Watch our videos or attend our live events here: http://Forex.Today Daily Trading Strategy For Traders of the Foreign Currency Exchange (FOREX) Today we discuss how to gauge the level of fear in the market using the VIX Index. This is important when you are trading "Risk On / Risk Off" strategies. You will see what a normal level of fear is and what happens when the market "freaks out", as well as what you will likely trade as a consequence as a forex trader. You will also learn how to know when the stock market is likely to peak... before it happens and thus be ready to short S&P futures or to buy a safe heaven currency. We also spend a half hour discussing how to use the Fed Funds Futures market to analysis the implied probability of a rise in interest rates by the Federal Reserve. You will learn how to analyze price differentials between various futures contracts to see what the interest rate will likely be in the near future. In this example, I show you why the professional market assumes a 25% chance of a hike by the Fed at tomorrow's FOMC meeting... but more importantly, I show you how that assumption is calculated. May the pips be with you! - Wayne McDonell Chief FX Market Strategist http://www.TradersWay.com TradersWay Is A Global Trading ECN Offering: Currencies | Energies | Metals | Indices | Binaries Live Forex Strategy Sessions Monday - Friday 7:30am ET (London Lunch) RISK WARNING Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. Seek education and gain experience before risking real money, but please always remember, your past performance does not guarantee future results. What Is Forex? The foreign exchange market (or "forex" for short) is the biggest financial market in the world, with over $4 trillion worth of transactions occurring every day. Simply, forex is the market in which currencies, or money, are traded in the interbanking system. Forex Tutorial: What is Forex Trading? By Investopedia Staff What Is Forex? The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. What is the spot market? More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement. VIX is a trademarked ticker symbol for the CBOE Volatility Index, a popular measure of the implied volatility of S&P 500 index options; the VIX is calculated by the Chicago Board Options Exchange (CBOE). Often referred to as the fear index or the fear gauge, the VIX represents one measure of the market's expectation of stock market volatility over the next 30-day period.] The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized. "VIX" is a registered trademark of the CBOE.[4] The VIX is calculated as the square root of the par variance swap rate for a 30 day term[clarify] initiated today. Note that you'll see the terms: FX, forex, foreign-exchange market and currency market. These terms are synonymous and all refer to the forex market.
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