Sunday, February 22, 2009
Wednesday, February 18, 2009
Market Hours
Forex
24-hour a day from 03:00 a.m. Monday till 12:00 a.m. Saturday. Including (approximately):
Japan 03:00 a.m. — 09:30 a.m.
Continental Europe 09:30 a.m. — 04:00 p.m.
Great Britain 11:30 a.m. — 06:30 p.m.
USA 05:30 a.m. — 12:30 a.m.
24-hour a day from 03:00 a.m. Monday till 12:00 a.m. Saturday. Including (approximately):
Japan 03:00 a.m. — 09:30 a.m.
Continental Europe 09:30 a.m. — 04:00 p.m.
Great Britain 11:30 a.m. — 06:30 p.m.
USA 05:30 a.m. — 12:30 a.m.
Market Hours
Forex
24-hour a day from 03:00 a.m. Monday till 12:00 a.m. Saturday. Including (approximately):
Japan 03:00 a.m. — 09:30 a.m.
Continental Europe 09:30 a.m. — 04:00 p.m.
Great Britain 11:30 a.m. — 06:30 p.m.
USA 05:30 a.m. — 12:30 a.m.
24-hour a day from 03:00 a.m. Monday till 12:00 a.m. Saturday. Including (approximately):
Japan 03:00 a.m. — 09:30 a.m.
Continental Europe 09:30 a.m. — 04:00 p.m.
Great Britain 11:30 a.m. — 06:30 p.m.
USA 05:30 a.m. — 12:30 a.m.
Point Value Calculation
All currency pairs can be divided into three categories — pairs with direct quote (EURUSD, GBPUSD), reverse quote pairs (USDJPY, USDCHF), and cross-rates (GBPCHF, EURJPY etc.).
For currency pairs with direct quote the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE
For currency pairs with direct quote the point value is constant and doesn't depend on the current quote.
Example:
For EURUSD the lot size is 100,000 Euro, tick size — 0.0001
PIP = 100,000 * 0.0001 = $10.00
For reverse quote pairs the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE / CURRENT_QUOTE
For reverse quote pairs the point value is changing depending on current quote.
Example:
For USDJPY the lot size is 100,000 US Dollars, tick size — 0.01. USDJPY quote is 114.66
PIP = 100,000 * 0.01 / 114.66 = $8.72
For cross-rates the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE × BASE_QUOTE / CURRENT_QUOTE,
where BASE_QUOTE — current quote of base (first) currency against US Dollar, CURRENT_QUOTE — current pair quote.
For cross-rates the point value is changing depending on current quotes of the pair and base currency.
Example:
For GBPJPY the lot size is 100,000 Pounds, tick size — 0.01, base currency — GBPUSD. GBPJPY quote is 230.82, and GBPUSD is 2.0107
PIP = 100,000 * 0.01 * 2.0107 / 230.82 = $8.71
For currency pairs with direct quote the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE
For currency pairs with direct quote the point value is constant and doesn't depend on the current quote.
Example:
For EURUSD the lot size is 100,000 Euro, tick size — 0.0001
PIP = 100,000 * 0.0001 = $10.00
For reverse quote pairs the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE / CURRENT_QUOTE
For reverse quote pairs the point value is changing depending on current quote.
Example:
For USDJPY the lot size is 100,000 US Dollars, tick size — 0.01. USDJPY quote is 114.66
PIP = 100,000 * 0.01 / 114.66 = $8.72
For cross-rates the point value measured in dollars is calculated with the formula
PIP = LOT_SIZE × TICK_SIZE × BASE_QUOTE / CURRENT_QUOTE,
where BASE_QUOTE — current quote of base (first) currency against US Dollar, CURRENT_QUOTE — current pair quote.
For cross-rates the point value is changing depending on current quotes of the pair and base currency.
Example:
For GBPJPY the lot size is 100,000 Pounds, tick size — 0.01, base currency — GBPUSD. GBPJPY quote is 230.82, and GBPUSD is 2.0107
PIP = 100,000 * 0.01 * 2.0107 / 230.82 = $8.71
What is Carry Trade
This is the trade on interest rates difference for the two currencies within some currency pair. To make it simpler, this is the position opening for currency pair with higher Swap–points and long-term holding of such position in order to get profit through these Swap–points.
For example, if you open 1 lot buy position for GBPJPY, you will be getting about 20 US Dollars a day. If the position is open for the whole year, the additional profit due to positive Swap-points will be $7,300!
What does Swap–points value depend on? As mentioned above, it depends on interest rates difference of the currencies forming some currency pair. E.g. the pound interest rate is 5% per year, and Japanese Yen — 0.5%, what gives us such a big amount of Swap–points in the shown above example.
However, there are currency pairs with more significant difference between interest rates, and, consequently, with more profitable Swap–points. E.g., the introduced in Akmos Trade Icelandic krona pairs — USDISK and EURISK.
The latter, for example, makes daily profit from Swap–points may be up to $50 per 1 lot! It's not hard to calculate, what will it make for a year.
However, we must say that such currency pairs usually highly volatile, and thus, rather high spreads are established.
Thus, for CARRY TRADE strategy you need to have rather big deposit, not to use “all money”and to hold open positions for quite a long period of time.
For example, if you open 1 lot buy position for GBPJPY, you will be getting about 20 US Dollars a day. If the position is open for the whole year, the additional profit due to positive Swap-points will be $7,300!
What does Swap–points value depend on? As mentioned above, it depends on interest rates difference of the currencies forming some currency pair. E.g. the pound interest rate is 5% per year, and Japanese Yen — 0.5%, what gives us such a big amount of Swap–points in the shown above example.
However, there are currency pairs with more significant difference between interest rates, and, consequently, with more profitable Swap–points. E.g., the introduced in Akmos Trade Icelandic krona pairs — USDISK and EURISK.
The latter, for example, makes daily profit from Swap–points may be up to $50 per 1 lot! It's not hard to calculate, what will it make for a year.
However, we must say that such currency pairs usually highly volatile, and thus, rather high spreads are established.
Thus, for CARRY TRADE strategy you need to have rather big deposit, not to use “all money”and to hold open positions for quite a long period of time.
Swap Calculation
At Forex market the position opening means the exchange of one currency to another. For example, when you open the position USDCHF BUY 1 lot, a trader acquires 100,000 US Dollars (USD) in exchange for the corresponding amount of Swiss Franks (CHF).
At the moment of writing 100,000 US Dollars corresponds to approximately 117,000 Franks. A trader usually doesn't have such amount of Franks (the transaction is made with leverage of 1:100). At first, he/she borrows it. After the position is opened, a trader starts to owe 117,000 Franks, and his account is credited with 100,000 US Dollars. The obtained CHF loan requires servicing — a trader has to pay an interest on its amount, and USD on his/her account, on the contrary, brings interest to this trader.
Since we don't now in advance how much time will the trader leave the position open, the shortest terms of loan and free cash placement are used. Usually such overnight rates are presented by LIBOR for loan, and LIBID — free cash placement. Besides, we add (with SELL) or reduce (with BUY) the interest rate difference the additional margin of 0.75%.
At the moment of writing LIBOR CHF rates were 2.08%, LIBID USD — 4.77%. Thus, a trader will get from placement of free dollars more, than he/she spend for servicing of CHF loan.
USDCHF BUY calculation example:
SWAP_USDCHF_BUY = ((LIBID_USD − LIBOR_CHF − 0.75%) × LOT_SIZE) / 100% / 365 =(4.77 − 2.08 − 0.75) × 100000 / 100 / 365 = $5.38
where 365 — number of bank days a year.
Thus, for holding the position USDCHF BUY, a trader with the above mentioned rates values will earn $5.38 a day.
For accounts with EUR as a deposit currency, the swap values are reduced to it through division by current EURUSD rate.
All the calculations are usually performed on the value date — the second day since the current date. The second day since Wednesday midnight is weekend, thus there occur three days settlements on Wednesday night — the payments are collected or charged in triple amount. The settlements are not made on weekends (Friday and Saturday nights).
Positive values in swap table mean payments to traders, negative values — deduction of values from trader's account.
At the moment of writing 100,000 US Dollars corresponds to approximately 117,000 Franks. A trader usually doesn't have such amount of Franks (the transaction is made with leverage of 1:100). At first, he/she borrows it. After the position is opened, a trader starts to owe 117,000 Franks, and his account is credited with 100,000 US Dollars. The obtained CHF loan requires servicing — a trader has to pay an interest on its amount, and USD on his/her account, on the contrary, brings interest to this trader.
Since we don't now in advance how much time will the trader leave the position open, the shortest terms of loan and free cash placement are used. Usually such overnight rates are presented by LIBOR for loan, and LIBID — free cash placement. Besides, we add (with SELL) or reduce (with BUY) the interest rate difference the additional margin of 0.75%.
At the moment of writing LIBOR CHF rates were 2.08%, LIBID USD — 4.77%. Thus, a trader will get from placement of free dollars more, than he/she spend for servicing of CHF loan.
USDCHF BUY calculation example:
SWAP_USDCHF_BUY = ((LIBID_USD − LIBOR_CHF − 0.75%) × LOT_SIZE) / 100% / 365 =(4.77 − 2.08 − 0.75) × 100000 / 100 / 365 = $5.38
where 365 — number of bank days a year.
Thus, for holding the position USDCHF BUY, a trader with the above mentioned rates values will earn $5.38 a day.
For accounts with EUR as a deposit currency, the swap values are reduced to it through division by current EURUSD rate.
All the calculations are usually performed on the value date — the second day since the current date. The second day since Wednesday midnight is weekend, thus there occur three days settlements on Wednesday night — the payments are collected or charged in triple amount. The settlements are not made on weekends (Friday and Saturday nights).
Positive values in swap table mean payments to traders, negative values — deduction of values from trader's account.
What is US Dollar Index
Just as Dow Jones Industrial Average reflects the general state of American stock market, US Dollar Index (USDXsup>®) reflects the general assessment of US Dollar. USDX does it through exchange rates averaging of US Dollar and six most tradable global currencies.
USDX = 50.14348112 × EURUSD−0.576 × USDJPY0.136 × GBPUSD−0.119 × USDCAD0.091 × USDSEK0.042 × USDCHF0.036
Those 20 countries (15 eurozone countries and five other countries, whose currencies are represented in USDX) make up the basis of global trade with the USA, have highly developed currency markets with the quotes which are independently determined by market participants. Besides, many currencies not included into USDX, are traded in close correlation with the currencies included in USDX. USDX value is calculated 24-hours a day, seven days a week.
Currencies and weights used in USDX calculation match the currencies and weights used in calculation of trade weighted US Dollar index by US Fed.
As USDX is based on indicative values of quotes, it can vary depending on quote source used.
USDX is calculated as geometric progression weighted average of six currencies rates against US Dollar in comparison with March, 1973. USDX measures the US Dollar value reduced to 100.00. Quote value 105.50 means that US Dollar value in relation to currency basket grew 5.50% from March, 1973.
March, 1973 was chosen as a zero point due to its significance in Forex market history. Those times the leading trade nations allowed their currencies to be quoted freely against each other. Such agreement was made in Smithsonian Institution in Washington, and is considered to be a victory of free market theorists. Smithsonian agreement replaced the collapsed fixed rate regime launched approximately 25 years earlier in Bretton Woods, New Hampshire.
Current rate of USDX reflects the average dollar value against this base period of 1973. Since that time, Dollar Index has reached the peak 165 and the low 76. The volatility of such instrument by amplitude and variability can be compared with stock index futures.
USDX = 50.14348112 × EURUSD−0.576 × USDJPY0.136 × GBPUSD−0.119 × USDCAD0.091 × USDSEK0.042 × USDCHF0.036
Those 20 countries (15 eurozone countries and five other countries, whose currencies are represented in USDX) make up the basis of global trade with the USA, have highly developed currency markets with the quotes which are independently determined by market participants. Besides, many currencies not included into USDX, are traded in close correlation with the currencies included in USDX. USDX value is calculated 24-hours a day, seven days a week.
Currencies and weights used in USDX calculation match the currencies and weights used in calculation of trade weighted US Dollar index by US Fed.
As USDX is based on indicative values of quotes, it can vary depending on quote source used.
USDX is calculated as geometric progression weighted average of six currencies rates against US Dollar in comparison with March, 1973. USDX measures the US Dollar value reduced to 100.00. Quote value 105.50 means that US Dollar value in relation to currency basket grew 5.50% from March, 1973.
March, 1973 was chosen as a zero point due to its significance in Forex market history. Those times the leading trade nations allowed their currencies to be quoted freely against each other. Such agreement was made in Smithsonian Institution in Washington, and is considered to be a victory of free market theorists. Smithsonian agreement replaced the collapsed fixed rate regime launched approximately 25 years earlier in Bretton Woods, New Hampshire.
Current rate of USDX reflects the average dollar value against this base period of 1973. Since that time, Dollar Index has reached the peak 165 and the low 76. The volatility of such instrument by amplitude and variability can be compared with stock index futures.
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