And who determines currency values?

The answer to the second part is easy. Currency value is determine by the purchasers of the currency. These are primarily travelers, governments and Forex traders. FOREX stands for Foreign Exchange. There are many factors that currency traders, governments and businesses take into consideration in determining the Fair Market Value of a currency.

Fair Market Value is the price at which a willing buyer and a willing seller come together. The buyer must factor in many elements and considerations to try to accurately assess a currency's value at any given time. There are approximately 180 different currencies in the world now. Let's consider some of the factors that are used to determine a currency's value

Factors Affecting Currency Value:

1. Political Conditions in the Country - This includes the stability of the government, the amount of corruption, bribery and the degree of law and order. Also includes a country's relationships with other countries and especially their relationship to US, UK, China and Russia. The form of government in the country is also a factor used to assess the value of a currency. Consider the widely varying forms of government in Saudi Arabia, China, UK, Venezuela and Thailand, just to name a few.

2. Economic Situation - This includes factors such as jobs, unemployment, work ethic, infrastructure, inflation and direction of the economy. Is it older or newer in orientation; computers and high tech, or more farming and manufacturing.

3. Perception from Outside - The perceptions and attitudes of other countries toward a country are as important as the reality of the country's actual situation. News, media, movies, newspapers, rumors and spin can create perceptions. How much is known about a country? The less that is known, generally, the lower the value of a currency.

4. Demographics - A young population may mean better prospects for the future, people who are more open to change and development and a growing size of the workforce. The overall population of a country is a factor. How much weight does this country have on the world scene.

5. National Leaders - The openness, trustworthiness and likeability of visible leaders is a factor. This includes political leaders, sports figures, business owners and celebrities. Here are some national figures who affect their countries, either for better or for worse. Kim Jung Il, David Beckham, Nicole Kidman, Madonna, Osama bin Laden, Barack Obama and Vladimir Putin. These help form the world's perception of a country.

6. Isolation versus Openness - Continuum China is becoming more open, more transparent. This helps. Cuba is very closed and isolated. Venezuela is becoming more isolated by some of its recent actions. China's markets are becoming more open. Cuba, Kyrgyzstan, Russia and Japan, all have differing levels of openness with the outside world, which affects the value of their currency.

7. Natural Resources - The kind of and amount of exploitation of a country's natural resources certainly helps create a perception of value, or lack thereof, of a country's currency. Mining of minerals, forests, oil, fish and other resources are considered. Also the level of technology to development these resources.

8. Weather Factors such as drought, tsunamis, earthquake and floods are taken into consideration. How frequent are they and how is the country's response to them. These also affect desirability, safety and perception of a country. Is it a tourist destination?

9. War and Conflicts - With which other country is a country at war, and who is it’s allies? Their military strength and technology, their willingness to go to war and for what, are important factors in assessing a country's strength, stability and the value of its currency.

10 . Education - This includes languages spoken, level of computer know-how, Internet connectedness, culture and religion. Scientists, entrepreneurs, authors and inventors are all affected by the type and quality of education in a country.

How is the currency value determined (e.g. gold reserves in the country etc.,)?

Ok here is the basic idea of how currency value is determined. After the gold standard and the US dollar standard fell, the world entered an age of the floating currency exchange. This means that everyday a nations currency might be more valuable or less valuable than the day before. What determines the fluxuations? Buyers. Countries all over the world purchase other countries currencies, which determines the value. The American Dollar is strong because many many countries buy a whole lot of US Dollars. If investors and buyers decide to stop buying US Dollars, then the value of the US dollar would drop significantly. Now about your Japan question, some economists argue that a country will intentionally keep the exchange rate low so that buyers on the world market will not purchase the Yen for example. You would think that a weak national currency would indicate that this country is poor. Not always the case (China is a good exampe), the argument is that nations like Japan and China want their currency to be low in value so that other nations (like the US) will buy more Japanese and Chinese products imported. Think about it, if the US dollar is twice as strong as the Yen, than it can buy twice as many Japanse goods. If a computer costs 1,000 dollars in the US, but 1000 Yen in Japan, than you could buy two Japanese computers. make sense?

Source(s):

No formal sources used in this answer.I am a student of world economics and political science at the university of missouri-columbia

Forex: Fibonacci & Price Action

Fibonacci is used many ways, but how many of you ever use it to determine the balance point between long and short? Fibonacci can be used to help identify reversal points in the market as they are unfolding and help give us one more tools in our inventory; to give you that ever so hard to keep edge in trading. Reversal signals are key in keeping pace with market sentiment. There are ways that we can use the Fibonacci tool as an aid in seeing these reversal points and to be able to look past its levels as merely support and resistance points. Used properly the Fibonacci tool can give you that looking glass that measures overall market sentiment. A simple observation is all that’s needed with the application of the Fibonacci tool to measure the balance between a long and short market sentiment. One day to the next can give us the direction that the market is most likely to take the following day along with a few basic rules of using the Fibonacci tool

Multi-Timeframe Fibonacci Forex Trading Setup

Many times I’ve seen a trader with one Fibonacci retracement tool on a small timeframe and wondering why price is not reaching a level or seemingly turning at a empty space on the charts. The reasoning for this is that Fib levels are traded from many different timeframes all at the same time and its best to know where all the higher timeframe levels are especially when trading from a small timeframe of 1 hour.

The object is to start from a higher timeframe here so that the trader can be aware of where the higher timeframe support and resistance levels are. In this example Ill set up a chart and make an analysis of each timeframe before stepping down to the next lower one. What this can do is help you to gain a perspective of price movement so that you can be prepared once price begins to move and you will not be at a loss as to why your trades do not work out.

In this example I'll use the EURUSD which is currently the most commonly traded pair and is easiest to trade. We want to start with the weekly and determine if there is trending in the markets and what direction is of that trend. First lets separate the chart into recent trending movements and ranging periods. Figure 1 depicts the ranging periods

Fap Turbo

Fap Turbo took the industry by storm when it was released on 25 November 2008. The creators of Fap Turbo promised to deliver the most advanced Forex trading robot there has ever been on the market and so far they have not dissapointed the thousands of traders that were eagerly waiting for the launch. The reason why Fap Turbo is so popular is the fact that it offers a system that is more profitable, but less risky than the famous Forex Autopilot..exactly what the market has been waiting for.
I purchased Fap Turbo on the day that it was launched and 3 days after that it had already earned me more than 500 pips in profit on my demo account. Fap Turbo is a fully automated trading system that requires virtually no human intervention or in depth understanding of the Forex markets. If you are interested in Forex trading, but have limited time and don’t want to spend more than a few minutes every day in front of the charts, then Fap Turbo is the system for you.

us dollar, japenes yen weaken

The US dollar and Japanese yen dropped on Wednesday, as enhanced risk appetite profited riskier assets such as the commodity dollars and stocks, with the DJIA and S&P 500 both finished the day up more than two %. Much of this was attributed to news that China is anticipated to reveal a 2nd stimulus package throughout Friday’s opening of the National People’s Congress, indicating that Chinese demand can hold up as much as necessary to maintain other international economies. In the meantime, the forex markets indicated little reaction to news that conditions in the US non-manufacturing division - which forms around 70 % of entire economic activity in the country and includes retail, services, and finance - deteriorated in February as the Institute for Supply Management (ISM) index dropped to 41.6 from 42.9.

Forex Market Development

The history of the Forex market as an international capital speculation market is much shorter compared the stock, the gold, the stock, the interest market, but it is developing in an astonishing speed. Today, the foreign exchange market daily trading volume has amounted to 150 billion US dollars, it’s scale has gone far beyond the stock, the stock and other finance commodity markets, it has became the world's most biggest sole finance market and the also the speculation market. Since the birth of the foreign exchange market, the fluctuation of the exchange rate of the Forex market is becoming bigger. In September 1985, 1 US dollar exchanged 220 Japanese Yen, but in May 1986, 1 US dollar only could exchange 160 Japanese Yen, in 8 months, the Japanese Yen has revalued 27%. In recent years, the foreign exchange market wave amplitude has been bigger, on September 8, 1992, 1 pound exchanged 2.0100 US dollars, on November 10, 1 pound exchanged 1.5080 US dollars, in the short two months, the pound exchanged US dollar exchange rate to fall more than 5,000, depreciated 25%. Not only that, presently, everyday the fluctuation of the exchange rate of the Forex market enlarges unceasingly, within a day the rise and drop 2% to 3% is commonly seen. On September 16, 1992, the pound exchanged US dollar from 1.8755 to fall to 1.7850, the pound on first lowers 5%.
Due to the large fluctuation of the Forex market, it has created more opportunities for the investor, attracted more and more investors to join this ranks

Forex market

1st, It consists market but no trading field The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.

European market inflation

One of the reasons why the foreign exchange developed rapidly was the rapid development of the Euro dollar market. In a Euro dollar market, US dollar is stored beyond the border of America banks. Similarly, the European market is refers to property depositing outside the currency rightful owner country market. A Euro dollar market was formed at first in the 50's, at that time Russia deposited its petroleum income beyond the US border, avoid being freeze by the US government. This has formed a large offshore US dollar national treasury which is beyond the control of the US government. The American government has formulated a law to prohibited US dollar from lending money for the foreigner. Because the degree of freedom of the Euro dollar market is bigger and the rate of return is bigger, therefore it has large attraction. Starting from the 80's, the American company starts to borrow loan from the offshore market, they discovered that the European market is a wealth center which consists of large amount of floating capital which could provide short-term loan.
London once was (until now still is) one of the main offshore market. In the 80's, the Bank of England in order to maintain its global finance industry center dominant position, using US dollar as England pound substitution to make loan, thus to become a Euro dollar market center. London's convenient geographical position (is situated between Asian and Americas market) also helps to maintain the European market as the dominant position.

What is the Difference Between Forex and Stock?

The Forex market has a lot of advantages compare to stock market:
A Forex trader could make profit through the market no matter if it is bearish and bullish which is different from the capital market, Forex has no strict regulation in speculation, no matter whether it is a long-term or a short-term transaction there is still a hidden profit, moreover, Forex market is a double-transaction market which means Forex traders could make profit through both upward and downward trend.
Forex traders could obtain a much larger transaction compared to the stock market, through the Forex trading, Forex traders could obtain 100 times larger transaction compared to the stock market. According to the present US situation, if a Forex trader invests $1,000 in the stock market, the trader may obtain $2,000 of stock domination property with a proportion of 2:1, but through Forex trading, a Forex trader can do transaction with a proportion up to 100:1.
Forex trader may make profit from the ordinary news, like the interest rate change, Forex market is closely related to various countries' politic, economy and culture, Forex traders could also obtain profit from other kinds of news, for example interest rate level change, will influence the interest of the Forex deposit.
Forex traders could do 24 hours trading. The stock market can only be traded during daytime at a specific time, generally from 9:30a.m. to 4:00p.m.. If you too have your own full time job, then you will face the dilemma - either to give up your full time job or forgo the trading opportunity. But Forex market can be traded 5 days a week and 24 hours a day, Forex traders can trade during their free time which is normally at night after working hour.
If a trader analyze based on technical analysis, Forex trading would be much more suitable for such traders because the Forex market has a very large trading volume. Currently the Forex market has daily trading volume of 190 billion Dollar, such giant market will completely digest a fore trader's transaction cash, under such situation the accuracy of the technical analysis would be much higher then any financial market, the chances of using technical analysis to make profit would be much more higher.
In the stock market there are hundred and thousand kinds of stocks, then choosing stock will be a very difficult matter. But in the Forex market, the currency combination is extremely limited, this may enable Forex traders to concentrate on these currencies combination, and could follow the trend quickly.

Fundamental analysis in Forex trading

Fundamental analysis, in short, is referring to the dynamic studies of distinct plans, erratic behaviors and unforeseen events that influence the economic of certain entity.
The focus of fundamental analysis mainly lies on the political, social, and economic force that drives the supply/demand trends the currency. Government policies, bank policies, natural disasters, social stability, overall economic trends are some of the major factors that draw a fundamentalist’s attention.
Fundamental analysis comes very handy in making mid-long term invesment decisions. However as the analysis method is mainly focus on the major thing, it will not be a good tool for Forex day traders.
It is easy to understand that fundamental skills are useful in forecatsing currency overall trends but in term of detailing job, seems to be more appropriate

Simple Moving Average (SMA)

Simple Moving Average (SMA) is one of the easiest method in Technical Analysis. SMA indicates the average price (closing.opening) of a given time period, where each of the chosen periods carries the same weight for the average.
The maths behind SMA is simple. For example you are developing SMA chart for USD/JPY closing price in 5-day time frame. The first 5 days USD/JPY closing prices are 125.0, 124.0, 126.0, 123.0, 127.0 -- thus the first dots of your SMA graph will be 125.0 (average of the first 5 days USD/JPY closing price). Assume the USD/JPY closing price is 126.0 for day sixth, your second SMA point will be (124.0 + 126.0 + 123.0 + 127.0 + 126.0)/5= 125.2. The calculation goes on for the following dots and SMA chart is defined by joining these SMA dots.
SMA graph "moves" because for each calculation, we use the 'latest number of time periods' data and drop the oldest data.

Trade Forex anywhere from the world virtually

A computer with Internet connection plus an active Forex account are sufficient for you to execute a trade in Forex market.
Professional Forex traders have the privilege to travel around the world but yet still connected to the market anytime, anywhere. The freedom of this is something you could not get else where by being an employee of a cooperation

Trade Forex 24 hours a day

Forex market never sleeps. In Forex trading, you do not need to wait the market to open, you can always response to world latest movement and news immediately.

Every Sunday 5.00pm in New York, Forex market starts its week from Sydney, followed by Tokyo, Singapore, Hong Kong, London, and New York. In Forex tradng, you can always response to the market trend a lot faster than in any other trading market.

Also, with the flexibility of Forex market trading time, you can work on your trade in Forex during your free time. This means you can start small and work as part time trader before going full time on FX trading.

Equal Prospective in Rising or Falling Market Trend

There is no structural bias to the market and there are no restrictions on short selling in FX market. Trading in Forex gives you an equal prospective in rising and falling market.
As trades are always done in pair of currency pairs, Forex traders can always find chance to make money in anytime, regardless on the fall or rise period of one single country currency.