Andre (Jul 16, 2003 4:30:22 PM)
Today we're pleased to welcome Kathy Lien of Forex Capital Markets to the Elite Trader Chat Room.

Andre (Jul 16, 2003 4:30:29 PM)
Kathy is the Chief Fundamental Strategist at FXCM where she is responsible for providing research and analysis for DailyFX, including technical and fundamental research reports, market commentaries and trading strategies.

Andre (Jul 16, 2003 4:30:46 PM)
A seasoned FX analyst and trader, Kathy was an Associate at JPMorgan Chase where she worked in Credit Derivatives, Cross Markets and Foreign Exchange Trading for over 3 years. Kathy has vast experience within the interbank market, trading both FX spot and options. She also has experience trading a number of products outside of FX, including interest rate derivatives, bonds, equities, futures and leveraging movements between markets.

Andre (Jul 16, 2003 4:30:57 PM)
Today, we're going to benefit from her experience in these areas as Kathy will talk about how traders can use equity and future strategies to profit in the FX market.

Andre (Jul 16, 2003 4:31:15 PM)
Kathy, welcome. Thanks for joining us today.

FXCM_Kathy (Jul 16, 2003 4:31:17 PM)
Thank you Andre. Good afternoon

FXCM_Kathy (Jul 16, 2003 4:31:28 PM)
Traditionally, self-traders have not had access into the foreign exchange market. With $1.5 trillion in daily turnover, it is the largest market in the world.

FXCM_Kathy (Jul 16, 2003 4:31:40 PM)
Access to this market was formerly restricted to hedge funds, large CTAs and institutional investors due to regulation, capital requirements and technology

FXCM_Kathy (Jul 16, 2003 4:31:51 PM)
Unlike the equity markets, where liquidity is dispersed across many different stocks, the $1.5 trillion in liquidity is concentrated in 4 major currency pairs, so they are very liquid.

FXCM_Kathy (Jul 16, 2003 4:32:02 PM)
This means that traders can easily get in and out, executing over $100 million without significantly moving the markets.

FXCM_Kathy (Jul 16, 2003 4:32:07 PM)
Aside from liquidity allowing for fast execution and tight spreads, the 24-hour nature of the FX market allows positions to be liquidated at any time and stops/limits filled without slippage.

FXCM_Kathy (Jul 16, 2003 4:32:20 PM)
However, in recent years, firms such as FXCM (Forex Capital Markets) have opened up the FX market to retail traders, providing leveraged trading as well as free execution platforms, charts and real time news

FXCM_Kathy (Jul 16, 2003 4:32:30 PM)
Unlike the equity or future markets, the FX market is a 24-hour market that allows day traders to respond immediately to breaking news and events.

FXCM_Kathy (Jul 16, 2003 4:32:38 PM)
As a day trader, you don't need to wait for the market to open, nor would you want to. This is particularly important in environments such as today, where significant developments around the world can happen overnight.

FXCM_Kathy (Jul 16, 2003 4:32:49 PM)
. Most FX firms also offer up to 200:1 leverage. Of course, leverage comes with risks, but leverage also allows traders with account sizes as low as $300 to make meaningful profits.

FXCM_Kathy (Jul 16, 2003 4:33:01 PM)
Technology is an additional advantage with leading firms offering automatic execution on live dealing rates.

FXCM_Kathy (Jul 16, 2003 4:33:09 PM)
. For active traders, you know the exact rate at which you will be filled, and will not have to wait for your broker to come back with a fill

FXCM_Kathy (Jul 16, 2003 4:33:15 PM)
Speaking of brokers, FX trading is commission free. From a transaction cost point of view, this is one of the reasons why FX trading has grown so rapidly in popularity

FXCM_Kathy (Jul 16, 2003 4:33:21 PM)
An additional attractive unique feature of the FX market is the ability to earn triple interest on rollover on Wednesdays.

FXCM_Kathy (Jul 16, 2003 4:33:29 PM)
And now onto equity and future strategies and how they can be applied to the FX market.

FXCM_Kathy (Jul 16, 2003 4:33:45 PM)
Equity traders will find it valuable to know that if they are equipped with the tools to successfully predict equity index movements, most likely, they would do a good job using the same views when predicting movements in the U.S. dollar.

FXCM_Kathy (Jul 16, 2003 4:33:58 PM)
Historically, there has been a positive correlation between U.S. equity prices and the U.S. dollar.

FXCM_Kathy (Jul 16, 2003 4:34:06 PM)
That is, when the S&P 500 index rallies, the USD will generally also strengthen against the Euro.

FXCM_Kathy (Jul 16, 2003 4:34:13 PM)
The reason why this has worked historically is that foreigners are huge investors in the U.S. equity markets.

FXCM_Kathy (Jul 16, 2003 4:34:19 PM)
The same is true for the international equity indexes and their respective domestic currency, such as the Nikkei and the JPY.

FXCM_Kathy (Jul 16, 2003 4:34:29 PM)
When the Nikkei rallies, generally, you would also see a corresponding rise in the JPY.

FXCM_Kathy (Jul 16, 2003 4:34:37 PM)
What this means is that if you have missed the move in the S&P, you may not be too late to catch a move in the USD.

FXCM_Kathy (Jul 16, 2003 4:34:44 PM)
Most day traders make decisions based upon technical analysis.

FXCM_Kathy (Jul 16, 2003 4:35:03 PM)
. When trading on TA, as long as you have a chart and indicators, trading shares of Microsoft or E-Minis is just like trading the European currency or EURUSD

FXCM_Kathy (Jul 16, 2003 4:35:13 PM)
In fact, technical analysis is the most common trading strategy used by professional FX traders because currencies rarely spend much time in tight trading ranges and have the tendency to develop strong trends.

FXCM_Kathy (Jul 16, 2003 4:35:38 PM)
Over 80% of volume is speculative in nature so as a result, the market frequently overshoots and then corrects itself.

FXCM_Kathy (Jul 16, 2003 4:35:54 PM)
A technically trained trader can easily identify new trends and breakouts, which provide multiple opportunities to enter and exit positions.

FXCM_Kathy (Jul 16, 2003 4:36:06 PM)
A great example is

FXCM_Kathy (Jul 16, 2003 4:36:34 PM)
the strong rally

FXCM_Kathy (Jul 16, 2003 4:36:37 PM)
in the EURUSD

FXCM_Kathy (Jul 16, 2003 4:36:47 PM)
from early April to the end May

FXCM_Kathy (Jul 16, 2003 4:36:56 PM)
it was a one-way trend upwards

FXCM_Kathy (Jul 16, 2003 4:37:00 PM)
with the currency pair

FXCM_Kathy (Jul 16, 2003 4:37:20 PM)
rising 1500 pips

FXCM_Kathy (Jul 16, 2003 4:37:36 PM)
each pip in a regular account with lot sizes of 100,000

FXCM_Kathy (Jul 16, 2003 4:37:43 PM)
is $10

FXCM_Kathy (Jul 16, 2003 4:37:52 PM)
so that rise was worth $15000

FXCM_Kathy (Jul 16, 2003 4:38:02 PM)
based off of a margin of $1000

FXCM_Kathy (Jul 16, 2003 4:38:31 PM)
Quite impressive

FXCM_Kathy (Jul 16, 2003 4:38:33 PM)
Additionally, aside from trend trading, certain currencies may undergo extended periods of range trading.

FXCM_Kathy (Jul 16, 2003 4:38:43 PM)
. Traders will find ample opportunity to play the end of ranges.

FXCM_Kathy (Jul 16, 2003 4:39:11 PM)
for example

FXCM_Kathy (Jul 16, 2003 4:39:15 PM)
the EURGBP

FXCM_Kathy (Jul 16, 2003 4:39:24 PM)
which is the european currency against the uk currency

FXCM_Kathy (Jul 16, 2003 4:39:46 PM)
was trapped in an approx 150 pip range

FXCM_Kathy (Jul 16, 2003 4:39:52 PM)
from feb 2003 to april 2003

FXCM_Kathy (Jul 16, 2003 4:40:10 PM)
Some of the most commonly used technical analysis indicators when trading FX include Fibonacci Retracements, Stochastic, RSI, and Moving Averages.

FXCM_Kathy (Jul 16, 2003 4:40:22 PM)
Tool I am sure many of you already use

FXCM_Kathy (Jul 16, 2003 4:40:32 PM)
Those who use these indicators to trade equities or futures may not realize it, but you are already one step closer to understanding how to trade and profit from the FX market.

FXCM_Kathy (Jul 16, 2003 4:40:41 PM)
For future traders, one of the best barometers of speculative market sentiment is the Commitment of Traders Report.

FXCM_Kathy (Jul 16, 2003 4:40:54 PM)
The report is released weekly by the Commodity Futures Trading Commission (CFTC) and contains an aggregate picture of open positions in existing US futures contracts.

FXCM_Kathy (Jul 16, 2003 4:41:06 PM)
The CFTC separates traders into two categories: commercials and non-commercials.

FXCM_Kathy (Jul 16, 2003 4:41:14 PM)
Commercials are comprised of investment banks, large funds, insurance companies, etc.

FXCM_Kathy (Jul 16, 2003 4:41:28 PM)
. The Commercial category is widely watched in markets like T-bond and S&Ps as commercials are considered to be "in the know".

FXCM_Kathy (Jul 16, 2003 4:41:41 PM)
Commercials are well capitalized and usually provide the "fuel" for market advances and declines.

FXCM_Kathy (Jul 16, 2003 4:42:02 PM)
In foreign currency futures however, their positions are less relevant as the majority of commercial trading is done in the spot markets and any positions held in the futures markets are highly unlikely to give an accurate representation of real market positioning.

FXCM_Kathy (Jul 16, 2003 4:42:38 PM)
COT data however, is useful in the analysis of speculative non-commercial data

FXCM_Kathy (Jul 16, 2003 4:42:53 PM)
Non-commercial traders are comprised of individual traders, locals, etc

FXCM_Kathy (Jul 16, 2003 4:43:02 PM)
Speculative traders are motivated by quick profits and typically enter positions with insufficient capital making them very "weak hands".

FXCM_Kathy (Jul 16, 2003 4:43:12 PM)
Extreme positioning in currencies by non-commercials has historically been accurate in identifying important market reversals.

FXCM_Kathy (Jul 16, 2003 4:43:24 PM)
Therefore, extreme net long speculative positions could be viewed as a sell signal, whereas extreme net short speculative positions could be viewed as a buy signal.

FXCM_Kathy (Jul 16, 2003 4:43:40 PM)
Non-commercial data, in contrast to commercial data, is reliable as it captures individual trader's positioning.

FXCM_Kathy (Jul 16, 2003 4:43:59 PM)
FXCM regularly publishes updates on COT positions

FXCM_Kathy (Jul 16, 2003 4:44:08 PM)
on our research site www.dailyfx.com

FXCM_Kathy (Jul 16, 2003 4:44:18 PM)
Spot FX trading has only become recently available to individual traders and many individual traders still rely heavily on the futures

FXCM_Kathy (Jul 16, 2003 4:44:25 PM)
markets to trade foreign currencies, which makes non-commercial data an excellent gauge of undercapitalized individual psychology.

FXCM_Kathy (Jul 16, 2003 4:44:41 PM)
As you can see, FX trading is actually very easy to grasp, especially if you already have experience trading equities and futures.

Andre (Jul 16, 2003 4:45:00 PM)
Kathy, that was great. Very informative.

Andre (Jul 16, 2003 4:45:30 PM)
Let me start with a real basic question. I got in the chat, but it's been talked about on our boards.

FXCM_Kathy (Jul 16, 2003 4:45:36 PM)
sure

Andre (Jul 16, 2003 4:45:49 PM)
If there's no commissions, how do the exchanges make money?

FXCM_Kathy (Jul 16, 2003 4:46:12 PM)
unlike the future or equity markets where there is a fixed exchange such as the nyse or cme

FXCM_Kathy (Jul 16, 2003 4:46:18 PM)
the fx market is a decentralized market

FXCM_Kathy (Jul 16, 2003 4:46:33 PM)
meaning that

FXCM_Kathy (Jul 16, 2003 4:46:41 PM)
there isn't one market maker

FXCM_Kathy (Jul 16, 2003 4:47:02 PM)
in fact there are hundreds of market makers providing their own dealable prices

FXCM_Kathy (Jul 16, 2003 4:47:22 PM)
market makers generally do not charge commission

FXCM_Kathy (Jul 16, 2003 4:47:27 PM)
and make money through the spread

FXCM_Kathy (Jul 16, 2003 4:47:37 PM)
now because there are so many participants

FXCM_Kathy (Jul 16, 2003 4:47:38 PM)
and

FXCM_Kathy (Jul 16, 2003 4:48:02 PM)
an abundance of liquidity

FXCM_Kathy (Jul 16, 2003 4:48:06 PM)
spreads do tend to be very tight

nitro (Jul 16, 2003 4:48:42 PM)
So, more accurately, how does FXCM make money?

FXCM_Kathy (Jul 16, 2003 4:48:49 PM)
FXCM is also a market maker

nitro (Jul 16, 2003 4:49:04 PM)
so then FXCM is taking the other side of our trades?

FXCM_Kathy (Jul 16, 2003 4:49:11 PM)
we source our rates from the interbank market (which is the market where the large institutionals trade with each other)

FXCM_Kathy (Jul 16, 2003 4:49:18 PM)
no

FXCM_Kathy (Jul 16, 2003 4:49:24 PM)
FXCM generally offsets

FXCM_Kathy (Jul 16, 2003 4:49:29 PM)
our clients' trades

FXCM_Kathy (Jul 16, 2003 4:49:33 PM)
in the interbank bank

FXCM_Kathy (Jul 16, 2003 4:49:38 PM)
therefore

FXCM_Kathy (Jul 16, 2003 4:49:48 PM)
it is always in our best interest that our clients

FXCM_Kathy (Jul 16, 2003 4:49:50 PM)
make money

FXCM_Kathy (Jul 16, 2003 4:50:02 PM)
the way it works is that

FXCM_Kathy (Jul 16, 2003 4:50:22 PM)
when chase and citibank deal with each other in the eurusd for example, they generally have a 2-3 pip spread

FXCM_Kathy (Jul 16, 2003 4:50:33 PM)
lets say 1.1010-1.1012

FXCM_Kathy (Jul 16, 2003 4:50:48 PM)
fxcm will take this feed and then publish a rate of 1.1009-1.1013

FXCM_Kathy (Jul 16, 2003 4:51:08 PM)
so we only make a small profit, as we have to offset

FXCM_Kathy (Jul 16, 2003 4:51:14 PM)
the trade with a bank such

FXCM_Kathy (Jul 16, 2003 4:51:18 PM)
as chase and citi

nitro (Jul 16, 2003 4:51:54 PM)
so there is an automatic arb for FXCm

nitro (Jul 16, 2003 4:51:58 PM)
so the no Comissions stuff is BS

nitro (Jul 16, 2003 4:52:00 PM)
the comission is built into the trade

FXCM_Kathy (Jul 16, 2003 4:52:16 PM)
many other firms

FXCM_Kathy (Jul 16, 2003 4:52:23 PM)
may charge commissions on top of the spread

FXCM_Kathy (Jul 16, 2003 4:52:39 PM)
it wouldn't be fair if we took positions against you

Andre (Jul 16, 2003 4:53:08 PM)
Ok, let's move on...

sonobob (Jul 16, 2003 4:53:11 PM)
Does the spread vary among firms? If so, how does FXCM's spread compare to others'?

FXCM_Kathy (Jul 16, 2003 4:53:20 PM)
yes, spreads do vary

FXCM_Kathy (Jul 16, 2003 4:53:35 PM)
fxcm spreads are very competitive

FXCM_Kathy (Jul 16, 2003 4:53:41 PM)
some firms offer wider spreads

FXCM_Kathy (Jul 16, 2003 4:53:51 PM)
we are able

FXCM_Kathy (Jul 16, 2003 4:54:01 PM)
to offer tight spreads due to the size of company

FXCM_Kathy (Jul 16, 2003 4:54:08 PM)
with over $500 million in credit lines

FXCM_Kathy (Jul 16, 2003 4:54:20 PM)
we are generally seen as a large customer of these banks,

FXCM_Kathy (Jul 16, 2003 4:54:35 PM)
so we can pass on

FXCM_Kathy (Jul 16, 2003 4:54:38 PM)
the tight spreads

FXCM_Kathy (Jul 16, 2003 4:54:47 PM)
we get from the interbank market onto our customers

Malcolm2 (Jul 16, 2003 4:55:09 PM)
How would anybody know if a firm traded against its clients, and what are the regulatory protections, if any, should this occur?

Andre (Jul 16, 2003 4:56:55 PM)
Kathy is back with us... let me rephrase the questions.

FXCM_Kathy (Jul 16, 2003 4:57:42 PM)
thanks andre

Andre (Jul 16, 2003 4:57:50 PM)
Are there regulatory protections to keep firms from trading against their clients?

FXCM_Kathy (Jul 16, 2003 4:58:32 PM)
generally speaking

FXCM_Kathy (Jul 16, 2003 4:58:37 PM)
the CFTC

FXCM_Kathy (Jul 16, 2003 4:58:46 PM)
which is the regulatory body that governs FX trading

FXCM_Kathy (Jul 16, 2003 4:59:14 PM)
ensures that Forex Firms are

FXCM_Kathy (Jul 16, 2003 4:59:56 PM)
not excessively churning any client accounts

FXCM_Kathy (Jul 16, 2003 5:00:14 PM)
however, in terms of the exact ruling on positioning

FXCM_Kathy (Jul 16, 2003 5:00:40 PM)
i will need to get back to you on that

FXCM_Kathy (Jul 16, 2003 5:00:54 PM)
i will come back with

FXCM_Kathy (Jul 16, 2003 5:00:58 PM)
an answer by the end of the chat

FXCM_Kathy (Jul 16, 2003 5:02:07 PM)
more questions andre?

ChatMaster (Jul 16, 2003 5:02:38 PM)
Andre just lost his connection. He's getting back in the room now.

FXCM_Kathy (Jul 16, 2003 5:03:29 PM)
Unfortunately, there is no such regulation in the FX market, but FXCM has over 12,000 clients worldwide

Andre (Jul 16, 2003 5:03:36 PM)
I'm sorry, folks... I got booted.

FXCM_Kathy (Jul 16, 2003 5:03:45 PM)
with offices in hk, tokyo, london and ny

Andre (Jul 16, 2003 5:04:00 PM)
And in getting booted, I lost the questions you've submitted. Please resubmit.

FXCM_Kathy (Jul 16, 2003 5:04:00 PM)
it would not be in our best interest to

FXCM_Kathy (Jul 16, 2003 5:04:09 PM)
trade against our clients

FXCM_Kathy (Jul 16, 2003 5:04:33 PM)
we have a very strong reputation within the forex market

rawman74 (Jul 16, 2003 5:04:40 PM)
have you used prosticks on daily charts? whats your opinion on those if you have?

FXCM_Kathy (Jul 16, 2003 5:04:45 PM)
with no compliants ever issued to the cftc

FXCM_Kathy (Jul 16, 2003 5:05:32 PM)
i have seen prosticks

FXCM_Kathy (Jul 16, 2003 5:05:45 PM)
prosticks for forex

FXCM_Kathy (Jul 16, 2003 5:06:00 PM)
is a fairly new item i believe

FXCM_Kathy (Jul 16, 2003 5:06:27 PM)
i have seen it used successfully

monkey (Jul 16, 2003 5:06:38 PM)
what are the peak movement times of the forex market in Eastern time?

FXCM_Kathy (Jul 16, 2003 5:06:43 PM)
but it is not a commonly used

FXCM_Kathy (Jul 16, 2003 5:06:49 PM)
charting package

FXCM_Kathy (Jul 16, 2003 5:07:05 PM)
generally the FX market

FXCM_Kathy (Jul 16, 2003 5:07:14 PM)
has the most activity

FXCM_Kathy (Jul 16, 2003 5:07:38 PM)
when markets overlap, i.e. Asia and Europe (12:00 AM to approximately 2:00 AM), Europe and the US (8:00 AM to approximately 11:00 AM) and US and Asia (5:00 PM to 9:00 PM).

FXCM_Kathy (Jul 16, 2003 5:07:51 PM)
During New York and London hours all the currency pairs trade actively. During the Asia hours, however, the trading activity for pairs such as NZD/USD and AUD/JPY peak and are less widely traded during New York and London hours.

FXCM_Kathy (Jul 16, 2003 5:08:07 PM)
traders can trade 24 hours a day

Andre (Jul 16, 2003 5:08:28 PM)
Speaking of pairs...

imc (Jul 16, 2003 5:08:31 PM)
Kathy, what in your opinion is the best currency pair to trade?

FXCM_Kathy (Jul 16, 2003 5:08:53 PM)
generally the eurusd, usdjpy, gbpusd, and usdchf

FXCM_Kathy (Jul 16, 2003 5:09:01 PM)
are the best currencies to trade because

FXCM_Kathy (Jul 16, 2003 5:09:04 PM)
they are the most liquid

FXCM_Kathy (Jul 16, 2003 5:09:11 PM)
as i mentioned in my presentation earlier

FXCM_Kathy (Jul 16, 2003 5:09:27 PM)
nearly all of the FX market's

FXCM_Kathy (Jul 16, 2003 5:09:35 PM)
$1.5 trillion volume is concentrated

FXCM_Kathy (Jul 16, 2003 5:09:40 PM)
in these four currency pairs

Andre (Jul 16, 2003 5:10:18 PM)
Kathy, I've got a bunch of great questions.

FXCM_Kathy (Jul 16, 2003 5:10:24 PM)
sur

FXCM_Kathy (Jul 16, 2003 5:10:25 PM)
sure

Andre (Jul 16, 2003 5:10:59 PM)
I'm going to try and shoot them to you a little faster, so we can get through them all. So if you have to be breif, go ahead.

tradewin (Jul 16, 2003 5:11:08 PM)
Is there anyway for retail clients to see interbank market spreads and how is rollover handled?

tradewin (Jul 16, 2003 5:11:23 PM)
and could you explain rollover

FXCM_Kathy (Jul 16, 2003 5:11:28 PM)
sure

FXCM_Kathy (Jul 16, 2003 5:12:02 PM)
because each market maker provides their own prices, it is impossible for self-traders to see interbank prices

FXCM_Kathy (Jul 16, 2003 5:12:11 PM)
unless they have EBS or Reuters

FXCM_Kathy (Jul 16, 2003 5:12:29 PM)
EBS are Reuters are the platform over which interbanks make markets

FXCM_Kathy (Jul 16, 2003 5:12:42 PM)
however, i believe it is very costly to have these systems

FXCM_Kathy (Jul 16, 2003 5:12:51 PM)
clients can always get a gage

FXCM_Kathy (Jul 16, 2003 5:13:08 PM)
of the current interbank market price by taking a look at any chart

FXCM_Kathy (Jul 16, 2003 5:13:16 PM)
that uses the S&P feed

FXCM_Kathy (Jul 16, 2003 5:13:26 PM)
which is average of interbank market makers

FXCM_Kathy (Jul 16, 2003 5:13:44 PM)
in terms of rollover

FXCM_Kathy (Jul 16, 2003 5:14:00 PM)
In the spot foreign exchange market, trades must be settled in two business days.

FXCM_Kathy (Jul 16, 2003 5:14:14 PM)
For example, if a trader sells 100,000 euros on Tuesday, the trader must deliver 100,000 euros on Thursday, unless the position is rolled over.

FXCM_Kathy (Jul 16, 2003 5:14:24 PM)
As a service to our traders, FXCM automatically rolls over all open positions i.e. swaps the trade forward to the next settlement date (two business days) at 5:00 PM Eastern Standard Time.

FXCM_Kathy (Jul 16, 2003 5:14:32 PM)
The swap rates are determined at the Interbank level and are tradable instruments.

FXCM_Kathy (Jul 16, 2003 5:14:42 PM)
In any spot rollover transaction there is a difference in interest rates between the two currencies that will be reflected in the overnight "loan".

FXCM_Kathy (Jul 16, 2003 5:14:53 PM)
If the trader is long dollars and the short currency has a lower interest rate, the trader should gain on the spot rollover through the premium relationship of the dollar to that short currency.

FXCM_Kathy (Jul 16, 2003 5:15:00 PM)
The amount varies based on the interest rate differential between the two currencies, and fluctuates day to day with the movement of prices

FXCM_Kathy (Jul 16, 2003 5:15:07 PM)
For instance, on any given day, the rollover can be $1 per lot for U.S. Dollar/Japanese Yen and $15 per lot for Great Britain Pound/U.S. Dollar.

FXCM_Kathy (Jul 16, 2003 5:15:19 PM)
For day traders that never hold a position overnight, rollover will not affect trading.

FXCM_Kathy (Jul 16, 2003 5:15:36 PM)
For positions that are open on Wednesday and held overnight, the amount added or subtracted to an account as a result of rolling over a position tends to be around three times the usual amount. This "3-Day" rollover accounts for settlement of trades through the weekend period

FXCM_Kathy (Jul 16, 2003 5:16:08 PM)
this means that traders have the opportunity

FXCM_Kathy (Jul 16, 2003 5:16:14 PM)
to earn triple interest on Wed

FXCM_Kathy (Jul 16, 2003 5:16:30 PM)
on our FX trading station, rollover amounts are clearly posted

FXCM_Kathy (Jul 16, 2003 5:16:41 PM)
every day at 3pm EST

leverage (Jul 16, 2003 5:17:47 PM)
Is it possible to daytrade FX just as futures and equities even with such a spread? what time frame is preferable to use if so?

FXCM_Kathy (Jul 16, 2003 5:18:10 PM)
the majority of FX traders are day traders

FXCM_Kathy (Jul 16, 2003 5:18:23 PM)
the spread is actually very small

FXCM_Kathy (Jul 16, 2003 5:18:35 PM)
for example, the EURUSD has a 4 pip spread

FXCM_Kathy (Jul 16, 2003 5:19:11 PM)
yesterday (granted there was alot of volatility), the EURUSD moved 200 pips

FXCM_Kathy (Jul 16, 2003 5:19:45 PM)
intraday

FXCM_Kathy (Jul 16, 2003 5:19:50 PM)
there is also alot of volatility

FXCM_Kathy (Jul 16, 2003 5:19:57 PM)
which makes for ample trading opportunities

FXCM_Kathy (Jul 16, 2003 5:20:07 PM)
FX markets move, sometimes more than stocks

FXCM_Kathy (Jul 16, 2003 5:21:09 PM)
The daily volume of the FX market exceeds $1.4 trillion per day, roughly 30 times the volume of all U.S stock markets.

FXCM_Kathy (Jul 16, 2003 5:21:26 PM)
The consistent liquidity of this market provides currency traders with the ability to enter and exit trades regardless of the size of the transaction or time of day.

FXCM_Kathy (Jul 16, 2003 5:21:39 PM)
In addition unlike the equity market, there is no restriction on short selling.

FXCM_Kathy (Jul 16, 2003 5:21:49 PM)
Profit potential exists in the currency market regardless of whether a trader is long or short, or which way the market is moving

FXCM_Kathy (Jul 16, 2003 5:22:07 PM)
Liquidity also means that

FXCM_Kathy (Jul 16, 2003 5:22:19 PM)
positions can be liquidated and stop orders executed without slippage.

FXCM_Kathy (Jul 16, 2003 5:22:27 PM)
the best

FXCM_Kathy (Jul 16, 2003 5:22:30 PM)
time frame to use

FXCM_Kathy (Jul 16, 2003 5:22:41 PM)
depends on your holding period

FXCM_Kathy (Jul 16, 2003 5:22:45 PM)
generally our day traders

FXCM_Kathy (Jul 16, 2003 5:22:49 PM)
like to use 5 minute

FXCM_Kathy (Jul 16, 2003 5:23:00 PM)
15 minutes, and hourly

FXCM_Kathy (Jul 16, 2003 5:23:02 PM)
charts

sonobob (Jul 16, 2003 5:23:06 PM)
Does the spread increase at times of lower liquidity or is it constant?

FXCM_Kathy (Jul 16, 2003 5:23:38 PM)
as one of the benefits of trading with a large firm, our spread is constant

FXCM_Kathy (Jul 16, 2003 5:23:41 PM)
throughout the day

FXCM_Kathy (Jul 16, 2003 5:23:54 PM)
even in times where liquidity is generally low

tradewin (Jul 16, 2003 5:23:59 PM)
what if anything keeps brokers from adjusting their quotes to take out customers stops?

FXCM_Kathy (Jul 16, 2003 5:24:49 PM)
since we source our rate feed from the interbank

FXCM_Kathy (Jul 16, 2003 5:24:50 PM)
maker,

FXCM_Kathy (Jul 16, 2003 5:25:09 PM)
market, you can always get a gage of where the rates would have been in the interbank market at the time

FXCM_Kathy (Jul 16, 2003 5:25:27 PM)
by taking a look at charts using the S&P feed, which FXCM offers free on our website

FXCM_Kathy (Jul 16, 2003 5:25:33 PM)

sonobob (Jul 16, 2003 5:25:43 PM)
Does FXCM offer simulation accounts with real data?

FXCM_Kathy (Jul 16, 2003 5:26:12 PM)
yes, if you'd like you can email your name and email address to klien@fxcm.com

FXCM_Kathy (Jul 16, 2003 5:26:23 PM)
and i will set up 30-day simulation accounts for you

FXCM_Kathy (Jul 16, 2003 5:26:33 PM)
our simulation accounts, or we call them demo accounts

FXCM_Kathy (Jul 16, 2003 5:26:44 PM)
are identical to the live, with real time rate feed

FXCM_Kathy (Jul 16, 2003 5:26:57 PM)
our rates are all executable, so you do

FXCM_Kathy (Jul 16, 2003 5:27:04 PM)
not need to wait for a quote

izeickl (Jul 16, 2003 5:27:09 PM)
Is FXCM ever considering opening up its API so that traders can use their own programs and get price updates, trade etc directly?

FXCM_Kathy (Jul 16, 2003 5:27:16 PM)
we have that

FXCM_Kathy (Jul 16, 2003 5:27:26 PM)
already

FXCM_Kathy (Jul 16, 2003 5:27:44 PM)
basically we allow programmers

FXCM_Kathy (Jul 16, 2003 5:28:04 PM)
to email us their codes

FXCM_Kathy (Jul 16, 2003 5:28:22 PM)
written in easylanguage

FXCM_Kathy (Jul 16, 2003 5:28:46 PM)
and we work with a company

FXCM_Kathy (Jul 16, 2003 5:28:55 PM)
that has a program called the trade robot

FXCM_Kathy (Jul 16, 2003 5:29:04 PM)
which can read this code and automatically generates the trades on our servers according to the strategy.

FXCM_Kathy (Jul 16, 2003 5:29:19 PM)
email me your request, and i will get you the appropriate information

FXCM_Kathy (Jul 16, 2003 5:29:42 PM)

leverage (Jul 16, 2003 5:29:43 PM)
FXCM advertises it moves 20 billion a month. What is considered to be a sizable amount, because I see other firms advertise other amounts?

FXCM_Kathy (Jul 16, 2003 5:30:29 PM)
$20 billion is substantial considering our traders generally trade in lot sizes of $100,000

FXCM_Kathy (Jul 16, 2003 5:30:46 PM)
we are one of the largest online FX market makers in North America

FXCM_Kathy (Jul 16, 2003 5:30:55 PM)
you can get a gage of how large a firm is

FXCM_Kathy (Jul 16, 2003 5:31:22 PM)
by accessing the latest financial statements of all registered FCMs in the United States, including FXCM, at http://www.cftc.gov/tm/tmfcm.htm

FXCM_Kathy (Jul 16, 2003 5:31:27 PM)
which is the CFTC website

FXCM_Kathy (Jul 16, 2003 5:31:31 PM)
look for Forex Capital Market

FXCM_Kathy (Jul 16, 2003 5:31:37 PM)

rrs456 (Jul 16, 2003 5:31:43 PM)
I have heard positive comments from my friends in the fx world about your company. I am currently considering fxcm and refco fx. My main problem with most fx trading platforms is lack of sophisticated order entry system -- e.g. no trailing stop any comments? PS I enjoy reading your insightful comments at dailyfx.com

FXCM_Kathy (Jul 16, 2003 5:31:59 PM)
thank you

FXCM_Kathy (Jul 16, 2003 5:32:14 PM)
At this time, the FX Trading Station does not support trailing stops.

FXCM_Kathy (Jul 16, 2003 5:32:39 PM)
However,

FXCM_Kathy (Jul 16, 2003 5:32:53 PM)
traders can place stop/limits on positions or to

FXCM_Kathy (Jul 16, 2003 5:32:58 PM)
enter into new positions

FXCM_Kathy (Jul 16, 2003 5:33:10 PM)
These stops can be “trailed” up or down manually as the market rate moves, and can ultimately be placed within 5 pips of the current market rate

FXCM_Kathy (Jul 16, 2003 5:33:22 PM)
In accordance with FXCM’s no slippage policy, all stops will be executed at exactly the rate entered – thus allow traders to minimize the losses they incur when the market moves against them.

victorsafta (Jul 16, 2003 5:33:57 PM)
Kathy, I was recently frauded by a FOREX broker and so I am very frustrated about the way they just vanished with my money and my clients' money (arr. 400.000USD) and nobody bothers to even answer my questions about what happened. Now as an unregulated market, who takes care of the clients' deposits with the brokers. How does FXCM guarantees my funds after opening the accounts? I want to open accoutns again but I am very concerned about the security of the funds ...

FXCM_Kathy (Jul 16, 2003 5:34:21 PM)
the market is regulated by the CFTC

FXCM_Kathy (Jul 16, 2003 5:34:39 PM)
Safety of funds is a paramount issue, yet be assured that as a regulated FCM, FXCM is under the strict supervision of government regulators and your funds are completely secure

FXCM_Kathy (Jul 16, 2003 5:34:46 PM)
As an FCM, government regulators require that client funds be held in segregated accounts.

FXCM_Kathy (Jul 16, 2003 5:34:58 PM)
FXCM maintains customer funds at banking institutions for the sole purpose of the clients' trading activity, and may never utilize such funds for operating expenses or other investment purposes.

FXCM_Kathy (Jul 16, 2003 5:35:06 PM)
Funds are withdrawn from these FDIC insured bank accounts ONLY as a direct result of clients' trading related activities or client's request for withdrawal

FXCM_Kathy (Jul 16, 2003 5:35:15 PM)
Client funds are completely segregated from operating accounts, and therefore may not be used for day-to-day operations, credit lines outside of trades placed by clients, and other investment purposes.

FXCM_Kathy (Jul 16, 2003 5:35:25 PM)
In the unlikely event of Forex Capital Market’s bankruptcy, all client funds are legally protected and held in segregated security deposit accounts by the financial institutions.

FXCM_Kathy (Jul 16, 2003 5:35:36 PM)
Government regulators also guarantee client’s funds by requiring FCMs to meet strict financial standards including capital adequacy requirements.

FXCM_Kathy (Jul 16, 2003 5:35:51 PM)
Government regulators also guarantee client’s funds by requiring FCMs to meet strict financial standards including capital adequacy requirements.

FXCM_Kathy (Jul 16, 2003 5:36:10 PM)
Market Makers (FXCM) are required to hold a certain amount of their own capital as a percentage of client assets. The minimum capital requirement is currently set at 6% of reserves

FXCM_Kathy (Jul 16, 2003 5:36:22 PM)
similar to most banks and brokerage houses around the world. The minimum capital requirement ratio is checked through regular audits

FXCM_Kathy (Jul 16, 2003 5:36:29 PM)
If firms are losing money and the capital adequacy ratio falls below the minimum, regulators can seize the operation.

FXCM_Kathy (Jul 16, 2003 5:36:37 PM)
Essentially Government regulators will stop the operation before the firm’s own equity is fully used up and clients’ funds are potentially dipped into.

FXCM_Kathy (Jul 16, 2003 5:36:45 PM)
It is because of this supervision that regulated firms are a safe place to deposit money

FXCM_Kathy (Jul 16, 2003 5:36:51 PM)

Andre (Jul 16, 2003 5:37:09 PM)
How about IRAs?

Galt007 (Jul 16, 2003 5:37:14 PM)
Can these accounts/trades be set up in a retirement acct? like an IRA or similiar tax deferred acct?

FXCM_Kathy (Jul 16, 2003 5:37:24 PM)
yes

FXCM_Kathy (Jul 16, 2003 5:37:38 PM)
however,

FXCM_Kathy (Jul 16, 2003 5:37:48 PM)
You cannot open an IRA account directly with FXCM since we are not a custodial firm

FXCM_Kathy (Jul 16, 2003 5:37:58 PM)
if you have an IRA with a custodian company, they may open an account in the name of the custodian.

FXCM_Kathy (Jul 16, 2003 5:38:11 PM)
Given the risk that this poses to them, very few of the larger institutions are willing to do so.

Andre (Jul 16, 2003 5:38:25 PM)
Catch 22, there.

FXCM_Kathy (Jul 16, 2003 5:38:26 PM)
However, there are number that we know

Andre (Jul 16, 2003 5:38:32 PM)
Any names off hand that you can share?

FXCM_Kathy (Jul 16, 2003 5:38:35 PM)
allow FX trading

FXCM_Kathy (Jul 16, 2003 5:38:38 PM)
off hand

FXCM_Kathy (Jul 16, 2003 5:39:15 PM)
http://www.entrustbank.com

FXCM_Kathy (Jul 16, 2003 5:39:46 PM)
is the easiest to work with

Andre (Jul 16, 2003 5:40:16 PM)
Ok, folks... we're going to move back to some general trading questions.

Andre (Jul 16, 2003 5:40:30 PM)
Kathy says she can stay with us longer!

Malcolm2 (Jul 16, 2003 5:40:36 PM)
How may retail customers compare spreads offered by different market makers? Is there anything analogous to NASDAQ level II, Market depth, etc.

FXCM_Kathy (Jul 16, 2003 5:41:20 PM)
unfortunately there is not, what you have to bear in mind with the FX market

FXCM_Kathy (Jul 16, 2003 5:41:42 PM)
is that there is no centralized exchange such as the NASDAQ, NYSE or CME where every trade is posted

FXCM_Kathy (Jul 16, 2003 5:42:04 PM)
hundreds of banks make markets in each currency pair

FXCM_Kathy (Jul 16, 2003 5:42:17 PM)
which is actually very advantageous, because it ensures

FXCM_Kathy (Jul 16, 2003 5:42:24 PM)
that the tightest spreads are always offered

FXCM_Kathy (Jul 16, 2003 5:42:49 PM)
however, the flipside of that is that there is no level II or market depth in the FX market

FXCM_Kathy (Jul 16, 2003 5:43:06 PM)

DEM (Jul 16, 2003 5:43:17 PM)
is there a difference in the behaviour in the different time-zones, e.g. London vs NY? Is the London time more trendy than say Tokio?

FXCM_Kathy (Jul 16, 2003 5:43:24 PM)
yes

FXCM_Kathy (Jul 16, 2003 5:44:11 PM)
generally the Japanese Yen, Australian USD, New Zealand dollar are the most active

FXCM_Kathy (Jul 16, 2003 5:44:15 PM)
during the Asian hours

FXCM_Kathy (Jul 16, 2003 5:44:33 PM)
the UK pound, Euro and Swiss Franc

FXCM_Kathy (Jul 16, 2003 5:44:44 PM)
are the most active when the US market and London market overlap

FXCM_Kathy (Jul 16, 2003 5:44:52 PM)
12:00 AM to approximately 2:00 AM

Guest (Jul 16, 2003 5:45:13 PM)
Why does the eur/Usd move drectly opposite to the USd/Chf??

FXCM_Kathy (Jul 16, 2003 5:45:40 PM)

Guest (Jul 16, 2003 5:45:52 PM)
In terms of beginning - are ther any currency pairs that you consider more "friendly" to the application of TA - and any that you would be wary of due to say, frequent Central Bank intervention?

Bri22 (Jul 16, 2003 5:46:05 PM)
What advice do you have for a college student interested in pursuing a career in FX? Also, what type of FX related entry level positions are there?

FXCM_Kathy (Jul 16, 2003 5:46:52 PM)
A number of FX firms are hiring as the self-trader market has recently grown tremendously

FXCM_Kathy (Jul 16, 2003 5:47:18 PM)
i would recommend

FXCM_Kathy (Jul 16, 2003 5:47:23 PM)
first reading books on FX

FXCM_Kathy (Jul 16, 2003 5:47:35 PM)
Cornelius Luca's books are very good

FXCM_Kathy (Jul 16, 2003 5:47:36 PM)

Andre (Jul 16, 2003 5:48:03 PM)
Kathy, also, in terms of the beginner... are there any currency pairs that you consider more "friendly" to the application of TA? A pair to trade when just starting out? Maybe a time frame, too?

FXCM_Kathy (Jul 16, 2003 5:48:23 PM)
If you are very new

FXCM_Kathy (Jul 16, 2003 5:48:32 PM)
i would focus on the EURUSD

FXCM_Kathy (Jul 16, 2003 5:48:49 PM)
it is the most liquid and offers the most intra-day activity

FXCM_Kathy (Jul 16, 2003 5:49:08 PM)
15minutes for day traders, with 1 hour as a step back view

Andre (Jul 16, 2003 5:49:26 PM)
Great.

FXCM_Kathy (Jul 16, 2003 5:49:28 PM)
1 hour for medium term traders, with daily as the fall back

FXCM_Kathy (Jul 16, 2003 5:49:30 PM)

Malcolm2 (Jul 16, 2003 5:49:44 PM)
Obviously naive question: If there isn't a 'best bid/offer', what data does one use for charting? I presume vendors like Qcharts or esignal offer something--can you comment on where the datafeed comes from and what sort of lag there is?

FXCM_Kathy (Jul 16, 2003 5:50:15 PM)
fxcm offers a number of charts that uses our feed

FXCM_Kathy (Jul 16, 2003 5:50:45 PM)
esignal and trade station also offer our feed

FXCM_Kathy (Jul 16, 2003 5:50:54 PM)

leverage (Jul 16, 2003 5:51:00 PM)
You haven't mentioned Gold US$ as a barometer to measure against FX. I was wondering what strategies one could employ by monitoring it? Does Gold lead and FX lag or vice versa?

FXCM_Kathy (Jul 16, 2003 5:51:09 PM)
and the feeds are all real time

FXCM_Kathy (Jul 16, 2003 5:51:21 PM)
ah, good question

FXCM_Kathy (Jul 16, 2003 5:51:58 PM)
Monitoring gold prices can provide significant insight into trends of the currency market.

FXCM_Kathy (Jul 16, 2003 5:52:22 PM)
Gold tends to have an inverse relationship with the USD.

FXCM_Kathy (Jul 16, 2003 5:52:33 PM)
Usually confidence in gold means a lack of confidence in the stability of the USD.

FXCM_Kathy (Jul 16, 2003 5:52:39 PM)
Over the past 10 years, gold and the trade weighted USD has had an 80% inverse correlation

FXCM_Kathy (Jul 16, 2003 5:52:47 PM)
Continued increases in the price of gold indicate increasing lack of confidence in the USD.

FXCM_Kathy (Jul 16, 2003 5:53:17 PM)
gold and chf move in the same direction

FXCM_Kathy (Jul 16, 2003 5:53:36 PM)
as the franc like gold, are generally seen as safe haven currencies during time of risk and turmoil

FXCM_Kathy (Jul 16, 2003 5:54:03 PM)
aud and gold also move in the same direction because australia is the world's third largest producer of gold

FXCM_Kathy (Jul 16, 2003 5:54:16 PM)
AUD has an 80% positive correlation with gold prices, as gold represents approximately $5 billion in exports for the nation each year. Strong commodity prices also benefit domestic producers. Therefore as gold prices rise, the AUD is expected to rise.

FXCM_Kathy (Jul 16, 2003 5:54:28 PM)

1000feuer (Jul 16, 2003 5:55:07 PM)
why is the nq down after hours?

FXCM_Kathy (Jul 16, 2003 5:55:53 PM)
i apologize i am not sure what nq represents

1000feuer (Jul 16, 2003 5:56:23 PM)
Nasdaq future

FXCM_Kathy (Jul 16, 2003 5:56:48 PM)
well nasdaqs are not our specialty but as far as i know,

FXCM_Kathy (Jul 16, 2003 5:57:02 PM)
trading closes on the main exchange at 4/4:30

FXCM_Kathy (Jul 16, 2003 5:57:12 PM)
so the futures trade on globex

FXCM_Kathy (Jul 16, 2003 5:57:22 PM)
for a few hours, but liquidity is generally low

FXCM_Kathy (Jul 16, 2003 5:57:29 PM)
because the bulk of the market is absent

FXCM_Kathy (Jul 16, 2003 5:57:44 PM)
in FX on the other hand, since it is a 24 hour market

FXCM_Kathy (Jul 16, 2003 5:57:51 PM)
with international participants,

FXCM_Kathy (Jul 16, 2003 5:58:03 PM)
there is activity during any time frame you reside in

FXCM_Kathy (Jul 16, 2003 5:58:34 PM)

Andre (Jul 16, 2003 5:59:00 PM)
Folks, I've a few more questions, and then I thnik it's time to let Kathy go.

Andre (Jul 16, 2003 5:59:11 PM)
We've got a couple of questions on pairs:

FXCM_Kathy (Jul 16, 2003 5:59:15 PM)
sure

imc (Jul 16, 2003 5:59:19 PM)
which pair give the best profit ptential to trade?

Guest (Jul 16, 2003 5:59:26 PM)
which pair is the most volatile?

Andre (Jul 16, 2003 5:59:37 PM)
And which pair is most volatile?

FXCM_Kathy (Jul 16, 2003 5:59:49 PM)
the most liquid pairs, which are eurusd, usdjpy, gbpusd, and usdchf, in that order

FXCM_Kathy (Jul 16, 2003 6:00:04 PM)
the most volatile tends to be usdchf

FXCM_Kathy (Jul 16, 2003 6:00:15 PM)
but the liquidity offered in the first three

FXCM_Kathy (Jul 16, 2003 6:00:38 PM)
allows for wide trading ranges

FXCM_Kathy (Jul 16, 2003 6:00:48 PM)
definitely focus on these if you are new

FXCM_Kathy (Jul 16, 2003 6:00:50 PM)

Andre (Jul 16, 2003 6:01:00 PM)
And finally...

Guest (Jul 16, 2003 6:01:14 PM)
Where you think the euro/gbp will be in the next few weeks? I would like the euro to rise!

Andre (Jul 16, 2003 6:01:39 PM)
Where do you think the eruo/gbp will b ein the next few weeks?

FXCM_Kathy (Jul 16, 2003 6:02:30 PM)
EURGBP is having difficulty breaking above the upper bollinger bands

FXCM_Kathy (Jul 16, 2003 6:02:51 PM)
and the 50-day SMA

FXCM_Kathy (Jul 16, 2003 6:03:13 PM)
however, fundamentally we are generally more positive EURGBP

FXCM_Kathy (Jul 16, 2003 6:03:26 PM)
expecting it to test 0.7100 in the near future

FXCM_Kathy (Jul 16, 2003 6:03:29 PM)

Andre (Jul 16, 2003 6:03:39 PM)
Folks, there comes a time when we simply have to let our guests go. And that time has come. Kathy... thanks so much for joining us today!

FXCM_Kathy (Jul 16, 2003 6:03:46 PM)
my pleasure

FXCM_Kathy (Jul 16, 2003 6:03:52 PM)
if you have more questions

FXCM_Kathy (Jul 16, 2003 6:04:09 PM)
or would like simulation accounts, do not hesitate to send them to klien@fxcm.com

imc (Jul 16, 2003 6:04:19 PM)
thx andre

FXCM_Kathy (Jul 16, 2003 6:04:26 PM)
for more information on fxcm, please visit http://www.fxcm.com

FXCM_Kathy (Jul 16, 2003 6:04:34 PM)
for research and analysis on the fx markets

FXCM_Kathy (Jul 16, 2003 6:04:45 PM)
http://www.dailyfx.com

McCloud (Jul 16, 2003 6:05:09 PM)
Thanks Kathy for your great commentary..

FXCM_Kathy (Jul 16, 2003 6:05:23 PM)
my pleasure

Baron (Jul 16, 2003 6:05:44 PM)
This was great. Thanks to Kathy and FXCM for providing us with this useful info!

Andre (Jul 16, 2003 6:05:49 PM)
And while this chat session may have ended, the discussion doesn't have to. For additional questions and comments, please see the following thread on our message board: http://www.elitetrader.com/vb/showthread.php?s=&threadid=20029