All posts by Gordon Gekko

Gordon Gekko is claimed to be the perfect mix of a corporate raider, a junk bond king and a living money making machine.
New Life

One Simple Truth: Live your Life

Let’s be honest and admit that the modern corporate script involves selling your own wishes and dreams for paychecks. I know that a lot of us have played along with it because of necessity, but this is not a way of life to cling to, it’s a way of life to escape.

You are meant to live your life. Yes, I know it can seem hard, but it’s the only life that’s really worth living. You have to give meaning to your life, and you’ll never get it by following the televised script and hoping for pats on the back from the people who are playing along with you.

This life you have is precious. Human beings are engines of creation; we are able to imagine and to turn our imaginations into reality. And we are capable of supercharging our creative abilities by sharing our lives and loves with other people. We are astonishingly capable creatures.

Don’t waste all your life’s abilities in a corporate cubicle. You’ve already seen how that goes: Work excessive hours, go home tired, watch TV, sleep, and start over. Your kids end up in mini corporate worlds called “schools,” where they are taught to sit, be quiet, obey, and turn off their internal desires and loves. If you play that game you’ll miss most of your life in the process, as well as most of your children’s lives.

Once you get some corporate inertia going, it is all too easy to get sucked into it permanently. Don’t let that happen to you.

 

A 360 turn

Wake up and see the world as it is. Turn off the talking heads on TV and get to know the real world. Stop spending all your brain cycles ( if you have any left) on celebrities, sports heroes and gossip hounds – get to know your neighbor and the old woman who lives around the corner, strike up a friendship with someone on the other side of the world. Travel. Spend your time with real people; get to know them, and reveal yourself to them. It only seems weird because the people who programmed you didn’t want you to think freely.

Start doing what you love. Don’t wait for someone else, do it yourself. Start helping your friends and neighbors, spend serious time with your children – not at a game or a party, but just you and them, talking. Find out what they love. Let them know you.

Start living, not merely existing. DO the things you feel an urge to do. And don’t fall into the usual trap of “what if I make a mistake?” That’s simply fear-based conditioning. Resist it. Do what you love, and in so doing, you will turn yourself on.

Are you going to go through your whole life and never follow your own wishes, always sacrificing them to the tyranny of other peoples’ opinions? Please don’t do that to yourself – you’ll suffer greatly for it when you’re old.

Screw all the expectations 

Drop Out

Stop wasting your time and energy on governments and arguments and politics. Drop out of their mindset and start reclaiming all those wasted hours. Lying politicians are simply not worth your devotion. Drop the endless party fights and stop arguing about them. Politics is ugly, and politics on the brain makes us ugly.

Stop paying attention to the hundreds of ads you see every day – they are scientifically designed to grab your thoughts. Turn away. Stop buying trendy things, and definitely stop buying things for the purpose of impressing other people.

Stop trying to fit in, and stop living according to other people’s expectations. Let them call you weird. Let them talk about you. Stop caring about it. If they were real friends, they wouldn’t treat you like that. So if they are willing to call you names, you’re better off dropping them now.

Don’t fight the system – that just keeps all of your energy and attention focused on them. Forsake the system and start creating a better life for yourself, the people you love and the people you respect. Stop giving all your life’s energy to a barbaric system of force and manipulation.

Let the system go; all of it. Move on and let it rot where it sits.

Let go of the plan addiction. Life is organic, not mechanical.

First of all, you need to identify what you want to create with the precious life you’ve been given. Not what you want to stop, but what you want to make.

If you’ve never been told to do this before it may seem hard, but you can do it if you try.

Don’t sit and wait. Stop talking and start doing.

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The US versus the UK betting market

The United States has a very large gambling market. Las Vegas in Nevada is one of the most famous gambling locations in the world and almost every state in the U.S. has its own casino. However, when it comes to sports betting, the situation isn’t so bright. Nevada, Oregon, Montana, and Delaware are the only four states in which sport betting is allowed and that is only due to special laws. New Jersey famously tried to join the sports betting states and failed after athletic leagues went to court to overrule their state legislation. However, the battle is not over. Despite being considered a Western, liberal country, the U.S., officially, is on the conservative side when it comes to gambling.

However, this says nothing about the demand for sports betting in the U.S. Many Americans simply turn to the internet for their sports betting needs. Online betting in the U.S. started in 1996, and became a huge market. There are no official numbers about the size of the market but modest estimate i around 12 billion dollars, while pretentious estimates are as high as 400 billion dollars. This stands in stark contrast to the second-largest gambling market after the U.S. – the U.K. In the United Kingdom sports betting have been legal since the 1960s. There are around 9000 betting shops in the U.K. where people can place bets with a licensed bookmaker. Yet the U.K. gambling market is estimated at around 6 billion pounds, a modest number in comparison to the U.S. The differences in market size can stem from different causes such as the much larger population of the U.S. the fact that British are much more careful spenders then American, and that they spend less time on the internet.

Legally, online sports betting in the U.S. is a gray area when it comes to individual people placing online sports bets. The enforcement of laws against online gambling focus mainly on those who process gambling transactions and operators that offer online gambling transactions to U.S. gamblers. The simple gambler isn’t affected by these laws; in fact, no one in America ever went to jail because of online gambling. Despite the different arguments for legalizing sports betting in the U.S., which include the substantial monetary profit for the country, it seems that it won’t happen any time soon. Part of the reason for this is the resistance of athletic leagues to legalization, because they fear it will hurt the integrity of the games themselves.

Despite their athletic leagues’ resistance to legalizing sports betting, the online betting industry continues to bloom in America. In fact, many Americans see betting on a game as an integral part of their sport experience. For example, the most watched sporting event in the U.S., the super bowl, is also a record-breaker when it comes to bets. 4.2 billion dollars were placed in bets on the super bowl 50 (2015), most of it was placed illegally.

The Super bowl is a great example of the American betting market. The most dominant sport in the U.S. when it comes to betting is football, followed by baseball, basketball and hockey. While for our friends across the pond, the most popular sport by far is soccer, followed by tennis and horse racing. This creates two distinct sports betting markets.

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Formula 1 and Betting

Globally 425 million people are known to watch Formula 1 races on television a figure which could possibly be boosted by an additional 40% when taking into account people viewing unaccountably via illegal online streams.

No, its audience is not going to numerically compete with World Cup Soccer but it dwarfs the Superbowl’s 120 million viewers the vast majority of which cannot legally bet on the event anyway.

The biggest question is why online bookmakers haven’t embraced the sport with open arms.  After all, research indicates the betting account of a typical Formula 1 fans is worth three times that of a traditionally sourced punter.

Considering eighty percent of the average online bookmaker’s profits come from just twenty percent of their customers, you would imagine the DHL, Allianz and UBS signage would have been torn down long ago and replaced by the likes of Bet365 and Betfair/Paddy Power  …the latest conglomerate seeking to take over the online gambling world.

Eurobet.com made a big effort with Formula 1 back in 2001 sponsoring the TWR Arrows Team.  But they were ahead of their time.  As were Interwetten, the first company to offer online betting in 1997.  Their flirtation with F1 came in 2012 when they had a few small stickers on the Lotus cars for a few races.

But ours is not to question.  As punters, ours is to take advantage and this is a sport which offers ample betting opportunities within an industry which seemingly employs a limited number of people to recognise statistical techniques when devising their betting markets.

In fact, F1 betting markets ultimately seem to be driven by a good old-fashioned weight of money which pours in on the back of consequences and commentator’s statements.

The consequences include a Ferrari qualifying anywhere near the front of the starting grid at the Italian Grand Prix. The passionate Italian’s always pour their Euro’s on their beloved red cars at prices woefully short of the true probability of them prevailing.

 

Of course, this revolves around in-running markets, which is a real interesting area of F1 punting.  In the very best traditions of Betfair be very aware, what is described as live coverage is not live more often than not.  There is always a lag, in the UK it ranges between 4sec and 8sec.  Overseas broadcasters deliver their pictures with an even greater delay, up to 30sec in some instances.

Of course, there are very few domestic in-play punters that are not aware of this.  But the 422.5 million other viewers who may decide to place an in-play race bet at any time are probably not so street-wise. But the bookmakers are often caught unaware as quick-fingered diligent punters can often find an angle courtesy of social media.

Put simply, Twitter is an invaluable information feed which can be used in an identical fashion to stock market traders eagerly awaiting news and trading figures down high-speed news wires.

Case in point:  Lewis Hamilton needing a gearbox change following a practice session at the 2012 Chinese Grand Prix.  His team announced the component change, which resulted in a mandatory five-place grid penalty, as soon as they were aware of the problem.

But time-zone differences meant the British bookmaking odds compilers were sound asleep when the news the race favorite had been handed a crippling disadvantage was made public …and their betting markets remained unchanged for hours.

Without knowing the first thing about Formula 1 racing, it is very clear there is money to be made using nothing more than common sense.  In fact having no interest in or knowledge of F1, or any other sport you bet on, is a huge benefit.

Most punters would be better punters if subconscious preconceived ideas were removed from their psyche.  We all have favorite teams, jockey’s, trainers, racecourses etc and we are all guilty of being influenced by those likes (and dislikes). So use every tool in your box when punting on F1.  This includes employing an accurate weather forecaster.

As it stands the major firms price up the proceeding F1 race moments after the cars cross the line but that race could be two or three weeks away.  The markets normally remain pretty much unchanged until the Tuesday before the race.  By that time, you might have just been made aware of a tropical storm which is due to land on the racetrack.

Wet conditions, just like a change in going for a racehorse, can make the form book redundant.

betfairtrading

Betfair Trading Management

Successful sports trading in Betfair or any other online betting exchange depends a lot on proper money management. It may only seem important to pick up the online betting odds movements correctly, but applying money management in trading the online betting odds will make money for serious sports traders. If we are just starting out trading the odds, managing our betting bankroll will certainly make us last a lot longer in this trading game.

To begin with we should define a starting online betting bankroll which we will use exclusively for trading and we won’t be upset if we lose it. If that happens, we will consider it as the fee we paid to learn about money management and how to trade correctly. However if we are proven to be good in trading, we would increase our capital without the risk of losing it and actually make money. Whatever the scenario, having put aside a specific figure for our available capital helps a lot in various ways and it looks a lot more professional.

Now that we have defined our trading capital, we divide it in 50 equal parts. For example, if our bankroll is €1000, we have 50 parts of €20. The reason behind this is to always risk no more than 2% of our bankroll at any time. Risking that much of our betting bankroll means that we will continue trading even after 40 losing trades. Variance can kill our trading game and we should properly think of our money management plans, so that we can continue testing our method or change it and try something else, but with a sufficient bankroll to work with. We then go on and divide our bankroll left again in 50 equal parts. For every new trading strategy we try, we always start by splitting our trading bankroll in 50 parts. The biggest the risk you want to take, the fewer those parts should be, meaning increasing the percentage of your bankroll you stand to lose in each trade or bet. For instance, you might find more appropriate to risk 5% of your available trading capital in each trade, which would lead you to divide your bankroll in 20 equal parts. However, a bad run of 20 losing trades would wipe out your whole bankroll. My opinion is to always start out with 2% of your capital and to increase your risk after 500 completed trades and a proven winning trading strategy, targeting higher returns and making money.

The next step we should be taking is defining our stop loss, the point that is we would close our trading positions. The stop loss is always defined in comparison with the amount we enter in each trade. Let’s examine an example for better understanding.

Let’s assume your trading bankroll is €1,000, you’ll be risking 2% in each trade and you’ll be trading in-play footbal matches. You have a very basic trading strategy starting by backing the favorite team and want to apply money management. In the upcoming football game between X and Y teams, X team is traded at 2.00 betting odds. You begin your trading by backing €100 at 2.00. Given the fact that you risk 2% of your €1,000, if the odds reach 2.20 you should exit the market since by laying €100 at 2.20 you’d have lost -€20.00 on X team. So, your stop loss is 2.20.

This is not however the whole story. There is a relation between the stop loss and the betting odds movement. If the X team’s odds were 1.50, your stop loss would be 1.70. But moving from 1.50 to 1.70 there are 20 steps, the so called “ticks”. Moving from 2.00 to 2.20 there are only 10 ticks (2.00-2.02-2.04-…-2.18-2.20). So, while in the 1.50 occasion you risk €20 on a 20 tick movement, in the other situation you risk the same amount on a 10 tick movement. That is why we should change our stop loss depending on the ticks’ value. Instead of 2% of our capital we will define our stop loss at a 10 tick movement. You can obviously put your stop loss wherever your strategy tells you better. After defining the number of ticks of your stop loss, you should calculate those ticks’ value to be equal to 2% of your bankroll. If for instance you have 10 ticks as a stop loss, each tick should be valued at €2.

Let’s do a small revision so that we don’t get lost in the money management maze. We have €1,000 as our trading capital, we risk €20 per trade and our stop loss is 10 ticks. Depending on the team’s odds, we now calculate the amount we should be trading according to the odds as follows:

  1. 1.01-2.00: We trade €200 so that a movement of 10 ticks to result in €20 win/loss.
  2. 2.00-3.00: We trade €100 so that a movement of 10 ticks to result in €20 win/loss.
  3. 3.00-4.00: We trade €40 so that a movement of 10 ticks to result in €20 win/loss.
  4. 4.00-6.00: We trade €20 so that a movement of 10 ticks to result in €20 win/loss.

If now we intend to green up  on all the possible outcomes of a game, we can increase the above amounts by just a little, since in the end we won’t be losing €20 but less after greening up. For example, €20 loss at 1.50 would mean that by backing €13.3 we would lose €13.3 whatever the outcome, while €20 loss at 4.00 would mean that by backing €5 we would lose €5 whatever the outcome. In other words, we should be trading with 2.66 (=4.00/1.50) times more money at 4.00 than at 1.50 so that the final loss would be equal.

Because maths can be confusing at times, we will calculate the final amounts we should be trading with, according to the mean price of the betting odds.

  1. 2.00-3.00: 2.50/1.50 = 1.66 times the amount we calculated earlier.
  2. 3.00-4.00: 3.50/1.50 = 2.33 times the amount we calculated earlier.
  3. 4.00-6.00: 5.00/1.50 = 3.33 times the amount we calculated earlier.

In conclusion we will be trading with the following amounts:

  1. 1.01-2.00: We trade €200.
  2. 2.00-3.00: We trade €166.
  3. 3.00-4.00: We trade €93.2.
  4. 4.00-6.00: We trade €66.6.

By trading the above figures and greening up in the end, we will always lose €13.3 in case of losing. We wanted €20, remember? We just have to multiply the above numbers by 1.50 (=20/13.3). So, for a trading bankroll of €1,000 and 10 ticks stop loss:

  1. 1.01-2.00: We trade €300 so that a movement of 10 ticks to result in €20 win/loss after greening up.
  2. 2.00-3.00: We trade €250 so that a movement of 10 ticks to result in €20 win/loss after greening up.
  3. 3.00-4.00: We trade €140 so that a movement of 10 ticks to result in €20 win/loss after greening up.
  4. 4.00-6.00: We trade €100 so that a movement of 10 ticks to result in €20 win/loss after greening up.

Depending on your bankroll, the % you want to risk per trade and the stop loss, you can change the figures above. If you have €500, you halve the figures. If your stop loss is 5 ticks, you double the figures. If you risk 6% of your bankroll, you triple the amounts.

 

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UK Financial EndGame

The simple truth is UK financial system is screwed.

If interest rates were at their historically ‘normal’ rate of 5% — instead of the all-time low of 0.5% they’re at right now — there’s absolutely no way Britain could ever repay its debts.

In fact, at normal rates of interest UK is already bust. Not just ‘in over our heads’ but six feet under.

It’s simple maths. If interest rates moved back towards the normal 5% level, our cost of borrowing would triple.

Just to put that into context, if our current debt repayments tripled, the government would have to take drastic action — like abolishing the state pension. Or privatizing the NHS. Or pushing tax rates back up to 90%, as they were in the 1960s.

In short, Britain would change radically.

And that’s just if interest rates move back to ‘normal’ levels.

Now you are probably thinking ‘there’s no way the Bank of England or the government would let this happen’. You think they’d act to prevent it.

You are right. They are about to act. They are considering abolishing your cash to keep a tight control on your money.

UK citizens may not think of themselves as an extreme economy like Argentina. Or Cyprus. Or Greece. But the reality of it is: IT’S the same.

In fact, UK has borrowed far more than any of those nations. The perception is that UK economy is too important. That Britain is too big to fail.

Don’t believe it.

What you are about to see is the end-game of Britain’s colossal accumulation of debt. And it is a ticking time bomb.

In this scenario, debt is the gunpowder… it has made our entire system prone to combustion.

Interest rates are the spark that will set the whole thing off.

Those in charge of the financial system know it.

They will do everything they can to delay the explosion of Britain’s debt bomb.

And that’s why they could be on the verge of implementing draconian measures:

Total control of your money.

Man Reading Book and Sitting on Bookshelf in Library

Few hints before start spread betting

Before you place a bet, work out your worst case scenario should a bet go against you. For example, a football Total Goal Minutes bet is much more volatile than a football Total Goals bet and you may want to ensure your selected stake size reflects this.

• If you are a little nervous ahead of making your first bet, why not try a ‘paper trade’ where you write down your chosen bets and then record the profit or loss that each would have recorded. This helps you understand more about the volatility of different markets and how sports spread betting works.

• Try and bet on markets you know about. If you have a great understanding of golf and follow the game closely then it follows that our golf spread betting markets may make more sense to you than our NFL markets.

• If you are intending to bet on a market in-play (i.e. when you can open and close your bets during the match or event), try and make sure you are able to watch your event. If you are on top of the action it gives you greater opportunity to put your bets on at the right time.

• Stick to your betting plans! It’s all too easy to start raising your stake sizes after a couple of wins or even to chase your losses. However, remember that increased stake sizes can mean increased losses should the bet go against you. As per rule one, always work out your worse case scenario each time so you know what you are risking when you place your bet.

The Interbank FX exchange rate

Interbank and Forex

The forex market has many players, large and small

As discussed before, like most markets, the forex essentially works because many participants are buying and selling a fairly uniform product. Currency contracts at the retail level are most often denominated in 100,000 or 10,000 units of the base currency in the pair. There are many dealers who will break a lot into units smaller than that, but a full-size 100K or mini-size 10K lot is the most common.

Forex dealers can be classified as over-the-counter market makers. That means that when you are buying a currency pair, they are the seller. Likewise, when you are selling a currency pair, they are the buyer. The quotes you see on a trading platform are the prices the dealer is willing to buy or sell the currency contract for.

That seems pretty straight forward, but you may wonder how the prices offered by all the dealers are virtually identical if they (the dealers) are independent. That question causes a lot of confusion in the market, even for experienced traders. Oddly enough, the source of that confusion is, in some cases, the dealers themselves.

That’s why it’s vital to educate yourself on the dealing process, and to carefully investigate a dealer before opening an account.

To get a better idea how all this works behind the scenes, let’s take a look at forex market participants and how they relate to each other.

Banks—The “Interbank Market” is one of the most misused terms in the retail forex market. The interbank market is what it sounds like; a network of banks that trade currencies with each other. There are a lot of banks in the network, and many of the largest forex dealers are considered part of the interbank market. Each of these banks trades with the other banks in the intermarket through the use of dealing, or trading, desks. Each bank’s dealing desk is in contact with the other banks’ desks as though they were on an exchange floor. So many transactions take place throughout the day that the interbank market participants have very uniform pricing. In other words, if you froze time, the prices available for a forex pair would be virtually identical from bank to bank.

Forex Dealers—Institutions who service the retail market and have access, through brokerage agreements, to one or more of the banks involved. The dealer receives current pricing on each forex pair from the banks they have relationships with. The price one dealer sees is the same as the price the other dealers see, because they all have access to the interbank market. In fact, many dealers use the same major banks—like Goldman Sachs or Deutsche Bank—to access the interbank market. A forex dealer will then send these prices through to you, the retail trader, in your trading station.

Dealers make money through the “spread.” The spread is the difference between the price a dealer will buy a currency contract from you (the bid price), and the price it can sell that contract to you, or another trader (the ask price). Spreads are an important factor for forex traders to understand, both in picking a dealer, and managing trades.
The forex dealer may modify currency prices in a couple of ways. First, some dealers offer fixed spreads. The industry term for this practice is “consistent spreads.” Fixed, or consistent, spreads are wider than the spread these dealers pay the banks they are using as a broker and represents a major portion of their revenue. Alternatively, a dealer may offer a variable spread to you the retail customer, which is usually narrower than a consistent spread but may widen considerably when market volatility increases.

When you make a trade with your dealer, they are in turn offsetting that risk through their prime brokerage accounts. For example, if you enter a trade long the EUR/USD, your dealer does not want to be remain short that position as the seller of that lot. Their business is providing liquidity not taking positions. They will offset their customer’s positions by trading an opposite position with another participant in the interbank. The actual process can be quite complicated with so many orders coming and going but that is how they manage their risk.

Retail customers—This is you. The retail customer has access to the forex through his/her dealer. Although they are one level removed from the primary interbank market, it is not usually a disadvantage for the retail trader.

 

 

The Supply and Demand Theory in Forex

Forex Supply and Demand

Supply and demand drives the forex market

The Forex market, just like every other market in the world, is driven by supply and demand. In fact, understanding the concept of supply and demand is so important in the Forex market that we are going to take a step back into Economics 101 for a moment to make sure we’re all on the same page.

Having a good grasp on supply and demand will make all of the difference in your Forex investing career because it will give you the ability to sift through the mountain of news that is produced every day and find those messages that are most important.

Supply is the measure of how much of a particular commodity is available at any one time. As the supply of a currency increases, the currency becomes less valuable. Conversely, as the supply of a currency decreases, the currency becomes more valuable.

Think about rocks and diamonds. Rocks aren’t very valuable because they are everywhere. There is a large supply of rocks in the world. You can literally walk down the street and have your choice of hundreds and thousands of different rocks. Diamonds, on the other hand, are expensive because there aren’t that many of them in circulation. There is a small supply of diamonds in the world, and you have to pay a premium if you want one. It’s a crude analogy, but the point is made.

 

On the other side of the economic equation, we find demand. Demand is the measure of how much of a particular commodity people want at any one time. Demand for a currency has the opposite effect on the value of a currency than does supply. As the demand for a currency increases, the currency becomes more valuable. Conversely, as the demand for a currency decreases, the currency becomes less valuable.

Japan as an illustration

Take oil prices for example. When demand for oil goes up or the supply of oil drops off, oil prices go up. As oil prices go up, gasoline and natural gas prices go up. As gasoline and natural gas prices go up, you end up spending more to drive around town and to heat your home. And as you spend more and more on oil-based products, your budget gets leaner and leaner. Well, these same factors that affect your budget affect the budgets of the world’s largest corporations and governments.

One country that suffers from rising oil prices just like you do is Japan. Japan imports nearly 100 percent of its oil. It doesn’t have much of a choice. Japan isn’t known for its booming oil reserves. So any oil Japan wants to use to produce electronics, cars, and other goods, it must buy it at whatever the going rate is. But that’s just the beginning. Japan’s economy relies on its ability to export the goods it creates to other countries, like the United States. As you’ve noticed driving around town, it costs a lot of money to transport your groceries, your kids, and yourself from one place to another. It costs even more when you have to ship your goods across the Pacific Ocean. Every car, DVD player, and computer Japan produces is becoming more and more expensive to ship to consumers. So when you look at it, Japan is getting hit on both sides. It has to import all of its oil at inflated prices, and then it has to turn around and pay inflated prices to ship all of its goods.

So what impact does all of this have on Japanese goods? It makes them more expensive. If Japanese companies have to pay more to produce their products and then have to pay more to distribute their products, they are going to have to charge more for their products to cover their expenses and make a profit. As products become more and more expensive, consumers are able to buy less and less. And as consumers buy less, companies make less, which leads to all sorts of economically negative outcomes. Now, let’s take a step back now and look at what all of this has to do with the exchange rate of the Japanese yen.

Looking through the lens of supply and demand, you can see how an increase in the price of oil would affect the value of the Japanese yen. Oil is priced and sold in U.S. dollars. As oil becomes more expensive, purchasers in Japan have to convert more and more of their Japanese yen into U.S. dollars so they could pay for their oil. This would increase the supply of Japanese yen in the Forex market and subsequently lower the value of the Japanese yen. To compound the problem, as Japanese goods become more expensive and fewer and fewer people can afford to buy them, demand for Japanese yen falls. The fewer products you buy, the fewer Japanese yen you need. And when you don’t need something, you stop demanding it. Rising supply plus falling demand equal a decrease in the value of the Japanese yen.

The price of oil and its effect on the Japanese yen is just one example of how supply and demand impacts the Forex market. We will be looking at many other fundamental factors that influence the Forex market in the coming lessons. But the important thing now is that you feel comfortable with the concept of supply and demand.

Always be thinking Supply and Demand in your analysis

Every time you analyze the Forex market, all you have to do is ask yourself how supply and demand are going to be affected by what is going on. This holds true for both fundamental and technical analysis—the two major disciplines in the Forex market and every other market, for that matter.

Fundamental analysis is the study of what is happening in the world around us. Everything we have discussed so far in this book and will continue to discuss, from oil prices to stock market performance, relates to fundamental analysis.

Technical analysis is the study of what is happening on the chart of a particular currency pair. We will be discussing a few basic tenets of this investment art in a later lesson.

But both forms of analysis are built upon a foundation of supply and demand, so get ready to ask yourself supply-and-demand-related questions a lot. We’ll now look at more illustrations and examples in the video.

Forex Computers

The Forex Introduction

The Forex market is the largest financial market in the world. More than $3 trillion in foreign currencies trade back and forth every day. Forex stands for the FOReign EXchange—the financial exchange on which governments, banks, international corporations, hedge funds and individual investors exchange foreign currencies.

How does the forex work?

When you fly to another country, one of the first things you do when you get off the plane is look for a place you can exchange your U.S. dollars for whatever currency is used in the country you are visiting—such as British pounds, Japanese yen or euros.

Why do you do this? Because you know the cab driver, the hotel clerk and the souvenir salesperson are all going to want you to pay them in their national currency, not U.S. dollars.

When you slide your U.S. dollars over to the teller and she slides back a stack of multi-colored bills (let’s face it, most currencies have more color than the greenback) you have just participated in the Forex market. You exchanged one currency for another.

Now, if you stop and think about all of the people who travel, all of the businesses that operate in multiple countries and all of the governments that are exchanging money, you can start to get an idea of how big the Forex market really is.

For those of you who travel abroad frequently, you have probably also noticed that the exchange rates at the currency counter at the airport never seem to be the same. They are constantly changing. It is those changes in exchange rates that enable you to make money in the Forex market.

Basic Lesson: Know your Forex terms

Before we delve any deeper into the exciting possibilities that exist in the Forex market, we need to get you up to speed on the lingo in the Forex market. Now, don’t worry. As far as vocabulary lessons go, this one is quite a lot of fun. Honestly! It’s a very short lesson:

Pip: While some of you may recognize “Pip” as a character in Charles Dickens’ Great Expectations, we hope you will become more intimately acquainted with the pips in the Forex market—because you will be using them to determine your profits and losses. A pip (percentage in point) or point, is the smallest unit of measurement in the Forex market. Most currency pair quotes are carried out four decimal places—i.e. 1.4500. The last decimal place is called a pip. So if the exchange rate of a currency pair moved from 1.4500 to 1.4510, we would say that the price moved up 10 pips. You make money when the pips move your way in a trade.

There is an exception: Any exchange rate that contains the Japanese yen or the Thai baht as one of the currencies will only be carried out two decimal places. If you want to know why that is, you will have to take it up with the International Organization for Standardization (ISO). Honestly, there is such an organization. It is located in Geneva, Switzerland, and you would be amazed at the fields it impacts—from health care and electrical engineering to ship building and metallurgy. Anyway, they set the rules.

Currency Pair: We wouldn’t have a Forex market if we weren’t able to compare the value of one currency against the value of another currency. It is this comparison that drives prices. Forex contracts are always quoted in pairs. The euro vs. the U.S. dollar (EUR/USD) is the most heavily traded currency pair. The U.S. dollar vs. the Japanese yen (USD/JPY) is another popular pair.

The following is a list of the most common currency pairs, their trading symbols and their nicknames:

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Understanding Pairs and Price Quotes

One distinction you do need to make when looking at a currency pair is which currency is the base currency and which currency is the quote currency. The base currency is the first currency listed in the pairing. For example, the base currency in the EUR/USD pair is the euro because it is listed first.

The base currency is important because it is the strength or weakness of this currency that is illustrated on the chart. For example, as the chart of the EUR/USD moves higher, it means the value of the euro is getting stonger as compared to the U.S. dollar.

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As the chart of the EUR/USD moves lower, it means the value of the euro in relation to the U.S. dollar is getting weaker.

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The same principle applies to the USD/JPY pair or any other currency pair. The U.S. dollar is the base currency in the USD/JPY pair. So as the chart of the USD/JPY moves higher, it means the value of the U.S. dollar in relation to the Japanese yen is getting stronger. And as the chart of the USD/JPY moves lower, it means the value of the U.S. dollar in relation to the Japanese yen is getting weaker.

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The quote currency is the second currency listed in the pairing. For example, the quote currency in the GBP/USD pair is the U.S. dollar because it is listed second. The quote currency is important because it is the currency in which the exchange rate is quoted.

To illustrate, when you say the exchange rate between the British Pound and the U.S. dollar is 1.7533, you are saying it costs $1.7533 to purchase ₤1. The same principle applies to the USD/CHF pair or any other currency pair. The Swiss franc is the quote currency in the USD/CHF pair. So when you say the exchange rate between the U.S. dollar and the Swiss franc is 1.2468, you are saying it costs 1.2468 Swiss francs to purchase $1.

Currencies are sold in lots

In the stock market, when you want to buy something, you buy a share of stock, or a share of that company. In the Forex market, when you want to buy something, you buy a contract, or a lot. (We use the term contract because the Forex market utilizes currency futures contracts). There is no way to buy a share of the U.S. dollar like you would buy a share of Google in the stock market. When you trade in the Forex market, you are trading lots or contracts.

Contracts are divided into three categories: full-size contracts, mini contracts and flexible contracts.

Full-Size Contracts control 100,000 units of whatever the base currency in the currency pair is. So for instance, if you were to buy one full-size contract on the EUR/USD, you would control €100,000 because the euro is the base currency in the pair.

Mini-Contracts control 10,000 units of whatever the base currency in the currency pair is. As you can see, a mini contract is one-tenth the size of a full-size contract.

Flexible Contracts allow you to choose the exact amount of a currency you would like to control. If you want to control 84,392 units or 2,755 units of the currency you are interested in, you can with a flexible contract.

Being able to choose among full-size, mini and flexible contracts allows you to tailor your investing to best meet your investment style and strategy.

Make sure to take the time to feel comfortable with the lingo of the Forex market. If you have a solid foundation of knowledge, you’ll be much better off in your investing. So now that you’ve got the basics, let’s watch the video and take a look at what makes the Forex market tick, how it came to be, and how you can use it to protect and multiply your money.

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The 11 winning rules of betting


#1 Don’t Bet More Than You Can Afford To Lose
It’s the simplest of advices and the most pertinent to any punter. Betting can be approached as another form of entertainment that you spend your money on. You’d never book a £200 per night hotel room, when you could only afford a £100 one, and so you should approach betting with this one governing factor always to the fore. Bet within your means.

#2 Don’t Increase Your Stake After Winning
Unless you are adopting a specific betting method or staking plan, never arbitrarily increase your stake just because you’ve won. Betting shop mugs do this all the time and with very few exceptions their money will only go one way – back to the bookie.

#3 Treat Your Betting As a Business – Your Bookie Does
Businesses can increase profit by minimizing losses and outlay. Your bookie does this, and so should you. The one thing you are guaranteed to do when betting is back a loser. Finding ways to cut down on the losers will greatly affect your potential to make profit.

#4 Don’t Follow The Money
Unless you are in on a gamble right at the start, by the time you get to know where the money’s going all the best prices will be gone. If you dive in at that stage you could very likely be betting at no value or even negative value (the price is shorter than the selection’s actual chances).

#5 Use A Betting Bank
If you’re just betting from what available cash you have in your pocket at any given time you are unlikely to have much control over your betting. Lack of control is one of the quickest ways to get skint. A betting bank lets you know how much you have to bet with, helps you control stakes, and more importantly can let you see whether you are winning or not (in conjuction with #7 and #8 also)

#6 Use A Staking Plan
Using a Staking Plan is a great way to control your betting. Used in conjunction with #6 and #7 (Betting Bank and Recording Bets) this will help you become a smarter punter, one who is control of his/her betting. It won’t guarantee to make you a profit but it should help you in one respect – to cut down on those silly unnecessary bets. Level Stakes is the most popular Staking Plan and a very sensible one too, but there are others. Bank Percentage Plan, Sequence Plan, and others.

#7 Specialize In Just A Few Sports
Bookies will have you betting on everything from the US Election to the X-Factor. One of the reasons they offer so much is because it’s profitable to them. One of the punter’s best tactics is to specialize. Most of us know a varied amount about one or two sports, so when it comes to betting a major plus is to do the research and become more expert in just a few sports. That can give you an edge the bookies don’t have, simply because their oddsmakers have to cover everything. By specialising you gain an advantage, and can better spot potentially good bets.

#8 Don’t Panic In A Losing Streak
As stated previously you are guaranteed to back losers, but what happens when you start to back loser after loser? It’s at this point that the novice or undisciplined punter can start to panic, to question their methods, to start changing methods, and start chasing losses. All of these you must avoid. If you’re organized, have confidence in your methods, and you have a properly sized betting bank to allow for a losing streak, stick with the plan. Stay calm and don’t waiver from your methods. The dreaded losing run is all too familiar to all of us. It’s a part of betting. [**caveat – methods of course can be changed under the correct circumstances, just not under the panic of a losing streak because you’re not best placed to make the right judgements]

#9 Don’t Chase Losses
This can be read in conjunction with #12 Don’t Panic In A Losing Streak. Chasing losses is one of the main contributions to losing made by punters. When the main bet or bets of the day go down, some punters can’t accept a losing day and so go off in search of winners, despite the fact that their earlier studies dismissed the remainder for having the potential for winners. Or a punter bets money he/she couldn’t really afford to lose, then go off in a futile attempt to recoup the loss, and thereby losing more. Know when to walk away and call it a day.

#10 Don’t Look For A Bet, Wait For One
You don’t have to have a bet. Sure, we all like the thrill of a bet and watching its progress, but the punters who tend to lose more are the ones who can’t resist having that thrill, and therefore go repeatedly looking for a bet they wouldn’t normally have done. You’ll see them in betting shops all the time, moving from one race to the next, taking only the few precious seconds there now are between races to try to find a selection. The disciplined punter will have his methods, and if those methods don’t pinpoint a bet on a particular day they won’t go looking for one – they’ll do the right thing and wait till the next day.

#11 Singles Offer The Best Profit Potential
This is one of the obvious ones to the more experienced punter, but to the novice or to those lured in by the ‘bonuses’ and ‘enhancements’ of the ‘big-money’ bets that the bookies keep pushing to your attention (there’s a reason why they keep advertising these bets), it may not be so obvious.

You won’t win big-money with singles, that’s true. But let’s face it how many of you out there have won big-money with multiple bets? With singles you don’t face the furstrating situation where you can lose it. With singles, you don’t get a winner only to have wait on having another winner to have it pay off for you.

Bookies don’t like you betting singles, that’s why you’ll rarely see them advertising them. Singles allows you to shop around for the best price and give yourself the best chance of profit. Multiple bets are for the dreamers.