Forex News | Currency News by Forexlive

Bids are another term for buy orders. Offers are sell orders.

You hit a bid if you are trading on the left-hand side of your dealer’s price quote.

You “lift” or “pay” offers on the right-hand side of the quote.

Also if we say we hear “left-hand side” interest at a fixing, that means customers are looking to hit bids, or sell. Right-hand side, means customers are looking to buy from the market-maker…

A. The further the spot price gets from the strike price (in this case 1.3700), the less influence the options will have on the market. Should we move higher on Monday, the option will come back into focus and start exerting a magnetic force on prices. If we stay down here around 1.3600, the expiry will have zero market impact…

Okay, just one more…

A. Pretty much never. Strategists are paid to make calls that will help clients and build prestige for the bank…No one purposely makes a bogus call to take the other side of the trade. Sometimes, you just get it wrong. (I know, hard to believe given our perfect track record here at FXL )

There have been allegations on the past that certain banks would front run their recommendations and then offload positions to the customers…Given today’s corporate climate, I doubt there is much of that going on any more.

A. If we hear directly from someone who has dealt with a central bank, we report it as fact. If we get it second hand (banks gossip a lot, especially the handful of very big banks who provide liquidity to the rest of the market), we report it as rumor or “talk”. Anyone who has spent any period of time on the site can attest that the information is pretty solid…

Central banks have all different motives. Some are strictly shuffling reserves. Some are looking for “alpha”. Some are like most of us. They book profits too quickly and hang on to losing trades too long. Those losers end up in the reserve account…It’s good to be the central bank!

I assume the question refers to be being a trader for a bank or fund, as it asks about MBAs, CFAs, etc.

As Gerry will tell you, in the early days of foreign exchange in London and New York, traders were mostly street-smart kids. Smart, hungry and poor (with a desire to be rich)  is how Ace Greenberg used to describe his idea recruit.

These days everyone is an MBA, PhD or some-such, with a degree in electrical engineering and the ability to write algorithms in their sleep.

Forgetting academic qualifications, any one who is patient, calculating and willing to learn from mistakes can be a successful trader. Markets have a way of following patterns; if you take the time to watch markets up close  for a long period of time, your odds of success will increase dramatically.

“What would you say about the FX market being too big for manipulation? I’ve heard this so many times, but the recent price action of EURUSD just screams the opposite. The big banks RULE the markets and they do whatever they want. How can we small players survive in this market?”

A. I’ll put it this way. The forex market can be influenced by a big player or two in the near-term but not manipulated for very long.

For example, you might be tempted to say that a certain Asian central bank manipulates EUR/USD all the time… I would suggest they sometimes get it right but quite often get it wrong. When they get it right, traders on the other side of the trade cry “manipulation”.

When they get it wrong (like in November when they bought EUR/USD from 1.40 on down below 1.29), no one says a peep…

More than manipulation, it is simply supply and demand at a particular point in time. Big funds, corporates, central banks can all move markets from time to time but there are also instances when large flows come into the market and the market does not move as you would expect. Those are the inflections points.

So next time you hear “tons of central bank bids around x.xx and the market drops right through that level, you’ve learned a valuable lesson: That the sellers have overwhelmed the buyers…

A: I usually refer to barriers (exotic options) generically because the incentives for the players are similar, but perhaps reversed.

Many of the exotics we hear about are part of a double-no-touch (DNT) structure which pays the owner a a multiple of his premium if prices stay within the proscribed parameters during the life of the option.

For arguments sake, let’s say there is a 1.2750/1.3750 DNT, the owner of the option wants to keep prices within that range while and may sell EUR/USD to protect 1.3750. The bank that sold the option will want to push prices out of the range to avoid having to pay-out on the options structure.

In the case of a knock-in, the incentives are reversed. The owner of the option will try and push prices through the knock-in while the seller will try and prevent prices from exceeding the strike.

So, in general, unless we know all the parameters of the options structure, we just report that there is a barrier at a particular strike because one part to the trade will want it higher and the other will want it lower…as observers, the details don’t make much difference.

• <
• 1
• 2
• 3