Understanding Rollovers and Interest Rates

One market convention unique to currencies is rollovers. A rollover is a transaction where an open position from one value date (settlement date) is rolled over into the next value date. Rollovers represent the intersection of interest-rate markets and forex markets.

Currency is money, after all

Rollover rates are based on the difference in interest rates of the two currencies in the pair you’re trading. That’s because what you’re actually trading is good old-fashioned cash. When you’re long a currency, it’s like having a deposit in the bank. If you’re short a currency, it’s like having borrowed a loan. Just as you would expect to earn interest on a bank deposit or pay interest on a loan, you should expect an interest gain/expense for holding a currency position over the change in value. Think of an open currency position as one account with a positive balance (the currency you’re long) and one with a negative balance (the currency you’re short).

But because your accounts are in two different currencies, the two interest rates of the different countries apply. The difference between the interest rates in the two countries is called the interest-rate differential. The larger the interestrate differential, the larger the impact from rollovers. The narrower the interest-rate differential, the smaller the effect from rollovers. You can find relevant interest-rate levels of the major currencies from any number of financial-market Web sites. Look for the base or benchmark lending rates in each country.

[ForexGen Money Manager]

An individual who is responsible for the entire financial portfolio of another individual or another entity. A money manager receives payment in exchange for choosing and monitoring appropriate investments for the client.

Benefits of being a Money Manager with [ForexGen]:

* Providing three different commission sources.
* Weekly commission plan.
* Easy & fast commission withdrawals.
* Fixed percentage of the profits.
* P = k * D “P=Profit, k=Variable Parameter, D=Deposits”

The money manager gets a fixed percentage of the profit previously agreed upon with the client for managing the client funds as a bonus feature.

The most competitive trading conditions:

* 2 pips spread on six currency pairs.
* Providing online trading services without maintenance margin, margin call and no automatic closing of positions below the initial margin on weekdays for accounts with initial equity of up to $1 million US. The margin level have to be recognized Fridays at 23:00 CET and before public holidays.
* Leverages up to 1:200 for accounts up to $1 million US.
* Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.

Top Economists Talk Unconventional Fed Policy

The Federal Reserve meets on Monday and Tuesday for a policy-setting session that will include a discussion of unconventional steps the U.S. central bank can take to lift the economy out of recession when official interest rates are already close to zero.

Following are comments from top economists on what the Fed should consider:

FORMER FED VICE CHAIRMAN ALAN BLINDER
The one-word advice to Dustin Hoffman in The Graduate was "plastics." My one-word advice to the Fed now is "spreads." Fortunately, I don't think Ben Bernanke needs this advice. He gets it.

The problem is not that risk-free (or nearly so) interest rates are too high; rather, they are ludicrously low as investors shun risk-taking of any kind. The Fed will soon drop the funds rate to 50 bps, but this will be strictly a feel-good gesture that won't accomplish anything. That's a good thing, too, since with funds at 50 bps and Treasury bills at zero, there's no more ammunition there.
The real problem today is that market interest rates that are built over the Treasury or Fed funds base -- the rates at which real borrowers borrow and real lenders lend -- now range from high to prohibitive. If we are to get credit flowing again, the spreads must come down -- a lot. When the Fed buys commercial paper, guarantees GSE debt, or backs asset-backed securities, it is trying to reduce the spreads on each of these instruments over Fed funds or Treasuries. It should keep doing that.

FORMER IMF CHIEF ECONOMIST SIMON JOHNSON
Consumers and firms around the world are trying to save more. Private demand is still contracting almost everywhere, and this continues to cause widespread insolvency.
In the U.S., monetary policy has responded aggressively and a large fiscal stimulus is in the works, but the financial system remains weak. The real sources of danger are: a) many emerging markets teeter on the brink of default and/or a major currency crisis; and b) serious pressures in vulnerable eurozone countries.

Three main Fed actions can help forestall further damage to the U.S. economy.

1) Interest rates on loans should be lowered through direct Fed action on mortgages and in other markets. Purchases of assets by the Fed should not be sterilized by selling Treasury debt. Inflation is much preferable to deflation.

2) Establish a clear policy on how the U.S. banking system will be recapitalized if needed. The Citigroup bailout is not scalable; there are better ways to protect taxpayer value.
3) As most emerging market debts are in dollars, investors around the world are potentially short of dollars. The Fed can expand its swap lines to more countries both directly and though the IMF. When the IMF is involved, the cost of any default is shared with other countries.

PIMCO CO-CEO MOHAMED EL-ERIAN

(At Reuters Investment Summit)
The Fed has done a tremendous amount of work to stabilize the banking system and restore the commercial paper market. So the situation institutionally is not as bad as it was before. Having said that, it speaks to the simple fact that cutting interest rates is now like pushing on a string; you won't get much impact. So if they go from 100 basis points to 50, as they most likely will, in terms of impact it will be de minimis.
Whether they go to zero or not is complicated, because at zero you declare that the money market industry is basically -- has no model there. So I'm not sure whether they get to zero or not, but the reality is at that these low levels of rates it doesn't matter.

I expect to hear both on monetary policy and on the implementation of what has already been announced in terms of the unorthodox. Whether it comes in the statement or not, I don't have a strong view. They have tended to keep the statement for monetary policy, and refer in general terms to the unorthodox measures, and then use other press releases for the unorthodox.
As to what is next, I think we got a very strong signal from the Federal Reserve and from the speech of Chairman Bernanke (on December 1). Because ... the crisis is now impacting the consumer, there is a desire to stabilize the triple-A consumer finance segment.
So the triple-A asset-backed, Alt-A, credit card, etcetera .. is going to be the next step. Again, you don't want to get there too early. You want to make sure that implementation occurs well. But that is the next step.

[ForexGen Money Manager]

An individual who is responsible for the entire financial portfolio of another individual or another entity. A money manager receives payment in exchange for choosing and monitoring appropriate investments for the client.

Benefits of being a Money Manager with [ForexGen]:

* Providing three different commission sources.
* Weekly commission plan.
* Easy & fast commission withdrawals.
* Fixed percentage of the profits.
* P = k * D “P=Profit, k=Variable Parameter, D=Deposits”

The money manager gets a fixed percentage of the profit previously agreed upon with the client for managing the client funds as a bonus feature.

The most competitive trading conditions:

* 2 pips spread on six currency pairs.
* Providing online trading services without maintenance margin, margin call and no automatic closing of positions below the initial margin on weekdays for accounts with initial equity of up to $1 million US. The margin level have to be recognized Fridays at 23:00 CET and before public holidays.
* Leverages up to 1:200 for accounts up to $1 million US.
* Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.

ForexGen | Know Your Competition

Why should you bother to know your competition in the FOREX market? Simply put,FOREX is a zero sum game – for every dollar someone wins, someone else loses that dollar. Wealth is only created for some by taking from others. It is not like the stock market, where almost everyone (except a small amount of short sellers) benefits from rising stock prices. FOREX is definitely not “win/win,” but rather “win/lose.” Knowing this rule, and recognizing your competition’s tendencies, can help give you an edge.

Who are the major players in FOREX? Banks, hedge funds and multinational corporations are all big players, and they make a lot of money from FOREX. One car company recently attributed a large portion of its profit to FOREX activities. These groups should strike fear into little minnows, because these groups are the professional sharks. They trade day and night, know the ins and outs of the market, and eat the weak. Big moves are usually due to professionals, so following their lead and following Trends they start may be a good strategy.In the same waters the professional sharks swim; there are also a lot of minnows.

They are also your competition, so knowing their tendencies can help you exploit them. Forexample, unsophisticated minnow traders are likely to put stop losses in obvious support or resistance levels. Knowing this, you can exploit this tendency and feed on them. Also, think about the first “sure thing” chart formation you ever learned about.Chances are new traders are just learning about that formation now, so you could fad
their trades and likely do alright

ForexGen Money Manager

An individual who is responsible for the entire financial portfolio of another individual or another entity. A money manager receives payment in exchange for choosing and monitoring appropriate investments for the client.

Benefits of being a Money Manager with ForexGen:

* Providing three different commission sources.
* Weekly commission plan.
* Easy & fast commission withdrawals.
* Fixed percentage of the profits.
* P = k * D “P=Profit, k=Variable Parameter, D=Deposits”

The money manager gets a fixed percentage of the profit previously agreed upon with the client for managing the client funds as a bonus feature.

For full Information and online application, please click here