for the EUR/USD is 0.9800, then US$0.9800 (98 cents) canbe exchanged for 1 euro.
SELL AND BUYEach row contains two five-digit numbers following identification of thecurrency pair. The first number appears under the column entitled “Sell.”This is the market exchange rate that can be executed immediately to sell.The trader is selling the base currency and buying the second currency.When executing a sell order, the trader expects the exchange rate to godown. For example, a trader executing a sell of EUR/USD at 0.9500 wouldlike the exchange rate to move toward zero.The next column to the right of the “Sell” column is the “Buy” column.This is the market price that can be executed immediately to buy the basecurrency and sell the second currency. When executing a buy order, thetrader expects the exchange rate to move higher.The “Sell” and “Buy” exchange rates move in tandem. When theexchange rates are moving higher, the numbers are red. When they aremoving lower, the exchange rates turn blue.
HIGH AND LOWThe next columns following “Buy” and “Sell” are entitled “High,” meaninghigh offer (buy), and “Low,” meaning ask (sell). The high is the highest thebid rate has reached since 5:00 P.M. EST the previous day. The low is thelowest the offer rate has reached since 5:00 P.M. EST the previous day.
INTEREST RATE B AND INTEREST RATE SAt 5:00 P.M. EST, traders with open positions have their positions automatically rolled over to the next settlement date. If a trader has no open positions at 5:00 P.M. EST, even if the trader executed transactions during theprevious 24 hours, there will be no rollover of positions.A rollover of positions will result in funds being added to or subtractedfrom the trader’s account. The amount changes day to day for each currencypair depending on market conditions. At 3:00 P.M. EST, the rolloveramounts are posted for each currency pair.Under the “IntrB” column, the amount in U.S. dollars per $100,000buy position is provided. If there is a minus sign next to the number, theamount will be subtracted. Under the “IntrS” column, the amount in U.S.dollars per $100,000 sell position is provided.
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TIMEEvery time an exchange rate is changed, a time stamp is placed next to thecurrency pair. “Time” is recorded in Eastern Standard Time (EST) in theUnited States. A time stamp of 14:00 would mean that the last updateoccurred at 2:00 P.M. EST.
HIGHLIGHTINGIn the Dealing Rates window, one of the rows will be underlined. Theunderlined currency pair will be the default currency pair when the traderenters market and entry orders. To change the underlined currency, click onthe gray box directly to the left of the currency identification.
OPEN POSITIONS WINDOWFigure 13-2 shows the Open Positions window.
TICKET AND ACCOUNT IDEach row in the Open Positions window contains information about a specific open position. In the “Ticket” column there is a unique ticket numberthat enables the trader to track each position easily. The “Account ID” column is next and should be the same on each row.
CURRENCY, B/S, AMOUNT K, OPENEach open position has four major characteristics: (1) “Currency” (see “Currency” under “Dealing Rates Window” for an explanations), (2) “B/S” (see“Sell and Buy” under “Dealing Rates Window” for explanations), (3) “AmtK,” the size of a position in increments of 100,000 of the base currency, and(4) “Open,” the exchange rate at which the positions were opened. For example, a row that reads “EUR/USD, S, 500, 0.9220” means that the trader sold500,000 euros for U.S. dollars at an exchange rate of 0.9220.
CLOSEThe “Close” column lists the current exchange rate at which the trader canexit the position. (For information on how to close a position, see “Close anOpen Position” below.)
STOP AND LIMITThe “Stop” and “Limit” columns allow stop-loss and limit orders to beplaced on individual positions. A stop-loss order is used to prevent further
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FIGURE 13-2 Open Position
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losses on a position after the exchange rate breaks through a prespecifiedlevel. The position will be liquidated at the next market price.A limit order is used to lock in profits when the exchange rate hits aprespecified rate. These orders are only active for as long as the positionremains open. For example, if a position has both a stop and a limit orderon it and the limit order is triggered, the stop-loss order will be canceled.
P/L AND GROSS P/LThe profit/loss on each position is tracked in real time in both pips and U.S.dollars in the “P/L” and “Gross P/L” columns. Pips are calculated in the“P/L” column by multiplying the difference in pips between the open andclose prices by the size of the trade. The profit/loss in U.S. dollars is shownin the “Gross P/L” column. A minus in front of the numbers in the “P/L” and“Gross P/L” columns indicates that the position has lost value.
COMMISSIONSPremiereTrade does not charge any commissions.
INTERESTThis is the cumulative dollar amount that is added to or subtracted from anopen position as a result of a rollover.
TIMEEach position bears a time stamp indicating when the position was opened.
HIGHLIGHTINGIn the Open Positions window, one of the rows will be underlined. Thehighlighted position will be the default position when you enter orders toclose or S/L. To change the highlighted position, click on the gray box onthe far left of the row.
ACCOUNTS WINDOWFigure 13-3 shows the Accounts window.
ACCOUNTAll account information is updated on a tick-by-tick basis in The “Account”column, giving traders a comprehensive view of their account. Eachaccount has a unique ID. If a trader has multiple accounts—for example, a
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FIGURE 13-3 Accounts
trader manages funds on behalf of several individuals—the trader will havemultiple account IDs. The information for each account is maintained in aseparate row.
BALANCEThe “Balance” column shows the value of funds in the account without taking into consideration profits and losses on open positions. The accountbalance is updated in real time.
EQUITYThe “Equity” column shows the value of funds in the account includingprofits and losses on open positions. The account equity also is updated inreal time.
USD MR (USED MARGIN)The “Usd Mr” column shows the amount of account equity currently beingcommitted to maintain open positions. The trader must maintain $1000 foreach $100,000 position. For example, if a trader has $500,000 in open positions, he or she would have $5000 in used margin. The used margin also isupdated in real time.
USBL MR (USABLE MARGIN)The “Usbl Mr” column shows the amount of account equity that is not currently being committed to maintain open positions. The formula for calculating usable margin is the account equity minus the used margin. Theusable margin also is updated in real time.
MC (MARGIN CALL)In the “Mc” column there will be a Y (yes) or an N (no). If Y appears, theusable margin reached zero, and open positions in the account wereclosed because there were insufficient funds. Please note that if thisoccurs, dealers have discretion over which open positions in the accountwill be closed.
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MULTIPLE-ACCOUNTS WINDOWFor traders who have multiple accounts and wish to see them all at once, thetrading software allows the trader simply to right click and highlight theaccount he or she wishes to view, and the trader will be able to see theOrders, Open Positions, and Summary windows in addition to the regularwindows he or she can view from the main account. Figure 13-4 shows theAccounts window when there are multiple accounts.
ORDERS WINDOWFigure 13-5 shows the Orders window.
ORDR ID (ORDER ID)Each row in the Orders window contains information about a specificactive entry order. The “Ordr ID” column lists a unique order ID thatenables the trader to track each entry order easily.
T (TYPE)The “T” column shows the type of order, of which there are two: (1) limitentry and (2) stop entry. If “LE” appears in the “T” column, the order is alimit entry. When placing a limit-entry order, a trader expects the exchangerate to move to a prespecified level and reverse direction. The limit-entryorder will be executed if the exchange rate touches the prespecified level.FIGURE 13-4 Account Reports
FIGURE 13-5 Orders
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If “O” appears in the “T” column, the order is a stop entry. When placing a stop-entry order, a trader expects that if the exchange rate breaksthrough its prespecified level, it will continue to move in the same direction. The stop-entry order will be executed if the exchange rate breaksthrough the prespecified level.
CURRENCY, RATE, AMOUNT K, B/SEach entry order has four major characteristics: (1) “Currency” (see “Currency” under the “Dealing Rates Window” for an explanations), (2) “Rate,”which is the exchange rate that must be touched (limit entry) or brokenthrough (stop entry) for the order to be executed, (3) “Sell” and “Buy” (see“Sell and Buy” under “Dealing Rates Window” for explanations), and (4)“Amt K” (amount K), the size of the position in increments of 100,000 ofthe base currency.
STOP AND LIMITThe “Stop” and “Limit” columns that appear in the Orders window arenonactive orders until the entry order is executed. The entry order will thendisappear from the Orders Window and appear in the Open Positions window with the stop and limit orders becoming active.
TIMEEach order bears a time stamp indicating when it was placed.
HIGHLIGHTINGIn the Orders window, one of the rows will be underlined. The underlinedposition will be the default position when you enter orders to close or enterStop/Limit orders. To change the Underlined position, click on the gray boxat the far left of the row.
PLACING A MARKET ORDERThere are four different ways to open the “Market Order” box:1.2.3.
In the Dealing Rates window, click on the exchange rate for thedesired currency and operation (buy or sell).Right click on the appropriate rate and select the “Market Order”command from the pop-up menu that appears.Click on the “Buy” button at the top of the trading screen, whichcauses the “Market Order” box to appear.
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Click on the “Action” heading located at the top of the screen abovethe “Quote” button. From there, select “Dealing Rates” and then“Market Orders.”
Figure 13-6 shows the “Market Order” box.“MARKET ORDER” BOXThere are five parameters a trader can set prior to sending an order to thetrading desk:Account. If the trader has more than one account, clicking on the“Account“ option will enable the trader to select the account fromwhich the trades will be placed.Currency. The “Currency” will default automatically to the currencypairing that is highlighted in the Dealing Rates window. However,any pairing can be selected simply by scrolling down the list ofcurrencies.Buy/Sell. This command will either buy or sell the first currencylisted. The command will default to either “Buy” or “Sell”depending on how the user summons up the pop-up menu. Leftclicking on the “Dealing Rate” or clicking the “Buy” or “Sell”button will prompt the default. Right clicking on the “Dealing
FIGURE 13-6 Market Order
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Rate” or clicking on the “Action” heading will not automaticallyset the default to the operation desired.Amount. Trades are made in increments of 100,000 of the base currency.Rate. This is the rate at which the trade will be executed, and thetrader cannot change this.At Market FeatureThis feature enables clients to customize the range of rates they are willingto accept; orders simply will be executed at the first rate the market reachesthat is within the range specified by the trader, thus ensuring rapid execution and the ability to create and liquidate positions easily.Stops/LimitsThis command will allow the trader to select the exchange rate at which thestop or limit should be triggered. The rate defaults automatically to 5 pipsaway from the current relevant market rate for both stop and limit orders.However, a trader can click on the box to the right of the “Rate” option andenter a specific rate for his or her stop/limit order.At any time during the stop/limit input process, a trader can cancel theorder by clicking on the “Cancel” button. Click on the “New” button afterall the selections have been made to place the stop/limit order. Once theorder is placed, the information will be updated under the “Stop” or“Limit” box in the Open Positions window.
COMPLETING THE TRADEAt any time during the trade input process, a trader can cancel the order byclicking the “Cancel” button. Click on the “OK” button after all the selections have been made to execute the trade.After “OK” has been selected, one of the following two responses willoccur:●
The trade order will be displayed in the Open Positions window.
●
A box will appear indicating that you do not have enough funds inyour account for the transaction.
When the trade appears in the Open Positions window, this confirmsthat the order has been executed. Note: Opening a new position (buyEUR/sell USD) that is the opposite and in the same amount as an existingopen position (buy USD/sell EUR) will effectively close the original position and serve to cancel the other position out.
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PLACING A STOP/LIMIT ON AN OPEN POSITIONThere are four different ways to open the “Stop/Limit Order” box:1.2.
3.4.
In the Open Positions window, click on either the “Stop” or “Limit”box of the highlighted ticket you wish to update.Right click on the appropriate “Stop” or “Limit” box from the highlighted ticket and select the “Stop Order” command from the popup menu.Click on the “Stop/Limit” button at the top of the trading screen,which causes the “Stop/Limit Order” box to appear.Click on the “Action” heading located on the top of the screenabove the “Quote” button. From there, select “Positions” and then“Stop/Limit.”Figure 13-7 shows the “Stop Order” and “Limit Order” boxes.
“STOP/LIMIT ORDER” BOXThere are three parameters a trader can set prior to sending an order to thetrading desk:Ticket. Select the specific ticket number of the ticket on which thestop or limit will be placed. The “Ticket” option will default automatically to whichever ticket is highlighted in the Open Positionswindow. However, any ticket can be selected simply by scrollingdown the list of numbers and clicking on the correct number.Stop/Limit. This command will allow the trader to place either a stopor a limit order on the selected ticket.Rate. This command will allow the trader to select the exchange rateat which the stop or limit should be triggered. The rate defaultsautomatically to 5 pips below the current sell rate for stoporders and 5 pips above the current sell rate for limit orders.However, the trader can click on the box to the right of the“Rate” option and enter a specific rate for his or her stop/limitorder.At any time during the stop/limit input process, a trader can cancel theorder by clicking on the “Cancel” button. Click on the “New” button afterall the selections have been made to place the stop/limit order. Once theorder is placed, the information will be updated under the “Stop” or“Limit” box in the Open Positions window.
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FIGURE 13-7 Stop/Limit Orders
FIGURE 13-8 Close Position
CHANGE PRICE ON A STOP/LIMIT (OPEN POSITION)To change the price for an existing stop/limit order on an open position, thetrader must click on the “Rate” option in the “Stop Order” box and enter thenew rate for the specific ticket number. The trader can bring up the “StopOrder” box four different ways as explained under “Placing a Stop/Limiton an Open Position” above. The trader can then click “Okay,” and the newrate should be updated in the appropriate “Stop” or “Limit” box in the“Open Positions” window.
DELETE STOP/LIMIT (OPEN POSITION)To delete an existing stop/limit order on an open position, the tradermust click on the “Delete” button in the “Stop Order” box for the specific ticket number. The trader can bring up the “Stop Order” box in thefour different ways as explained under “Placing a Stop/Limit on anOpen Position” above. Once the trader deletes the existing stop/limit
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order, the applicable “Stop” or “Limit” box in the Open Positions window will be empty.
CLOSE AN OPEN POSITIONThere are four different ways to open the “Close Position” box:1.
2.
3.
4.
In the Open Positions window, click on the “Close” box of the highlighted ticket the trader wishes to close. This will cause the “ClosePosition” box to pop up and allow the trader to close the position.The trader also can right click on the “Close” box from the highlighted ticket and select the “Close Position” command from thepop-up menu. Once again, the “Close Position” box will appear,allowing the trader to close the position.The trader also can close out a position by clicking on the “Close”button at the top of the trading screen. Again, this will prompt the“Close Position” box to appear.The same menu also will appear by left clicking the “Action” option(above the “Quote” button) at the very top of the screen. From there,select “Positions” and then “Close Position.”Figure 13-8 shows the “Close Position” box.
“CLOSE POSITION” BOXThere are two parameters that a trader can set prior to sending the close tothe trading desk:Ticket. Select the specific ticket number that is to be closed. The“Ticket” option will default automatically to whichever ticket ishighlighted in the Open Positions window. However, any ticketcan be selected simply by scrolling down the list of numbers andclicking on the correct number.Amount. Select the dollar amount to be closed. The “Amount” optionautomatically selects all dollars to be closed out. However, anyamount can be selected simply by scrolling down the list of dollarfigures.At any time during the close position process, a trader can cancel theorder by clicking on the “Cancel” button. Once the position is closed, it willdisappear from the Open Positions window. Click on the “OK” button after
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FIGURE 13-9 Entry Orders
all the selections have been made to close the position. Once the order iscompleted, the account balance will be adjusted in the Account Informationwindow.
PLACING AN ENTRY ORDERThere are three ways to open the “Entry Order” box:1.
2.
3.
In the Orders window, right click on any part of the window andselect the “Create Entry Order” command from the pop-up menu.The “Entry Order” box will appear, allowing the trader to place theorder.An entry order also can be placed by left clicking on the “Entry”button at the top of the trading screen. This will prompt the “EntryOrder” box to appear and allow the trader to place the order.The same menu also will appear by left clicking the “Action” option(above the “Quote” button) at the very top of the screen. From there,select “Orders” and then “Create Entry Order.”Figure 13-9 shows the “Entry Order” box.
“ENTRY ORDER” BOXThere are five parameters a trader can set prior to sending an order to thetrading desk. The first four are the same ones that appear in the “Market
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Order” box (account, currency, buy/sell, and amount). However, the difference is that for an entry order the trader sets a specific level to trigger execution of the trade. An entry order remains active until either the trade isexecuted or the trader cancels it.At any time during the trade input process, a trader can cancel the orderby clicking the “Cancel” button. Click on the “OK” button after all theselections have been made to execute the trade. Once the order is accepted,the information will be listed in the Orders window. Once the trade is executed, the position will disappear from the Orders window and reappear asan open position in the Open Positions window.
CHANGE AN ENTRY ORDERThere are four ways to open the “Change Order Rate” box (Note: The“Order ID” automatically defaults to the highlighted order in the “OrderEntry” box):1.
2.
3.
4.
In the Orders window, click on the “Rate” box of the highlightedorder or the order the trader wishes to update. This will cause the“Change Order Rate” box to pop up and allow the trader to changethe order.In the Orders window, right click on any part of the window andselect the “Change Entry Order” command from the pop-up menu.The “Change Order Rate” box will appear, allowing the trader tochange the order.A change to an entry order also can be made by left clicking on the“Change” button at the top of the trading screen. Again, this willprompt the “Change Order Rate” box to appear.The same box also will appear by left clicking the “Action” option(above the “Quote” button) at the very top of the screen. From there,select “Orders” and then “Change Entry Order.”
FIGURE 13-10 Change Order Rate
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Figure 13-10 shows the “Change Order Rate” box.
“CHANGE ORDER RATE” BOXThere are two parameters a trader can set prior to sending an order to thetrading desk:Order ID. If the trader has several pending entry positions, select thespecific order number of the order that is going to be changed.The “Order ID” option will default automatically to whicheverorder is highlighted in the Orders window. However, any ordercan be selected simply by scrolling down the list of numbers andclicking on the correct number.Rate. This option allows the trader to select the new exchange rate atwhich the entry order should be triggered. The trader clicks on thebox to the right of the “Rate” option and enters a specific rate forthe selected entry order.At any time during the order change process, the trader can cancel thechanges by clicking the “Cancel” button. Click on the “OK” button after allthe selections have been made. Once the trade is completed, the updatedinformation will be listed in the Orders window.Only the exchange rate can be changed for an existing entry order. Thedollar amount or currency selection cannot be changed for any particularFIGURE 13-11 Advance/Simple Dealing RatesAdvance
Simple
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“Order ID” number. The user must input a new entry order and remove theexisting one to effect changes in amount and currency.
CANCELING AN ENTRY ORDERThere are two ways to open the “Delete Order” box:1.
2.
In the Orders window, right click on any part of the window and selectthe “Remove Order” command from the pop-up menu. The “DeleteOrder” box will appear, allowing the trader to delete the trade.The “Remove Order” menu also will appear by left clicking the“Action” option (above the “Quote” button) at the very top of thescreen. From there, select “Orders” and then “Remove Order.”
“DELETE ORDER” BOXThe trader will be asked if the highlighted order ID number is to be deleted.Click “Yes” to cancel the trade, and click “No” to make no changes to theorder. Once the “Yes” button is clicked, the order will be deleted from theOrders window and officially removed.
REPORTSTo access this feature, click on the “Reports” button located at the top ofthe screen, and select the time period of interest. Traders can pull up adetailed report of their account status on a daily, weekly, monthly, or yearlybasis. This report presents, in a format ideal for printing, such key accountinformation as records of floating positions and completed trades.
CUSTOMIZING THE TRADING SCREENEach window can be customized to meet a trader’s personal specifications.There are several modifications that can be made.
SHOW OR HIDE WINDOW SCREENSTo show or hide any of the four window screens (Accounts, Dealing Rates,Open Positions, Entry Orders), simply click on the boxes located at the topof the trading screen. To hide a screen, a trader also may click on the “X”box in the upper right-hand corner of the window.
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CHANGE WINDOW SIZETo move a window or adjust the window size, follow the same proceduresyou would use for any Windows-based program. Simply click on the outeredge of the window and drag it to the size desired.
ADJUSTING BOX SIZES INSIDE A WINDOWTo adjust the individual box sizes inside each window, simply click on theouter edge of the box and drag it to the left or right to the desired size.
SELECTING THE CURRENCY PAIRS FOR THE DEALING RATESWINDOWThe trader has the option of adding or removing currency pairings to andfrom the Dealing Rates window. To do this, the trader must open the “Currency Subscribe List” box. There are two ways to open this box:1.
2.
In the Dealing Rates window, right click on any part of the window,and select the “Currency Subscribe List” command from the pop-upmenu. The “Currency Subscribe List” box will appear, allowing thetrader to choose which currency pairings he or she wishes to view.The “Currency Subscribe List” menu also will appear by clickingthe “Action” option (above the “Quote” button) at the very top ofthe screen. From there, select “Dealing Rates” and then “CurrencySubscribe List.”
CHANGING THE LOOK AND FEELA trader can either choose a simple or advanced look. To change the lookof the Dealing Rates window, left click on “Action,” then “Dealing Rates,”and then “Look & Feel.” There are two selections: “Advanced DealingRates” and “Dealing Rates” (see Figure 13-11).
OPTIONS CURRENCY SUBSCRIBE LIST BOXA trader can either add or remove a currency pair from among the 17currency pairings that the trading platform offers. Note: Once an order isplaced or a position is opened, the trader will be unable to unsubscribefrom any currency pairings until all positions are closed or removed.To add a currency pairing, simply highlight the pairing and then clickthe “Subscribe” button. The pairing will then show up in the Dealing Rateswindow, and there will be a “T” in the “Status” column inside the “Currency Subscribe List” box.
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FIGURE 13-12 Options
To remove a currency pairing, simply highlight the pairing and thenclick the “Unsubscribe” button. The pairing will then show up in the Dealing Rates window, and there will be a “D” in the “Status” column inside the“Currency Subscribe List” box.
TRADING STATION OPTIONSThere are some additional features that allow traders to customize their platform when it comes to font size, color, and sound. They are listed below.
FONT SIZETo change the font size of the characters inside each window, click on“File,” “Options,” and then “Font.” Highlight the window you wish tochange the fonts for in the “Table” box, and then click the “Change” button.A “Font” box will appear that will allow you to change the font type,style, and size of the characters for that window. Click the “OK” buttonafter the changes have been made, and the desired font will be updatedinside that window. Figure 13-12 shows the “Options” box for changing thefont sizes for a window.The font size also may be changed by clicking on the “Action” headinglocated at the top of the screen above the “Quote” button. From there, select
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FIGURE 13-13 Color Options
either “Accounts,” “Dealing Rates,” “Orders,” or “Positions,” and then clickon “Font” to change the font for the chosen window.
COLORSTo change the color of the characters inside each window, click on “File,”“Options,” and “Colors.” Highlight the window for which you wish tochange colors in the “Table” box, and then click the “Change” button.A “Color” box will appear that will allow you to change the color of thecharacters for that window. Click the “OK” button after the changes havebeen made, and the desired color will be updated inside that window. Figure 13-13 shows the “Options” box for changing colors.
SOUNDThe sound feature allows the client to program the software to make asound for a variety to differentiate various functions from an update in thedealing rates to a margin call. To use this function (or to silence it), click on“File,” “Options,” and then “Sounds,” which will allow you to make yourchoices. Figure 13-14 shows the “Options” box for sound changes.
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FIGURE 13-14 Sound Options
FIGURE 13-15 Select Interface Language
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SELECT INTERFACE LANGUAGETo change the language on the trading station, click on “File,” “Language,”and then select the language in which you wish to view the platform. Onceyou have selected the language, you must restart the trading station for thechange to take effect. See Figure 13-15.By becoming familiar with the trade station, you will have a much better opportunity at making profitable trades. As you explore the trade stationusing a demo account, you will start to become efficient at the functionsdetailed in this chapter. The trade station is very user friendly and very easyto use.
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CORPORATIONSIN THE FOREX●
Introduction
●
Forward Transactions
●
Examples of Strategies
●
Portfolio Management and Currency Risk
INTRODUCTIONRecognition of the financial risks associated with the foreign exchangemarket (FOREX) means that some decisions need to be made. The key toany good management is a rational approach to decision making.The most desirable method of management is the preplanning ofresponses to movements in what are generally volatile markets so that emotions are dispensed with and previous careful planning is relied on. Thisapproach helps to eliminate the panic factor because all outcomes havebeen considered, including worst-case scenarios, which could result fromeither action or inaction.Even though the worst-case scenarios are considered and plans ensurethat even such worst-case scenarios are acceptable (although not desirable),the preplanning focuses on achieving the best result.179Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
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Corporations doing business internationally have had to deal with theeconomic consequences of fluctuations in floating exchange rates.Whether large or small, for corporations that have outstanding contractsinternationally with buyers, sellers, or manufacturers, transactional risk isbecoming a huge concern. For example, Caterpillar