to the stock exchange, then in relation to private traders to purchase online securities are without supplies, with the obligatory reverse a sale. Hence, the broker knows the purchase price and the selling price of a financial asset and must itself pay tax to the State. Of course, this is true only brokers registered in the Russian Federation. Brokers registered, for example, in offshore areas, will not take you for any returns were - in this case, the burden of taxes fall on your shoulders at your own risk.

As for the Forex market, the concept of a financial asset as such it is not. There is a pure currency trading, but without its actual delivery. Moreover, trading on a mini account, a trader, in fact, playing against a broker, as a warrant for mini accounts in the interbank market is not exposed. Consequently, this type of activity can be safely classified as a species of gambling, and the broker is not much different from the bookmaker.

Until recently, the picture with the payment of taxes in the Forex market has been eroded. But the February 4, 2009 the Ministry of Finance of the Russian Federation issued a letter № 03-04-05-01/41 «On taxation of personal income tax on the same basis income of an individual, resulting from transactions in the market Forex». The text of the letter is provided below.

The Tax and Customs Tariff Policy considered the letter on taxation of income derived from transactions in Forex, and in accordance with Art. 34.2 of the Tax Code of the Russian Federation (hereinafter - the Code) explain the following.

In accordance with paragraph 1 of Art. 209 of the Code subject to taxation for individuals who are tax residents of the Russian Federation shall be income derived by them from sources in the Russian Federation and (or) from sources outside the Russian Federation.

In addition, Art. 210 of the Code establishes that in determining the tax base all the income of the taxpayer, he received both in cash and in kind, or the right to dispose of whom had arisen, as well as income in the form of material benefit, as determined in accordance with Art. 212 of the Code.

Thus, the income derived by the taxpayer from transactions in the Forex, is liable to tax on income of individuals on the same basis using rates set by Section 1, Art. 224 of the Code.

Deputy director
Department of Tax
Customs and Tariff Policy
N.A.KOMOVA

As you can see, in the government's attempt to find new sources of tax revenues to the treasury, under a broom and hit trade in the Forex market. Despite this, the tax is unlikely in the near future to arrange a "crackdown on traders", because to determine the fact of trading with a broker registered in an offshore zone is problematic. As for the Russian brokerage companies and banks, it is likely, such a tax would be paid automatically when you try to withdraw funds to the account. In the end, decide whether to pay tax or not, it's certainly you.

Lesson 7: Fundamental Analysis

In this part of our study we will look at Forex fundamental analysis, which is the study of macroeconomic phenomena, political news and other events in the world that have an impact on exchange rates. Proponents of fundamental analysis of forex market are of the opinion that the primary in relation to changes in exchange rates is the event (news). It entails a chain of trading on Forex, which in turn is reflected in the change in exchange rates. As can be seen, the fundamentalists, unlike the followers of technical analysis, have diametrically opposed views on the source of the price movement. After all, as we remember, technical analysts are of the opinion that future changes in prices laid solely at their historical trends.


In order to become a guru of fundamental analysis may take many years of studying such disciplines as "Economy", "Finance and Credit", "International Economic Relations". Of course, that ordinary internet trader has neither the time nor the inclination to spend as much time training. Therefore, the majority of Forex traders have only a superficial understanding of the basics of fundamental analysis - in the course of their work in the foreign exchange market, they listened to the views of professional financial analysts. Analysts' forecasts are published in newspapers and magazines, they are referred to in the financial announcements on special television and radio channels. Most brokers on the Internet provide their clients with access to information systems that publishes information of a fundamental nature. Such systems include Reuter, Dow Jones Telerate, Bloomberg, etc.

But despite the abundance of Forex market analysts, to understand the basics of fundamental analysis is necessary for every online trader. Drawing an analogy, let's say that you can not understand the device the car, but you have to understand the principles of management and they know the rules of the road. Otherwise, you've done a lot of trouble on the road - the same is true for the Forex market. Before you start trading for real money you need to clearly understand what is the role of fundamental analysis in the prediction of changes in exchange rates.

As we have said, the basis of fundamental analysis is an event. Events can be classified as macro-economic, political, natural, etc. Examples of events include also rumors that at times can lead to perceptible changes in the Forex currency quotes, especially if they come from a well-known and influential people in the world politics.

Events can be divided into two broad categories: the expected and random. The expected time of occurrence of the event is known in advance. These events include the output of various economic indicators, the onset of various seasonal events. For example, the trade balance data (trade balance) in the United States is published in the second half of each month for the last month, so is the expected event. By random events include natural disasters, political upheaval, acts of terrorism. Such events are usually instantly recognized on the exchange rate dynamics involved in these countries. This once again underlines the fact that trading in the Forex, you must have good information support to not miss an important global event.

An interesting fact is that almost all economic indicators for a given country are published with a delay - for the last or before last reporting period. This means that the estimated value of the index can be calculated prior to the date of its official publication. Typically, the world's leading financial analysts are speculating on such indicators and Forex market at the time of their release has already adapted to the expected value. Thus, if the published values ​​is the same as predicted, the dynamics of the exchange rate does not change. Interesting things happen in Forex, if the published values ​​of economic indicators is very different from the forecast, especially if the difference is going in the opposite direction. In such cases, the more unpredictable - the faster the reaction of the market. It is important to understand that the financial markets, including the Forex market is not so much the value of the value of the economic indicator, as its deviation from the expected value.

Various fundamental news have different effects on the dynamics of exchange rates. For the duration of impact on the Forex market news to classify on the news with a long cycle and short cycle life. Long cycle lasting from a few weeks to several years. This cycle is caused by factors in the general state of the economy, such as the dynamics of inflation, unemployment, interest rates. On the basis of such news can build strategic forecasts of exchange rate changes to long-term investment. Short cycle lasts several minutes to several days and can be caused by a release of some not very important economic indicators and various political events.

Exchange rate and its economic condition of the country are interconnected. This relationship can be associated only with a neural network - it is so complex that it is unlikely for it can display a single "magic" formula. Fundamental analysis aims to systematize this relationship, but sometimes it leaves more questions than answers. Forex market does not always behave as described in textbooks - often leads to a news outlet opposite reaction. We can only with a certain probability to talk about this or that statement. And, nevertheless, have more or less working system - it's better than nothing. Fundamental analysis is important when analyzing the forex market. Together with the technical analysis it provides Internet trader a distinct advantage over other, less knowledgeable participants in the FX market. Understanding the basics of macroeconomics, financial systems, devices biggest powers in the world - an important step on the way to becoming a successful Forex trader. Subsequent chapters Portal Forex Arena will focus on key aspects of fundamental analysis.

Forex reaction to the political instability

The political developments worldwide, usually immediately find their resonance in the international foreign exchange market. Despite the fact that such events directly from foreign currency transactions are not related, psychological sentiment of currency exchange their effect on the painting of currency rates. The world's main reserve currency today is the U.S. dollar, so all the events affecting in any way the American politicians or military operations of the U.S. Army are reflected on the balance of demand and supply of the U.S. currency, which means that almost all traded on the Forex currency pairs.

July 19, 1990 The Iraqi army invaded Kuwait, triggering Middle East crisis. In response, the U.S. military command has decided to go to war in the Persian Gulf. January 17, 1991 began "Operation Desert Storm". As part of Operation Joint UN army began to put missile and bomb strikes on the Iraqi army. Forex market reacted to the strengthening of the U.S. dollar. February 24th launch a ground phase of the operation, and on February 27 the Iraqi army was defeated, and Kuwait was liberated. The forex market responded with an even stronger appreciation of the U.S. dollar relative to other currencies.

Events August 19, 1991 marked the collapse of the Soviet Union and in the annals of history were recorded as "August coup." USSR at the time of the event was the largest debtor in Germany, so the Forex market on that day the German mark collapsed. But once the debts have been recognized by Russia, the course of German Marks returned to their former positions.

October 30, 1998 NATO air forces begin to check flights over Kosovo. November 13, 1998 NATO decides to drop troops in Macedonia in order to assist the observers of the OSCE Mission in Kosovo, if necessary. The U.S. dollar during this period on Forex is growing significantly. 24 March 1999, NATO launched the first phase of the allied operation "Allied Force" with the bombing strategic targets in Serbia and Montenegro, resulting in Belgrade broke off diplomatic relations with key NATO countries - the U.S., Germany, France and Britain. June 9, 1999 between the Serbian military and NATO signed an agreement on the border of Yugoslavia and Macedonia, and June 10, 1999 NATO Secretary General orders the suspension of the bombing. The UN Security Council adopts a resolution to ensure international security presence in Kosovo. All of these events were accompanied by certain strengthening of the U.S. dollar in forex trading.

Events 1998-1999,. around the scandal of sexual relations existing at the time of U.S. President Bill Clinton with intern Monica Lewinsky were reflected in the Forex market. On the agenda of the November 19, 1998 in the House of Representatives was considered the prosecution of Bill Clinton's false testimony at the trial, and a number of other charges. Charges on the two issues were supported and forwarded to the Senate panel of judges, which took place January 7, 1999 On the agenda, thus, the question of impeachment of the President. Because of the uncertainty as to who will be the new president, and what will be the policy of the U.S., the dollar on the Forex market has fallen sharply. The Senate rejected the allegations on both issues, retaining the Bill Clinton presidency, but about the love affairs of the American President has had a long talk in the world.

May 12, 1999 came the news of the resignation of the Prime Minister, EM Primakov stressed that political instability in Russia. As a result of the euro against the U.S. dollar on the Forex dropped significantly. A little later came the news that the U.S. Treasury Secretary Robert Rubin resigned instability that has characterized the U.S. financial system. The forex market has reacted to it reversed the appreciation of the euro relative to the U.S. dollar, that is, the fall of the dollar.

September 11, 2001 shocked the world of the terrorist act in the United States, which claimed thousands of lives. Immediately after the terrorist attack on the U.S. dollar Forex plummeted. The next day trading was suspended, and the day was declared in the United States as non-working. In the next few days the market has consolidated.

August 15, 2003 after the official close of trading in the U.S. as a result of the human factor in large power plants the U.S. and Canada, there have been failures, resulting in the largest cities of the two countries practically left without electricity. While still considered a terrorist act version, the rate of the U.S. dollar against the euro in the Forex market fell nearly 100 points, but after the resolution of the situation has returned to its previous level.

March 21, 2003, the war in Iraq. Initially, the expectation that the military operation forces the anti-Iraq coalition goes according to plan, a positive impact on the U.S. dollar in the foreign exchange market. Positive impact on the dollar and the publication of data on the level of inflation in the United States. But subsequent events of March led to a decline in the U.S. dollar. Analysts attributed this drop in the market's fears that the military presence in Iraq, coalition forces could take longer schedule, which will result in an increase in U.S. government spending on the military. The negative impact on the dollar provided reports on the losses of the American army and reinforce the fighting. But when April 3, 2003 in the U.S. media reports suggested that the coalition forces are located a few kilometers from Baghdad, then there is hope for a speedy end to the possible military campaign in Iraq, causing the dollar to Forex stabilized.

February 20, 2004 exchange rate of the U.S. dollar against the Japanese Yen rose nearly 250 points. Precipitous drop in the yen, analysts attributed the level of preparedness of the Japanese government security forces to the maximum level in connection with the bombings near the building of the Ministry of Defence. Many then described these bombings as a protest against the deployment of Japanese troops to Iraq.

As we can see, the Forex market is very thin mechanism and responds to the events of the political instability in the world. This is not surprising, because such events are inextricably linked to the global economy and its future development. They quickly spread throughout the world by the media. Keep abreast of world events - an integral part of trading on any professional Forex trader. Therefore, if you do not want to be caught off guard, so stay tuned!

Lesson 6: The Parabolic SAR (Parabolic Stop and Reverse)

The next indicator of technical analysis, you should pay attention to the process of learning Forex - Parabolic SAR (parabolic stop and reversal, SAR). This indicator was developed by Welles Wilder (J. Welles Wilder Jr.), The famous trader who made a great contribution to the research and development of the technical analysis of financial markets. Applying this indicator properly, you will be able to significantly reduce the number of trading errors, and, consequently, increase profits.



Parabolic SAR indicator system got its name because of the form that it takes a curve on the chart. The parabolic form of the indicator is explained by a mathematical formula for its calculation, which will be discussed below. An important condition for the application of this indicator in the analysis of the Forex market is the presence on the roar explicit trend - in this case, the indicator may give a good signal weakening trend or its reversal, ie good signal for closing position in one direction and its possible opening to another. If the price fluctuation occurs in a horizontal range, this indicator can give a lot of false signals. So, before you use this indicator and rely on its signals should confirm the existing trend in the market analyzed by currency pair. You can use these tools of technical analysis, examined above, and the levels of support and resistance lines, shapes, trend reversal, trend continuation patterns, moving averages, Bollinger bands, convergence-divergence of moving averages, etc.

On the example of quotation USD / JPY indicator Parabolic SAR system is shown in Fig.



As can be seen from the figure, the indicator is the curve formed by dots. Each dot corresponds to your sales period depending on the scale of the price chart, but, as a rule, are used daily charts. If the curve indicator is under the price chart, it indicates an upward trend. If the curve is above the indicator price indicator, indicates a downward trend. In that moment, when the curve crosses the indicator price chart trend strength decreases and there is a high probability of a reversal. Approximation of parabolic curve SAR system to a price chart indicates weakening trend. The distance between adjacent points of the indicator also symbolize the strength of the trend - the greater the distance, the stronger the trend. But remember that the trend may reverse at high speed!

As you can see, the curve of the indicator is not continuous. At the time of intersection of the curve with the price schedule, the next point indicator as it jumps in the opposite direction relative to the price chart. This behavior of the parabolic curve of SAR is sufficiently precise algorithm of its construction. This algorithm is based on two concepts: an extreme point (extreme point) and the acceleration factor (acceleration factor). At the extreme point of the uptrend is considered the highest price recorded in the trend. On a downward trend this point is a minimum fixed price. As soon as the indicator of the parabolic SAR system signals a trend reversal, the algorithm calculating extreme reversed. When a signal occurs, the acceleration factor is reset to the initial value for which in practice is often used value of 0.02, ie 2%. When the closing price of the current trading period on an uptrend surpasses last committed point of extremum, this ratio increases to 2%, and the value of extreme updated. The same increase in acceleration factor and updated extreme occurs if the closing price of the current trading period is less than the extreme points on a downward trend. The indicator is calculated ahead, ie data for the current day are used in the calculation of the indicator value tomorrow. The mathematical formula for calculating the indicator parabolic SAR system is recursive and has the form:

SAR (n +1) = SAR (n) + AF * (EP - SAR (n)),

where the SAR (n +1) - the value of the indicator of tomorrow, SAR (n) - an indicator of the current value of the day, AF - accelerating factor and EP - the last committed an extreme point. In addition, in the process of calculation of the indicator used by several additional conditions:

if its value is tomorrow's SAR (n +1) is within or outside the price range today (n) or yesterday (n-1) of the trading day, then it is set to the lower limit of this range. For example, if an upward trend, the indicator value is more than the minimum price fixed for the last two days, including today, the indicator takes the value of the fixed minimum price, a down trend the opposite is true;

if its value is tomorrow's SAR (n +1) is within or outside the price range of tomorrow, it is a signal of a trend reversal, and the algorithm for calculating the indicator to toggle the "phase".


Once there is a change trend that switch "phase" of the algorithm, the value of the indicator parabolic SAR system for the new trend set in the last committed point of extreme EP old trend. The very extreme point at this point is set to the maxim, if the new trend - rising in the minimum point, if the new trend - downward. Acceleration factor AF is reset to the initial value of 2%.

Parabolic SAR indicator system can be used as a stop-loss signal in the bidding process in the Forex market. The value of technical indicators are always lagging behind the price, so at the time of entry into the market can be easily set stop-loss in the current value of the indicator. But first make sure that such an approach does not violate your strategy for managing capital in trading on the Forex market. Parabolic SAR indicator system can also be used as both a take-profit signals at a time when the curve indicator closely approaching the price chart or crosses it. About types of trading signals will still be covered in later chapters Portal in learning forex trading.

An important observation, as already noticed, is that this indicator can give a lot of false alarms, if trading in the currency pair are in a horizontal range. This indicator should be used only if the trend can be confirmed by other technical analysis tools. Generally speaking, Internet trading should never be accompanied by a decision on the basis of only one tool of technical analysis - always use a few such tools. Take your trading decisions to open or close positions only if the most used tools you give the same trading signal.

After crossing the indicator curve parabolic SAR system with a price schedule, wait until the indicator next few points will confirm the formation of a new trend, and only open position. Close your position at the time when the curve indicator closely approaching the price chart and crosses it. The indicator gives a signal with a delay, so if you close your late position, you will lose some profit. Keep in mind that after the formation of a new trend is confirmed by his power distance between adjacent points of the curve indicator - the more such a distance, the more pronounced trend. Typically, the acceleration of the trend occurs after 4-5 points, so this acceleration can be a good confirmation of the correctness of the decision in the course of trade of trading on the Forex market. To enter the market at a time when the trend has already gained some strength, can be dangerous because of the high probability of the return of corrective movement or trend reversal. So it is risky to open positions at a time when the distance between the points of the curve indicator parabolic SAR system is large. Later in the process of learning Forex trading on the information portal Forex Arena we consider the stochastic indicator, which allows to determine the price chart of the market stress zone - zone "overbought" and "oversold". The combination of the indicator with the indicator parabolic SAR systems can provide good trading results.



Elliott Wave

It's no secret that many of the phenomena and processes in life are cyclical. We have all heard the expression that the story develops in a spiral, and already taking place in the past events are repeated in his new incarnation. Financial markets in this context - is no exception. In this chapter, we will look at Elliott Wave as a tool for wave analysis of the Forex market.

In one of the previous chapters we have considered the Dow theory, which is the foundation of the technical analysis of financial markets. This theory has been redesigned accountant Ralph Nelson Elliott and further developed in his book "The Wave Principle", which was released to the press in the thirties of the 20th century. Initially, Elliott waves have been created to analyze the liquid assets of the stock market, but subsequently were successfully applied to analyze the Forex market.

Elliott began creating his theory after retirement, attempting to find patterns in the seeming chaos of market movement. They had done a tremendous amount of work, which resulted in the calculations for the mass psychology of the market participants. Elliott came to the conclusion that the behavior of the market price is determined by a cyclical, which is based on behavior psychology of traders in the market. This recurrence, according to the author, reflected in the appearance on the chart so-called market assets waves, which became known as the Elliott Wave.

According to the Elliott wave theory, the market can be in two states or phases - bullish and bearish. The current phase of the market is determined by the trend. Elliott drew conclusions that any movement in the financial markets is divided into five waves in the direction of the main trend of the price and three corrective waves in the opposite direction. In order to understand the above, let's look at the figure, which discussed the situation in the bull market.

All Elliott Wave are divided into two types: the pulse wave and the rollback. On the considered wave figure 1-5 are the main market dominated by bullish sentiment. Three of them (1, 3 and 5) are pulsed so as to place the main movement direction, and the remaining two (2 and 4) are the waves roll. AC are corrective waves, and two of them (A & C) are pulsed, as confirmed by the corrective movement. Wave B is a wave retracement correction.

One important property possessed by the Elliott Wave is the principle of nesting. Any wave can be up to a certain limit is subdivided into smaller waves, and she is part of a long wave. Pulse wave thus classified into five fundamental waves and the waves roll into three corrective wave.

Elliott highlights in his theory of the longest cycle and gives it the name "Grand Supercycle", which is 8 waves. Each of these waves are divided into a series of short-wave to a degree resolution hierarchy. But it is worth noting that clearly expand the market for Elliott Wave is not always possible - the theory is often at odds with the practice.

By analyzing a large sample of data, the author of the wave theory came to the conclusion that the Elliott Wave have a certain regularity. In particular the ratio of wavelengths belonging to one series are often interrelated. To express the relationship is often used so-called Fibonacci numbers, which will be discussed in a later chapter.

Thus, the wavelength 2 is often defined as 0.382, 0.5, or 0.618 of the wavelength 1. 3 Wavelength often defined as 0.618, 1.618, or 2.618 of the wavelength 1. Wavelength 4 is often defined as 0.382, or 0.5 times the length of wave 1. The length of wave 5 is often defined as 0.382, 0.5, or 0.618 of the length of wave 1. A wavelength is often defined as 0.618 or 0.5 or 1 of the wavelength 5. Wavelength B is often defined as 0.382, or 0.5 times the length of wave A. Wavelength C is often determined as 0.618, 0.5, or 1.618 of the wavelength A. Several modifications of the original theory, Elliott Wave exhibit and another relationship. The above factors are a sort of "magic numbers" are calculated by a certain algorithm and will be addressed in light of Fibonacci numbers in a later chapter.

It is considered that the above calculations are corroborated by the classic market with an accuracy of 10-20%. The error is the result of various factors, which are an integral part of the financial markets. Objectively speaking, this formula is, of course, very conventional. In addition to the above relationships, the ratio of the size of the Elliott wave to any other wave cycle can also be expressed in terms of Fibonacci numbers. By Elliott Wave size can be understood as its height in the graph of the financial instrument and the actual duration. Each wave has its own characteristics, which will be discussed below for a bull market.

Wave 1 occurs when the market is almost entirely dominated by bearish sentiment, and financial news is still on the side of the bears. This wave is usually very strong, especially if it is accompanied by dramatic changes in the technical or fundamental aspect (for example, breaking through resistance or evidence of an unexpected change in interest rates). If drastic changes in the market does not suffer, then this wave is a little impulsive move.

Wave 2 occurs when you roll back from that just reached the bulls profitable positions. This rollback can almost offset the price movement reached wave 1, but lower than its beginning rollback does not usually happen. Wave 2 can be explained by the fixation of nervous bulls have just achieved profits in fear of the return of the price movement. Wavelength 2 is typically 50-70% of the wavelength 1.

Wave 3 is the subject of "search" of all the supporters of Elliott Wave Theory. It is the "catch this wave" can make the most profit. This wave is characterized by a sharp rise in optimism among professional traders. It is in 90% of cases, is the most powerful and long, it accounts for the maximum acceleration of prices. Typically, wave 3 is accompanied by an increase in trading volumes. In a classic case of wave 3 than wave 1 is at least 1,618 times.

Wave 4 corrects the rapid rise in the opposite direction. Despite the fact that the identification of the waves on historical chart presents no great difficulties in determining initiation of real time is difficult. Rollback is typically at a distance of 35-45% in the wavelength 3, and the duration of corrective movement is small. In a classic case of wave 4 should not overlap wave 2.

Wave 5 is often characterized by the fact that is not supported by an increase in trading volumes. It is sometimes said that the impulse is the divergence, ie, there is an increase in the price dropping to medium volumes. By the end of wave 5, trading volumes are increasing again. At this stage, the main motion (along the prevailing trend) and ends with a transition to a series of corrective waves.

A wave is characterized by a market situation in which the bulls are beginning to boom fix lucrative position. On the market there are players who are inclined to predict a further fall in prices stable. This wave is pulsed and its properties are similar to the one considered wavelength (in the reverse direction).

B is an analogue wave wave 4 in the opposite direction and is also quite difficult to identify in real time. This wave is characterized by a residual price movement upward pressure of the few bulls who believe in a further increase in the price of the underlying asset.

Wave C is an impulse sharp downward movement against the increasing bearish sentiment. This wave by extension, in the classical case, the length of wave 3. By the end of the waves in the market bulls reappear, ready to take risks.

Everything looks good in theory, but in practice the Elliott wave is difficult to identify - the market does not always behave in accordance with the scheme described. What is clearly visible on historical data analysis is often blurred in real time. We have considered only the classical picture of alternating waves. But there are a large number of non-standard configuration patterns of waves and recommendations for action. Elliott wave analysis made using a graphical analysis of the figures (Figures trend reversal and trend continuation patterns), we have discussed earlier. We consecrate the basics of Elliott Wave Theory - for more information, if desired, you need to refer to the literature.

Lesson 4: Income of forex participants

As we have repeatedly said no, a private Internet trader enters the market Forex online broker or dealing companies. Internet trader earns money through currency speculation, closing positions in a more favorable exchange rate conditions than opening. For Internet trader working at Forex - risky business. Depending of the strategy of trading (trading strategies will be discussed in the University of Foreign Exchange), the efficiency of the foreign exchange market may be different. An important success factor is the nature of the trader, his ability to control his emotions and make informed decisions.

Internet service brokers in the Forex market, by contrast, can be called a business. In this business, there is practically no risk. The principle of margin trading, as stated in the relevant chapter, does not allow the client dealing company to lose more money than is available in their account and "get into the pocket" Internet broker.



We know that the transactions are made in the Forex interbank level. In dealing company has multi-currency accounts at the bank, where it is served. This bank provides quotes dealing company, and that, in turn, provides quotes to its customers. Typically, these quotes are different - Internet traders get quotes from several enlarged spread. This allows dealing company to make a difference in a spread, because the level of interbank transactions are made at more favorable quotes. Here is an example. Suppose the bank exposes dealing center quotation USD / JPY 104.75/104.77 to the size of the spread of 2 points. Dealing center increases the size of spread to 4 points and provides its customers with a quotation USD / JPY 104.74/104.78. Suppose Internet trader opens a short position (sell U.S. dollars) in one lot, the amount of which is equal to 100 thousand dollars. Internet trader sells dollars at the price of 104.74 yen to the dollar, but in fact at the interbank level transaction is executed at the price of 104.75 yen per dollar. A difference of 100,000 * (107.75 - 104.74) = 1000 Japanese Yen, which in terms of dollars at the bank rate is approximately 1,000 / 104.77 = 9.54 dollar. This amount - a steady income dealing company that is not associated with any risk. It should be noted that this is only the income from the client's open positions. As much as dealing company earns a closing position. Of the order of $ 19 of income from the transaction. When dealing with clients of thousands, and the day they make dozens of trades, the daily income of dealing company may be hundreds of thousands of dollars! As you can see, this is a very lucrative business.



But the spread can not be the sole source of income online brokers. Some dealing companies may charge a fee for the transaction, or even separate fees for opening and closing. In principle, such a commission similar to the income from the spread. For example, in our example, dealing company can provide customers with interbank quotation USD / JPY 104.75/104.77 directly (without increasing the spread), but take 19 dollars from the client for each transaction. It turns out the same profits. It should be noted that some online brokers may take commission and increase the interbank spread. In fact, check whether dealing company increases the interbank spread or not is difficult, since quotes are constantly changing, and interbank spreads unknown Internet trader.



The above described method of dealing income occurs when Internet trader in his work on Forex uses standard lot sizes. If using a mini or micro lots, the situation is somewhat different. Dealing company can not make a deal on such a small amount through the bank at the interbank level. The size of one mini lot is equivalent to 10 thousand dollars, and a micro lot - 1000 dollars. Minimum transaction size is at the interbank level - 100,000 dollars. How, then commit the transaction in this case? It operates a simple stats - up to 95% beginner Internet traders lose their money at work on Forex. Typically, this is because most people are starting to work on Forex, looking for easy money. They do not study thoroughly the theory of the foreign exchange market, the tools of his analysis, the impact of the release of economic indicators exchange rates. For people working at Forex becomes a game of roulette. It is because the mini and micro lots generally work only novice traders and amateurs, the dealing company trades on such lots at the interbank level does not enter. If the Internet trader closes the position on the mini or micro lot with losses, these losses are dealing company receives as income. If the Internet trader closes the position on the mini or micro lot at a profit, then that profit pays dealing company. Since 95% of new traders will sooner or later lose their money, the remaining 5% to ravage dealing company, you need to make a profit greater than the loss of the most 95% of the fortune hunters. If we assume that the initial size of each trader's account is the same, then the profit is expected to increase by 19 times, and the probability of this is negligible. Moreover, if the Internet trader is a very successful operation in the mini lots, then soon it goes to the standard items, where dealing company did not pay him an income of "the pocket", and conducts operations through a bank in the interbank level.

The above-described alternative way to earn money is not advertised dealing companies. Most of them said that all transactions are made at the interbank level, regardless of the size of the lots. But common sense and logical reasoning leads to the opposite. Perhaps the truth is somewhere in between. Everyone decides for himself what to believe and what to not. But understand that most new traders lose money is very important. You can make money in Forex, and it's not a myth. But it is not enough to click on the "make a million." Work on Forex - a risky business, requiring Internet trader certain knowledge, skills and abilities.



An additional source of income for dealing company can become a bank interest, as described in the previous chapter. But the income from it, tend to be small, and to get them, open position should not be closed for a long time. Internet broker is much more beneficial if the positions are opened and closed by internet traders as often as possible. Indeed, as described above, each transaction is bringing Internet broker revenue in the form of commissions or by the spread. Income from bank interest, compared with income from commissions and spreads are negligible. It should be noted that dealing companies can not only earn interest in the bank, but to pay it, and this was discussed in detail in the previous chapter.



As we can see, dealing companies are in a better than Internet traders position. They have a stable income, and their activity can be considered a successful business. Dealing companies receive revenue from the spread, commissions, bank interest, failed trades of their smaller customers, working with mini and micro lots. Internet Income traders are limited only successful deals on the change in foreign exchange rates (currency speculation) and, in some cases, bank interest. But despite this, the work on Forex is very attractive. If we consider this type of activity is a "job" rather than a "game", you can get stable high returns. Profitability in this case may exceed the yield on investments in stocks, bonds or mutual funds. If you give in to temptation and begin to work at Forex without having adequate knowledge and skills, it is likely you will lose your money. Now you have a good tip, and what to do in the end - you decide!





The calculation of the



So far, we have thoroughly studied the basic terms and concepts used in Forex, as well as the principle of margin trading. It is time to learn how to calculate the gain or loss on the transaction.

We know that the Internet is a trader on the international currency market through a dealing company that offers him a U.S. dollar account. To work on the Forex trader must put an initial sum of money on this. All gains and losses on transactions made, regardless of the currency transactions are translated into U.S. dollars. In this chapter we discussed in detail the principle of profit and loss account.



In general, the formula for calculating the profit or loss on the transaction can be written as follows:



Financial result = (sale price - purchase price) * lots * of the lot size - commissions * number of lots ± bank interest



As we can see, the financial result is made up of three parts: the trading result, paid fees and bank interest.



We already know that there are two types of Forex quotes (not counting the cross rates) - forward and backward. In the first case, the base currency is a foreign currency against the dollar and is expressed (traded) in dollars. In the second case, the dollar itself is the base currency and is expressed in units of foreign currency. Trading result in the above formula is calculated in the quoted currency. Same bank commission and interest, usually expressed in dollars, so the formula is valid only for direct quotations. It should be noted that in the formulation of the sale price and the purchase price - it does not make up quotes, and the real price for which we sold and bought currencies, regardless of whether the operation was used (buy or sell). When the outcome is positive, then we get the profit. If negative, then we have a loss.



For indirect quote is the difference between buying and selling prices denominated in foreign currency, while the overall financial result is expressed in dollars. Therefore, for the calculation of the financial result of the reverse quotes the following formula:



Financial result = (1/tsena purchases - 1/tsena sale) * lots * of the lot size - commissions * number of lots ± bank interest



The lot size is dependent on the specific quotes (on currency pairs) and the preferences of a particular Internet broker. The above formulas are used if the lot size is expressed in foreign currency (not in U.S. dollars). For example, the lot size for direct quotation GBP / USD may be 70,000 pounds sterling. Or the size of the lot on the back quotation USD / JPY may be 12.5 million Japanese Yen. If your online broker indicates the size of the lot in dollars, in order to use the above formula, you will need to convert dollars into the appropriate currency. Lot Size in foreign currency, in this case, will not be fixed but will depend on the current exchange rate prevailing on the date of opening positions. In U.S. dollars the size of a standard lot is almost always equal to 100,000.



The calculation of the financial result of cross rates is somewhat different. As we discussed in the relevant chapter, cross training - is currency exchange rates in relation to each other, excluding the U.S. dollar. Any cross rate can be represented by two dollar quotes. For example, the cross rate EUR / JPY can be calculated through the quotation EUR / USD and the quotation USD / JPY. Profit and loss in this case is as follows. First, the financial results calculated on the quote EUR / USD, and then calculates the profit or loss on the quote USD / JPY. These financial results are added together to get the total financial result.



As we know, the Forex currency exchange rates vary in points. In different quotations point size varies. When opening a position important to know what the trading result brings us to change course by one point in dollar terms. It will assess their current profit or loss and in time to close the position. Using the above formula, this value is easy to calculate and depends on the type of quotes (forward or backward), the size of one lot, the currency in which the item has been expressed and the size of one item.



Consider a direct quote GBP / USD with a size of one lot of 70,000 pounds sterling, and the point size 0.0001. Since direct quotation, we use the first formula to calculate the trading result. The minimum difference between the purchase price and the selling price is always one point, and in this case is 0.0001. Hence, the trading result of significant changes in GBP / USD on one lot at one point is equal to 0.0001 * 70,000 = U.S. $ 7.



Consider the inverse quote USD / JPY to the size of one lot 12,500,000 Japanese Yen and the point size of 0.01. Since the quotation is reversed, we use the second formula for the calculation of the trading result. Know the value of one point in the case of indirect quote is not enough as the trading result also depends on the values ​​of the prices themselves buying and selling. Assume that the current value of the course is 104.75 Japanese yen per dollar. Then the trading result from the change of USD / JPY for one lot at one point is (1/104.75 - 1/104.76) * 12 500 000 = 11.39 USD. It is worth noting that the different buying and selling prices, we get different trading result. If the lot size is expressed in dollars, it would have to be pre-translated into yen at the appropriate rate at the time of opening the position. And if I go long (buy dollars for yen), the calculations are based on a rate of sale, and if it is short (selling dollars for yen), then - the rate of purchase.



As we can see, change of course by one point at different quotes gives a different performance results. In the quote GBP / USD is smaller than in the quote USD / JPY. The smaller the trading result from the change of one item, the smaller the loss you incur in the event of an unfavorable exchange rate. But on the other hand, the lower will be your profit if the rate of change in the desired direction. Beginners Internet traders are encouraged to work with a less "aggressive" quotations, such as GBP / USD and USD / CHF.



At first glance discussed in this chapter methods of calculation may seem too complicated. But you do not make sense to worry about it, as all the calculations related to gains and losses, trading platform run automatically. Various dealing companies use different trading platforms, but the principle calculations does not change. You also important to understand what constitutes your profits and losses, not to close the position at a loss by mistake!

Lesson 3. Margin Trading
   
  So we have already dealt with the possibility of buying and selling on forex, I will not again explains and pointed to as examples in the short term can earn money on forex and what is its uniqueness. Margin trading is one of the biggest advantages in the international market. It enables investors to trade even with little capital to Fores. Thanks to them, we are private investors can trade and work on international market. Without margin trading, we need at least one hundred thousand Dollar to get started. So, let's take a look how does margin trading. The investor takes out a loan with the possibility to market speculation, he takes it from middlemen on the exchange. This deposit consists of one to five percent of the value of the deal is also directly depends on the selected leverage. din of twenty one to fifty, one hundred, and to whether there is one to two hundred, it all depends on how a broker you are working with. Simply put - this means that you can with a hundred dollars to get a loan of two thousand Dollar, up to twenty thousand. The more you scrip attachments robots the more you can earn money. But don forgot that the forex can easily double as the same amount and reduce it to two atoms and three times. Taking credit, the client can not lose more than invested, in other words, a private investor risks only his (Investments in Projects with money), and brokers provide credits, are protected.



  Why do these companies do not give you credit? Are not they themselves can not invest this money? Let us analyze in detail on what have money from their company's.

And the benefits they receive from literally all over. Companies receive a percentage of your transactions, regardless of whether they are profitable or not, the percentage of permanently gradually bagining them for what they provide you with their services. In previous lessons, we have already spoken to you about the spread, so I think for you not to be news is that brokers also have money to spread because of the unnatural spread (which is not so in the real market), everything is on the market makes the company for the means ( given to you on credit). Also have money from campaign for clients that work with  the smallest lots are not even  between banks. This scheme does not distinct from the principle of roulette, but statistics suggest that the majority of small investors in the truest sense of the word "Media player" their money this company. So we have one more reason to slowly, quietly and leisurely understand incomes for the system to forex trading, and then make deposits and start trading.

  Also, the company may charge interest on the loan is issued to you. This means that the sum of all open positions that go into the next day (not closed at the end of the day) and earn interest on the loan. At best, it will be the interest rate (refinancing rate), that is, the rate at which the central bank lends to commercial banks in the country. In this case we speak of bank interest (discussed in detail in the relevant chapter). Different countries have different rate of interest, so, depending on the exchange open positions and the type of transaction (purchase or sale), bank interest can be charged to the client as well as be charged to the client.



In margin trading real currency delivery will not occur and the value date is losing its meaning. Internet trader earns on speculation, opening the position for one price and closing it on the other. Traders can work with any currency pair, not only with the currency of their security deposit. Furthermore, traders can open both long and short positions in the interest of the currency pair. All profits and losses are translated into the currency of the security deposit.



Consider the principle of margin trading by example. Suppose you are working with mini lots and expect the growth rate of the dollar against the Japanese Yen USD / JPY. Your account is 2000 USD, and the size of one mini lot is equivalent to 10,000 U.S. dollars. Suppose your online broker gives you a leverage of 1:50. This means that in order to open a position, you need a security deposit of U.S. $ 200 (because 200 x 50 = 10,000). At the time of opening a long position in your account the amount of the security deposit is frozen, and only 1,800 dollars, called the free part of the bill, are at your disposal. On them you can open other positions.



Leave too little available funds in the account is not recommended. The fact is that once you open a position, fluctuations in the dollar the yen may temporarily go to the unfavorable side for you. This means that if you close your position at this point, we will incur losses, which will be debited from your account. Internet broker can not let your losses are greater than the size of your account, otherwise he will have to pay "from his pocket." Consequently, as soon as the current (floating) losses will reach the point where your score will not be able to cover them, your position will be automatically closed or blocked by the Internet broker (blocking position, lock position, will be considered in the Forex University). Such automatic closing of positions is preceded by the so-called margin call, which will be described in detail in the next chapter. Thus, the larger the amount in your account, the greater the fluctuations in the open position, you can withstand, avoiding the occurrence of margin call. After all, the direction of the course may change in the right direction for you and bring you profit, but if your account is not able to withstand temporary adverse fluctuations, then you are losses.



It should be noted that the higher position (lots) you open, the greater the available funds in your account. If in our example, the U.S. dollar and the Japanese Yen, we would not have opened a lot, but four, the security deposit would not be $ 200, and 800. Consequently, the free part of the bill would amount to 1,200 dollars. Since losing temporary fluctuations are now reflected on all four open positions, the chance to get a margin call increases proportionally - four times! In the next chapter, this situation will be discussed in detail.



Thus, margin trading provides a number of advantages Internet novice trader. With the right approach to trading, it can be a source of increasing your income. But, on the other hand, the increase in income is possible and the increased risk of loss. Therefore, margin trading - a "double-edged sword." It can make you very rich or very poor. Only your intellect, the practice of the Forex and share of luck determines your success!



Every time when a trader opens a position on Forex, using the services of Internet broker (dealing company), part of the money in his account frozen. This part is called the security deposit is used to provide assurance that the trader will never lose more money than is available in their account. Frozen funds are called the free part of the account and can be used to open new positions. But to use the full amount of the bill on the opening position is not recommended, as the free margin is also used to maintain the current level of losses (time loss) on open positions that become losses incurred by closing the position at the moment vremeni.Esli client has not enough funds to ensure the ongoing loss is the so-called margin call, signaling the need to update your account. Otherwise, the position is closed automatically online broker, and the client is a real loss. Current loss can be caused by unintended movement rate in the direction opposite to the open position. For example, suppose you have a long position in the U.S. dollar in the quote USD / JPY, and the U.S. dollar began to fall in price. This does not mean that you will suffer losses, because at a certain time course can be developed, and the U.S. dollar will rise again. But if at some point in the fall of the dollar against the yen amount in your account is insufficient to sustain current losses, your position will be automatically closed, and you will suffer real losses.



Amount in the account is divided into security deposit and free margin. Amount of security deposit depends on the amount of leverage provided by dealing company (as discussed in the previous chapter), a type of lots to which the trader is working and the number of such lots. In the case of leverage 1:50 and go long USD / JPY, open one mini lot (10,000 U.S. dollars) the amount of the security deposit is equal to 10,000 / 50 = $ 200. If our bill had 1,000 U.S. dollars, 200 of them are frozen, and 800 are at our disposal.

Since the opening of the positions calculated current profits or losses, as the dollar the yen is constantly changing. Imagine that the current loss amounted to $ 800, that is, came a moment that if we close the position, will incur a loss of $ 800. But the position is still open, and the course can turn in the opposite direction, bringing us a profit. We still believe that a long position was the right decision. But dealing company understands that if the losses exceed the current size of our bill, then pay extra for the loss it would have to "own pocket", and this of course it will not work. Since the Forex currency exchange rates may change quickly, it is difficult to fix the time when your current losses will be the exact amount in your account. Dealing company reinsured in this regard, so as soon as your current losses cover a portion of your security deposit, there comes a margin call, and all of your open positions are automatically closed. Your account remains unaffected only part of the security deposit, which is converted to the free account. Each Internet broker its own rules regarding the size of the current losses, leading to a margin call. The figure shows an example where 30% of the security deposit is the threshold value. This means that upon the occurrence of margin call, your account is still only 70% of the security deposit. In our example, a long position in U.S. dollars upon the occurrence of margin call on our bill will be 0.7 * 200 = $ 140. This amount is not even enough to open another position, so you have to make extra money in the account.







What swings should happen to come margin call? Suppose that the U.S. dollar to the Japanese Yen in the quote USD / JPY at the time of opening a long position was 104.75/85. That is, we bought dollars at the exchange rate of 104.85 yen per dollar. The position is closed reverse transaction, ie selling dollars for yen and Restatement of profit / loss in U.S. dollars. Assume a constant spread size (10 points), and we are interested in a quotation USD / JPY X / (X +10), at which a margin call. Since we opened one mini lot position (worth 10,000 U.S. dollars), $ 200 security deposit is on, $ 800 are free margin, we get the following equation:



10 000 * (104.85 - X) / (X + 10) = 800 + 0.3 * 200



Hence it follows that X is equal to 95.76. That is the quotation which comes margin call, to be USD / JPY 95.76/86. We see that the rate should fall to around 900 points, came to margin call. In practice, for such a large change in the course must pass a lot of time, it is unlikely that we will get margin call.



What would happen if instead of one mini lot, we have opened a position at once by four (worth 40,000 U.S. dollars)? Then the security deposit would be $ 800, available funds in the account would remain $ 200, and our equation would have taken the form:



4 * 10000 * (104.85 - X) / (X + 10) = 200 + 0.3 * 800



In this equation, X would be equal to 103.6. That is the quotation which comes margin call, would be 103.60/70. We see that in this case, the oscillation rate at just over 100 points would lead to a margin call. It should be noted that the fluctuation of 100 points during the trading day - this is a common phenomenon in Forex. This example shows that the greater the amount of your open positions and the less money remains in the free part of your score, the more likely that you will get a margin call. Take this with a high degree of seriousness!



From the above it can be a view that, in order to avoid a margin call is necessary to constantly monitor all open positions and close them in advance to minimize losses if the rate changes in an unfavorable direction. In order to rid the Internet of terydera need for constant monitoring of the quotations, introduced the term limit order (limit order). With it you can have when opening a position to specify thresholds for the current losses (stop order, stop loss) and operating income (target, target, take-profit). As soon as the current profit or loss will exceed the threshold, the position will be closed automatically. In contrast to the market order (market order), which is a request to open or close a position at the current market price, limit orders to limit your losses as well as your expected profit. On these terms will be discussed in more detail in the section Forex University.



So, as the Internet trader, you have to be afraid of fire as a margin call. After all, his offensive can simply make you lose everything. Therefore, in every possible way to avoid situations where a large portion of your account is frozen under a security deposit and make sure that the free part of your bill always had enough money. Do not try to open positions on all available in the free cash account and use limit orders



Interest of banks

At the moment, we have found that the margin trading involves the use of borrowed capital - the trader takes cash for transactions on the Internet from your forex broker. To understand the material in this chapter, we need to examine the principle of circulation of money in the state. Imagine that formed the new state. There is a working-age population, but the money in the state yet - what to do? The Central Bank of the virtual state of our requests to print a series of coin-operated home banknotes standard pattern. Let us assume that the notes are printed, but now distribute them to the public? In the state there is a number of commercial banks, which take a loan from the Central Bank (style credit). Credit, as we know, does not come for free, for it must pay interest. This is - a key point of forming monetary policy. The central bank sets the interest rate at which lends to commercial banks. In different countries, this rate is called differently. In Russia it is called refinancing rate (the interest rate). In the foreign literature it can be called interest rate, base rate, key bank rate, etc. Let's return to our virtual state - now commercial banks have money, and they, in turn, begin to issue loans to organizations at a higher percentage than the refinancing rate. Thus, commercial banks earn profit on the difference in interest rates on the loan. Establishing the organization as a business, hire employees who are paid wages. As a result, business processes in organizations are goods (or services are provided). Profit organization, and return to commercial banks borrowed money and interest. Commercial banks, in turn, pay for the loans with the Central Bank. As a result, the money distributed by the state. Of course, this is a very simplified diagram, but her understanding is very important for the study of Forex trading borrowed capital.

The interest rate in the state - one of the main levers to regulate the rate of inflation. Inflation is an increase in the amount of cash in circulation. In other words, the banknotes in circulation becomes larger, they can buy more. In this situation, organizations are trying to increase the prices of goods and services as a result of money depreciates. To slow the growth of inflation should reduce the amount of cash in circulation. To do this, the government increases the interest rate. The meaning higher interest rates to slow the rate of inflation, at first glance, is not obvious, and to understand it is just necessary to know the basis of education money in the state. The higher the interest rate, the larger commercial banks have to raise interest rates for loans to organizations. Consequently, organizations are taking in less debt, the production is minimized, the salary is paid on a smaller scale, and therefore the amount of cash in circulation is reduced. As a side-effect of this "intervention" because of reductions in production in the state increased levels of unemployment. This example shows that in the state of all processes are interrelated, and often have to sacrifice one for the other.

What is the meaning of all this for the Internet trader? Consider an example where we are going to buy U.S. dollars for Japanese yen on the quote USD / JPY. In Internet broker, we have opened the account for 1000 dollars. We have already said that the principle of margin trading allows us to buy dollars for yen, even if we do not have Ian. But it is important to understand that the yen is not taken out of the air - these Yen, we take a loan from online broker! They buy dollars (Internet broker buys them on our behalf). And another very important point - bought dollars remain with Internet broker, we do not dispose them. The only thing that we can do with them - it is to sell them back at Jena, ie close the position at a profit or a loss. So bought dollars remain with Internet broker. In other words, we give them a loan online broker.

We have already learned that if we take the money in the debt (take credit), we have to pay the appropriate credit rate. Since all transactions are carried out in the interbank forex level used is the same interest rate charged by the Central Bank. And, if we took in U.S. dollars loan, the interest is paid at the rate set by the Central Bank of the United States (Federal Reserve Bank). If we took in the Japanese Yen loan, the interest is paid at the rate set by the Central Bank of Japan (Bank of Japan). Different countries have different interest rates, which we'll talk.

The interest rate expressed as a percentage per annum (%). In Japan, at the time of writing this chapter, it is set to 0.5%, while in the U.S. it is equal to 3.0%. So for borrowed from Japanese Yen Internet broker we pay 0.5% annual interest on the loan taken. But the Internet broker for obligations we have to borrow U.S. dollars pays 3.0% per annum. Note that this principle applies only if our long open position on the quote USD / JPY does not close for several days. That is, interest is calculated daily on the open positions! If we close the position on the same day that it opened, the interest rate used in the calculations. Suppose that our position was opened for a month, and at the end of the month we have decided to close it. For simplicity, assume that the rate of purchase is equal to the rate of sales, we have a course on the quote USD / JPY remained virtually unchanged for the month. On exchange we earned nothing. But what about the credit crunch? We have to pay the broker Internet 0.5% per annum for one month, which is about 0.5% / 12 = 0.04% of the amount taken. We have to pay this amount in yen, but the calculations are converted into the currency of our account, in this case, in U.S. dollars at the exchange rate of dollar sales in the quote USD / JPY. Internet broker must pay us 3.0% per annum for one month, that is, 3.0% / 12 = 0.25% of the dollar amount taken. It should be understood that the amount taken, we must in yen, and the amount that we have in the U.S., equivalent to the size of the open position, ie the size of one lot, lot or mini micro lot, depending on what the lot size we use. Assume the position was opened one mini lot (one mini lot is equivalent to 10,000 U.S. dollars). Then, in our example, we will earn on the difference in interest rates of 0.25% - 0.04% = 0.21% of the size of a mini lot, ie about 10 000 * 0.0021 = 21 dollars.

Keep in mind that if we opened a short position on U.S. dollar (U.S. dollars sold for Japanese Yen), the result would not have earned and lost U.S. $ 21 on the difference in interest rates. Do you earn or lose on the difference in interest rates depends on the currency being traded and the type of open position (long or short). The amount payable on the interest rate called the bank interest (interest). In margin trading bank interest earned is always on the currency, which is always bought and paid for the currency you are buying for.

As we have just seen, the profit on Forex can earn not only on the change in foreign exchange rates, but also on the difference in interest rates around the world. Type of Forex trading, which involves income on the difference in interest rates is called carry trading. Not all online brokers pay the bank interest - there are those who only earn on the interest rate, but never on it do not pay. Some online brokers current interest rates might differ from the Central Bank of the countries of the world and may change over time. Therefore, consult with a broker over the internet bank interest payments on interest rates before you make it a live account! Opening the position you must clearly understand the components of your income and your expenses, not to deliberately open trading position or close it with a loss. It is important to understand that the bank may be of interest as part of your income and your expenses component. In the latter case, close a position as to overlap not only spread but block interest costs bank.

The concept of bank interest and the interest rate may confuse the novice online trader, so if you do not want to initially deal with these concepts, just do not leave your position open through the night (overnight). Use only the strategy of day trading (day trading). If the position is opened and closed on the same day, the bank interest on it is not calculated. On the trading strategies will be discussed in detail in the section Forex University.

We have already said that on weekends and holidays active trading in Forex is not conducted. Therefore, bank interest can be calculated evenly throughout the week. That is, at the weekend it is not calculated, and the corresponding weekly share of bank interest spread on weekdays. Considering that in the week 7 days, we can have a situation where on Monday, Tuesday, Thursday and Friday have on seventh week of bank interest, and on Wednesday have three sevenths. Typically, Internet brokers publish a table that indicates the distribution of bank interest on weekdays. We emphasize once again that the bank interest is calculated daily! \

Below is a table which shows the interest rates of the world, operating in March 2008, in order to reduce the share of trading on the Forex relevant currency. The table also shows the name of the central banks of the world, and links to their pages on the Internet.