What Is Forex Trading? (continued...)

Interest Rates
If the market has uncertainty regarding interest rates, then any bit of news regarding interest rates can directly affect the currency markets. Traditionally, if a country raises its interest rates, the currency of that country will strengthen in relation to other countries as investors shift assets there to gain a higher return on the interest rate. Hikes in interest rates, however, are generally bad news for stock markets. Some investors will transfer money out of a country's stock market when interest rates are hiked, causing the country's currency to weaken. Which effect dominates can be tricky, but generally there is a consensus beforehand as to what the interest rate move will do. Indicators that have the biggest impact on interest rates are PPI, CPI and GDP. Generally the timing of interest rate moves are known in advance. They take place after regularly scheduled meetings by the BOE, FED, ECB, BOJ, and other central banks.

International Trade
The trade balance shows the net difference over a period of time between a nation’s exports and imports. When a country imports more than it exports the trade balance will show a deficit, which is generally considered unfavorable. For example, if U.S dollars are sold for other domestic national currencies (to pay for imports), the flow of dollars outside the country will depreciate the value of the currency. Similarly if trade figures show an increase in exports, dollars will flow into the United States and appreciate the value of the currency. From the standpoint of a national economy, a deficit in and of itself is not necessarily a bad thing; If the deficit is greater than market expectations then it will trigger a negative price movement.

What are SOME of the Risks Involved?

Margined Currency Trading is one of the riskiest forms of investment available in the financial markets and is only suitable for sophisticated individuals and institutions. An account with Forex Capital Markets permits you to trade foreign currencies on a highly leveraged basis (up to approximately 200 times your account equity). An initial deposit of $1,000 will enable the account holder to take a maximum position with $200,000 market value. The funds in an account trading at maximum leverage can be completely lost, if the position(s) held in the account has a 1/2 percent swing in value. Theoretically, an account could lose more than the equity it contains, if the account is trading at maximum leverage and positions held in the account swing more than 1/2 percent in value. Given the possibility of losing one's entire investment, speculation in the foreign exchange market should only be conducted with risk capital funds that if lost will not significantly effect one's personal or institution's financial well being.

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