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Chapter 5, Part II. Intermediate Checkpoint. - Q&A

Discussion in 'Complete Trading Education- Forex Military School' started by mrVynes, Mar 2, 2012.

  1. mrVynes

    mrVynes Private

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    Helo,

    In Task #2, point 3: How does buying loads of USD for JPY by BoJ decrease the value of JPY relative to USD (increase USD/JPY rate)?

    Thanks
     
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  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi mrVynes,
    Since BoJ will start to sell large amount of JPY - it becomes cheaper, while buying in the same amount USD - it becomes more expensive. Hence, USD/JPY will move south.
     
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  3. mrVynes

    mrVynes Private

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    Oh, as in accordance with supply/demand? I'm just not yet forming a clear picture on how these factors apply to currency.
     
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Exactly. BoJ simulteniously increases demand for USD and supply for JPY.
     
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  5. mrVynes

    mrVynes Private

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    Thank you!
     
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  6. Anthonia Taiwo

    Anthonia Taiwo Private

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    I still find it difficult to understand swap. When creating an account if we select the swap free option are we going to be charged a negative commission when a trade is carried overnight?
     
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  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Anthonia,
    more about swap you may read in chapter dedicated to Carry trade (If I do not mess something, but it is definitely some in-depth explanation exists somewhere ahead).
    Usually yes, if broker provides swap-free accounts, he compensates it in two ways - net positive and negative swap of customers, and get some fees of wider spread. But currently this is more rare than previously. Usually this applied on micro accounts
     
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  8. Matt_f

    Matt_f Recruit

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    Swap EURO/USD

    Thanks. I have problem with the example. By the text, commander says: "If you Buy (i.e. Lend to counterparty) currency with higher interest rate and Sell (i.e. borrow from counterparty) currency with lower interest rate, then the interest rate differential will be positive and you will get positive swap."

    In the table, interest rate of Euro Zone is 1 and for US is .25 %. So the swap should be positive for the example (bought Euro and sold USD later). Am I missing any point? Thanks.
     
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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Matt,
    you understood correctly, but not always brokers calculate swap based on interest rates difference. Read the end part of this chapter. This table was taken from Alpari UK demo account. Now I've checked some trades and it shows always negative swap as for long as for short:

    for example buy 0.1 lot eur/usd 1 day swap was "-0.21" and
    and sell 0.05 lot eur/usd 1 day swap was -0.06.
     
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  10. Hamza Samiullah

    Hamza Samiullah Corporal

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    Good Effort..
     

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