This article is a basic introduction to the fixed income market.  It covers the primary facets and features of fixed income as they relate to trading from the individual, as opposed to institutional, perspective. The term “fixed income” is used to describe a collection of securities which have predefined pay-out terms.  An example would be a certificate of deposit (CD) in which one deposits a set amount of money and in return receives a given amount of money, which includes both the original deposit plus interest...

The financial markets provide us with the opportunity to grow in ways that most people probably do not even think about. We all know of the gains in wealth to be had buying and selling stock, bonds, commodities, currencies, and other instruments. One need not look far to find stories about the riches to be had. Successful traders, investors and portfolio managers like George Soros, Peter Lynch, and Warren Buffet have become household names. What is less commonly talked about is the personal development which takes place along...

The things which contribute to price levels and action in the financial markets are numerous and diverse, and their influences can vary through time, and across different markets. This article identifies the different types of Economic Data influences and the role they play. There are two ways economic information can influence prices. The first is in the macro sense. Macroeconomic inputs include: Interest Rates Economic Growth (GDP) Government Budget Surpluses/Deficits Trade Balances Commodity Prices Relative Currency Exchanges...

Terminology and Market Conventions If you are going to trade forex you need to understand the terms and quoting conventions used, especially in regards to the spot market. Notational Conventions The forex market uses 3-letter codes for all currencies.  These are commonly known as SWIFT or ISO codes.  For example, USD is the code for the US Dollar. Here are the codes for the other primary currencies: AUD: Australian Dollar CAD: Canadian Dollar CHF: Swiss Franc EUR: European Euro GBP: British Pound JPY: Japanese Yen ( For a complete...

Understanding the Trades The best way to understand what happens in a forex trade is to demonstrate by way of example.  In this case we will outline a trade in which we buy EUR/USD at 1.2100.  Remember, when buying or selling in the forex market you are doing so in regards to the base currency (the first one listed in the pair).  That means for EUR/USD we are long the Euro, and by extension, short the USD. This diagram shows the way the transaction runs it’s course: Simple Spot Forex Trade Buy 100,000 EUR/USD at 1.2100 Borrow...

Foreign exchange rates are both a market unto themselves and an influence on the fundamental situation of other markets.  They reflect the strength or weakness of an economy and are a factor in it.  This kind of duality can create a truly mind-spinning situation at times.  There are a few things, however, which directly influence forex prices. Interest Rates Most people will think first of interest rates when the idea of evaluating one currency against another comes in to play.  They are indeed a major part of the forex market...

Advantages of Forex Trade on Your Schedule The single biggest advantage the forex market has over other markets is its 24-hour nature. A trader can put on or take off positions literally any time of day or night, regardless of their base of operations. That opens the game up to a great many individuals who might not otherwise have the time available to trade. Consider, for example, the working person with a 9 to 5 type of job.  Most folks like that cannot be expected to operate effectively as day traders in a market such as...

Excerpt from The Essentials of Trading OK. So we’ve done a trade, but what does that mean? The financial markets bring together buyers and sellers. Some transactions are very straightforward, as in the stock market. The buyer pays the seller money and receives shares in return. Even when using leverage and margin, the basics of the transaction remain very simple. This is not always the case. The stock market is what can be referred to as a cash market. That means the buyer gives the seller cash now to receive an asset immediately....

(Excerpt from The Essentials of Trading) Back in the chapter on market analysis methods we mentioned the representation bias, which is the tendency to view the portrayal of something as the thing itself. The example we used was a map, which shows the terrain, but is not the terrain itself. As such, it presents a limitation on one’s ability to use it in the decision-making process. There are other biases as well. The Lotto Bias relates to control. Its name comes from those who play the lottery and their belief that picking numbers...

What is Forex? The foreign exchange market, often referred to as forex, is the market for the various currencies of the world. It is a market which, at its core, is rooted in global trade.  Goods and services are exchanged 24 hours a day all over the world. Those transactions done across national borders require payments in non-domestic currencies.  For example, a US company purchases widgets from a Mexican company. To do the transaction, one of two things is going to happen.  The US firm may, depending on the contract terms,...

Trading requires time in a couple of ways. The first is the time dedicated to developing a trading system. This can be thought of as a one-off thing, but in reality it is more an on-going process. Once a system is in place, time is required in terms of monitoring the markets for signals, executing transactions, and managing positions. How much time all these different elements require depends on the trading system. The trading system, in turn, needs to take in to account the amount of time the trader has available. With that...