Tue Aug 12, 9:00pm (GMT +7:00) : USD : Low Impact Expected : IBD/TIPP Economic Optimism

Source Investor's Business Daily (latest release)

Measures Level of a diffusion index based on surveyed consumers;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, around the second week of the current month;

Next Release Sep 9, 2008

FF Notes Above 50.0 indicates optimism, below indicates pessimism;

Derived Via Survey of about 900 consumers which asks respondents to rate the relative level if economic conditions including six-month economic outlook, personal financial outlook, and confidence in federal economic policies;

Also Called IBD/TIPP Consumer Confidence;

Acronyms Investor's Business Daily (IBD), TechnoMetrica Institute of Policy and Politics (TIPP);

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Tue Aug 12, 3:30pm (GMT +7:00) : GBP : High Impact Expected : CPI y/y

Source National Statistics (latest release)

Measures Change in the price of goods and services purchased by consumers;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, about 15 days after the month ends;

Next Release Sep 16, 2008

FF Notes This is considered the UK's most important inflation data because it's used as the central bank's inflation target;

Why Traders
Care Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate;

Derived Via The average price of various goods and services are sampled and then compared to the previous sampling;

Acronyms Consumer Price Index (CPI);

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Tue Aug 12, 6:50am (GMT +7:00) : JPY : Low Impact Expected : Revised Industrial Production m/m

Source METI (latest release)

Measures Change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, about 45 days after the month ends;

Next Release Sep 12, 2008

FF Notes The 'Previous' listed is the 'Actual' from the Preliminary release and therefore the 'History' data will appear unconnected. There are two versions of this indicator released about 15 days apart - Preliminary and Revised. The Preliminary release is the earliest and thus tends to have the most impact;

Why Traders
Care It's a leading indicator of economic health - production reacts quickly to ups and downs in the business cycle, and is correlated with consumer conditions such as employment levels and earnings;

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Tue Aug 12, 6:50am (GMT +7:00) : JPY : Low Impact Expected : CGPI y/y

Source Bank of Japan (latest release)
Measures Change in the price of goods sold by corporations;
Usual Effect Actual > Forecast = Good for currency;
Frequency Released monthly, about 11 days after the month ends;
Next Release Sep 10, 2008
Why Traders
Care It's a leading indicator of consumer inflation - when corporations charge more for goods the higher costs are usually passed on to the consumer;
Also Called Domestic CGPI;
Acronyms Corporate Goods Price Index (CGPI);

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Mon Aug 11, 7:30pm (GMT +7:00) : CAD : Low Impact Expected : New Housing Price Index m/m

The New Housing Price Index (NHPI) measures monthly changes in the selling prices of new residential houses. The NHPI is used as the inflation measure of new home construction.

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Mon Aug 11, 7:15pm (GMT +7:00) : CAD : High Impact Expected : Housing Starts

Source CMHC (latest release)

Measures Annualized number of new residential buildings that began construction during the previous month;

Usual Effect Actual > Forecast = Good for currency;

Frequency Released monthly, about 9 days after the month ends;

Next Release Sep 9, 2008

FF Notes While this is monthly data, it's reported in an annualized format (monthly figure x12). Market impact tends to vary and is occasionally quite hefty;

Why Traders
Care It's a leading indicator of economic health because building construction produces a wide-reaching ripple effect. For example, jobs are created for the construction workers, subcontractors and inspectors are hired, and various construction services are purchased by the builder; Acronyms Canada Mortgage and Housing Corporation (CMHC);

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The risks of forex trading (MODUL 6-11)

We hope you now have a better understanding of the off-exchange foreign currency market. The NFA brochure, “Trading in the Retail Off-Exchange Foreign Currency Market: What Investors Need to Know,” lists contact information for other regulatory bodies, as well as authorities you can turn to for additional information. This brochure is available on NFA's website.

Remember, however, that you should consult with your financial advisor and consider your financial situation and objectives before making any trading decisions.

If you have any questions about the material in this program, contact NFA’s Information Center toll-free at 800-621-3570.

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The risks of forex trading (MODUL 6-10)

If you suspect any wrongdoing or improper business conduct in your forex account, you may contact or file a complaint with NFA by telephone at 800-621-3750 or online at www.nfa.futures.org.

You may also file a complaint with the Commodity Futures Trading Commission, a federal regulatory organization. The CFTC has prepared a questionnaire to assist the public in reporting suspicious activities or transactions. The questionnaire form is available on the CFTC’s Web site at www.cftc.gov. You can also transmit the form to the CFTC electronically or by mail to 1155 21st Street, N.W., Washington, D.C. 20581.

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The risks of forex trading (MODUL 6-9)

A good place to start checking the background of a forex firm or individual is NFA’s Background Affiliation Status Information Center, or BASIC. It’s available through NFA’s Web site and contains the registration and disciplinary records for individuals and companies involved in the futures industry. Although some forex companies and brokers are not required to be registered with NFA, BASIC is a good place to start to determine if a broker or company has any past industry experience.

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The risks of forex trading (MODUL 6-8)

Check the background of everyone you will be dealing with. If you cannot satisfy yourself that the persons are completely legitimate and above-board, the wisest course of action is to avoid trading through those companies.

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The risks of forex trading (MODUL 6-7)

Stay away from opportunities that sound too good to be true. In general, get-rich-quick schemes tend to be frauds. For example, avoid any forex company that predicts or guarantees large profits. If a company says that they will double or triple your money in one month or will guarantee a monthly return, walk away.

Stay away from forex companies that promise little or no financial risk. There is no doubt that trading forex is risky, so if someone is telling you the opposite, they are not being truthful. Beware of forex companies that make the following types of statements: “Whichever way the market moves, you can’t lose” or “While there is risk, it is substantially outweighed by the reward.”

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The risks of forex trading (MODUL 6-6)

As with any investment, you should protect yourself against fraud. Over the last few years, there has been a sharp rise in foreign currency scams, and you should do as much due diligence as you can before trading forex.

Here are some tips to help you avoid becoming a victim of a forex scam.

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The risks of forex trading (MODUL 6-5)

If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.

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The risks of forex trading (MODUL 6-4)

Unlike regulated futures exchanges, in the retail off-exchange forex market there is no central marketplace. The forex dealer determines the execution price, so you are relying on the dealer to give you a fair price.

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The risks of forex trading (MODUL 6-3)

Retail off-exchange forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade forex contracts are not insured and may not receive a priority in bankruptcy. Even customer funds deposited by a dealer in an FDIC-insured bank account may not be protected if the dealer goes bankrupt. Be wary of firms that say “Your investment is protected” or “Your funds are segregated.”

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The risks of forex trading (MODUL 6-2)

The market could move against you. Fluctuations in the foreign exchange rate between the time you place a trade and the time you close it out will affect the price of your forex contract and the potential profit and losses relating to it.

You could lose your entire investment. As mentioned earlier, leverage allows you to hold a large forex position with a relatively small amount of money. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.

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The risks of forex trading (MODUL 6-1)

The risks of forex trading

We’ve mentioned throughout the program that forex trading carries a high level of risk. We’d like to take a minute to highlight some of those risks.

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How leverage works (MODUL 5-15)

The correct answer is C.

In the case of a $100,000 position with 100:1 leverage, the customer would have been required to post a security deposit equal to 1% of the position value. In this case, the security deposit would have been $1,000 ($100,000 X .01). A 1,000 US dollar decline in the value of the position would have completely wiped out the security deposit.

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How leverage works (MODUL 5-14)

In an account with a $100,000 position in Japanese yen with 100:1 leverage, what would be the impact of a $1,000 decline in the value of the position?

A. 10% loss

B. 50% loss

C. 100% loss

D. 25% loss

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How leverage works (MODUL 5-13)

The correct answer is B – 100:1.

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How leverage works (MODUL 5-12)

A 1% security deposit is what type of leverage?

A. 50:1

B. 100:1

C. 25:1

D. 10:1

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How leverage works (MODUL 5-11)

The correct answer is C.

The formula for calculating the security deposit required is the current price of the base currency times the transaction size times the security deposit percentage. In this case, the price of the base currency is $.7707. The transaction size is 1,250,000 and the security deposit percentage is 1%.

7707 X 1,250,000 X .01 = 9,634 US dollars

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How leverage works (MODUL 5-10)

Quiz #3

If a forex dealer charges a 1% security deposit, how much will a speculator be required to post as a security deposit to trade an Australian dollar/US dollar spread if the speculator bought 1,250,000 Australian dollars at .7707 US dollars?

A. $7,707

B. $1,250

C. $9,634

D. $3,760

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How leverage works (MODUL 5-9)

A number of firms are presently offering options on off-exchange foreign currency contracts. Buying and selling forex options present additional risks, many of which are similar to those inherent in buying options on exchange-traded futures contracts. NFA publishes a brochure called “Buying Options on Futures Contracts: A Guide to Their Uses and Risks” which discusses the mechanics and risks of options trading. The brochure can be downloaded from NFA’s Web site.

Most exchange-traded options can be exercised at any time before they expire. These are called American-style options. Many forex options are European-style options, which can be exercised only on or near the expiration date. In other words, you can’t take advantage of a favorable price move that occurs before the expiration date unless you can offset your position. You should understand which type of option you are purchasing.

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