But what ever the reason we have for finding that we owe too many people or organisations more money than we can find a way to repay, please understand that you are not alone. There are a great many people who are in precisely the same situation as you and thankfully there are people whom you can approach who will help you find your way through the nightmare of debt that currently you are enduring.

In order to take control of your debts you need to find a way of managing them. So where do you go for debt management help?

Debt managers’ day job is managing debt, so it makes sense that they are they people to whom you should talk.

Yes, it is difficult to pick up that phone and talk to a stranger about your current situation of which you might feel ashamed. Even when people find themselves in debt due to matters entirely out of their control, events such as losing a job, the most common emotion is one of shame and embarrassment.

Being in unaffordable debt is extremely painful. At least nowadays you do not get arrested and carted off to some hell hole of a dungeon, though emotionally it can feel like that. All you need to do in order to get some debt management help is pick up the phone and speak to a specialist

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By using a Forex hedge, a trader who is long a foreign currency pair can be protected from this of a currency pair falling, while a trader who is short a foreign currency pair can protect against a currency pair increasing.

Traders hedge their currencies primarily through a system known as currency options.

As with options on other types of securities, such as oil or precious metals, foreign currency options give the purchaser the right, but not the obligation, to buy or sell the currency pair at a particular exchange rate at some time in the future. The trader forms an agreement with the dealer to buy a currency at a given price within a limited period. Traders can utilise regular options strategies, such as long straddles, long strangles, and bull or bear spreads, to limit the loss potential of a given trade although some brokers do not allow this, or most other forms of hedging.

Another method of hedging is through spot contracts. These are just like typical trades made by Forex brokers but have a very short-term delivery date (typically two days). Because of this delay however, they are not the most effective currency hedging vehicle and in many cases, regular spot contracts are usually the reason why a hedge is needed.

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A number of brokers have started to introduce Mini Forex accounts, designed to provide a less daunting introduction to Forex trading and introduce new traders by removing a significant proportion of their potential liability.

In essence, a Mini Forex account is simply a cut-down version of a standard Forex account that allows the trader to enter positions that are one-tenth the size of the standard lot of 100,000 units. That means that a one-pip change in a currency pair (based in U.S. dollars), is equal to $1 when trading a mini lot, compared to $10 for a standard-lot trade. This obviously reduces a trader’s potential profitability but crucially, it also limits their liability on a trade.

Mini Forex traders are not limited to only trading one lot at a time, making the accounts ideal for increasing exposure as an individual’s trading confidence builds. If a Mini Forex Trader feels confident enough to make an equivalent trade to one standard lot, a trader can just trade 10 mini lots.

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The main benefit to the scalper is that whilst the potential returns are very minimal, just a few points at best, the risk is also minimised. By acting quickly when a currency is showing a clear upwards trend, the scalper is taking the best step possible to ensuring some form of return. By hanging onto a currency for longer, he risks the possibility of that currency dropping.

For example, if a scalper begins with a trading position of 100 000 units with GBP/USD, he will earn around $10 for each pip. If he closes at a 3 pip profit, his return is $30 - all within less than a minute.

Whilst scalping isn’t prohibited or illegal in any way, many brokers do take a dim view on it. After all, they don’t want to be paying out on almost every trade that an individual makes and some brokers will ask traders who they suspect of scalping to “change their trading habits”, or close their account down in more extreme cases. Other brokers have introduced a delay to the initiation of an order and its actual filling. This allows them to offset that trade and ensure that the broker does not lose out on a trader that closes in profit.

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There are three common forms of swapping that take place on foreign exchange markets; currency swaps, commodity swaps and asset swaps.

Currency Swap

A currency swap is essentially a swap between two currencies for their equivalent monetary value.

For example, a company in Europe may need to acquire a particular quantity of US Dollars. At the same time, a firm in the US may require a quantity of Euros. In this incidence, the two companies could agree to swap currencies directly. This would be done by establishing an interest rate, an agreed amount and a common maturity rate for the exchange. Typically, Forex swaps are negotiable for up to ten years, making them an extremely versatile form of foreign exchange.

Commodity Swap

A commodity swap is an exchange where the cash flows involved are dependent on the value of a particular commodity, such as oil or gold. This is usually used to hedge against the price of a commodity.

In this form of exchange, the user of a commodity would secure a maximum price and agree to pay a financial institution this fixed price. Then in return, the user would get payments based on the market price for the commodity involved. On the other side of the exchange, a producer wishes to fix his income and would agree to pay the market price to a financial institution, in return for receiving fixed payments for the commodity.

Commodity swaps are used frequently by airlines and shipping companies as a means of controlling their oil costs and it is oil which is the focus of the overwhelming majority of currency swaps.

Asset Swap

An asset swap contract follows a similar process to a plain vanilla swap. The difference here is that instead of the underlying basis of the swap being interest rates, the swap involved the exchange of investments.

In a plain vanilla swap, a fixed libor (an interest rate between financial institutions) is swapped for a floating libor. In an asset swap, a fixed investment, such as a bond with guaranteed coupon payments, is being swapped for a floating investment such as an index.

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But whilst brokers use shading as a tactic to increase their profit margins, price shading can in some cases be beneficial for traders, allowing those who are selling a currency to benefit by trading at a better price.

How does Price Shading Work?

When looking at how price shading works, it is important to understand the role of the forex broker.

Forex trading is essentially an inter-bank market. Banks trade currencies against other financial institutions and the rates at which trades are completed between these banks are the prices that you see listed on financial news websites such as Bloomberg, Reuters and the BBC.

Brokers act as an intermediary or “middle man”. With the majority of traders, particularly in retail market, not having trading accounts with the various banking institutions, the job of the broker is to effectively complete the transaction on the trader’s behalf. For acting as this go-between, the broker obviously places a mark-up on the price that he trades with the bank and the price that he trades with you.

For example, if a broker receives a price of 78 - 79 on 45 when trading the euro, it means that their bank will sell them €1 for $1.4579 or buy it from them for $1.4578. However, the broker will add a margin of around three-points when he trades with a retail customer, he would typically offer to sell it for $1.4580 or to buy it for $1.4577.

However, with shading, the broker can use trending data to attempt to determine whether or not a currency is likely to keep attracting a disproportionate number of either buyers or sellers. If a currency is, for example, proving to be particularly desirable and attracting a large number of purchasers, then the broker may attempt to increase his profit margin by adding an additional pip to that currency’s buy price.

Why do brokers price shade?

Quite simply, brokers price shade in an effort to cash in on market trends. If there is a particularly strong demand for a particular currency, the broker can usually get away with adding a pip to his price and increase his profit margin.

How can I make it work?

Price shading doesn’t always work in the broker’s favour however and, by going against the trend, that extra pip can work to your advantage.

Brokers shade because they know that the majority of retail customer traders are usually wrong, meaning that they can bias their pricing strategy towards either buyers or sellers. If there is a large demand for buying a currency, this creates an order flow imbalance and the broker will up their price to suit. Because the majority of retail traders are usually wrong, there may be an opportunity to trade against the bias. This would mean selling, if the bias is on the buy side, or by buying if the bias is on the sell side. By going against the bias you would also be going against the majority of the other retail traders. If they are mostly wrong, you, in theory, will be mostly right.

In addition, because the broker has moved the spread to disadvantage the majority of traders, your broker will have created an advantage for traders who want to go against the trade. If the shade is on the buy side, you will make greater profits by selling.

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Arbitrage is a term that refers to exploiting a pricing discrepancy in a market. This could be a discrepancy in a financial market or even in some sportsbook markets and it allows traders to pinpoint a profit making opportunity.

For example, if the value of the Euro weakens, this is likely to be reflected in any trading pair in which the € is traded. However, not all trading pairs will reflect this at the same time. Instead, the pair £/€ may reflect the change before the change is reflected in the US$\€ pair. Arbiters will exploit this gap between the two by trading in the US$/€ pair, knowing that the Euro is likely to have decreased in value as it has already fallen against other currencies.

Unsurprisingly, these pricing discrepancies do not last long, with many arbitrage opportunities closed within a matter of minutes and even seconds. For that reason, many traders use dedicated software to spot and trade in such scenarios before the opportunity closes.

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Sunspots, an increasingly reported solar phenomenon are solar storms that can affect the weather, the ozone layer, and some people even think global warming. These sunspots come and go in approximately eleven year cycles, and some analysts have attempted to draw parallels between sunspot cycles and business cycles. In fact, this is not as ridiculous as it might sound. In the early nineteenth century it was noted by William Herschel the famous astronomer that there was a direct correlation between grain prices and sunspot activity.

This was taken further during the latter half of the nineteenth century by an economist, named William Stanley Jevons, who believed that he had discovered a causal connection between sunspot activity and the business cycle. His work, though interesting, failed to survive later critical scrutiny and largely was dismissed, however it did lead to the term ‘sunspot’ being adopted by economists. ‘Sunspot’ is a term that has been coined by economists to refer to minor disruptions that logically should not impact significantly on the markets, but given a suitable set of conditions, may do so.

This ‘suitable set of conditions’ refers to a set of expectations which can arise from either real news or rumour. Often they can take the form of a self-fulfilling prophecy. For instance a newspaper might publish a speculative article on the Euro, which might create a sentiment that the Euro will fall against the dollar, speculation will turn to action as speculators sell their Euros, and as a consequence the Euro really does fall.
Separating out reality from rumour is not a simple task, particularly considering how rapidly rumours can spread online. Numerous experiments have been carried out that have demonstrated how rumour can bring about major market shifts, and one economist, Eric Fisher, has demonstrated statistically that there is very little correlation between reality and market movements.

During recent times of market uncertainty, sunspots have occurred more frequently than usual and the result has been a level of volatility in Forex that has not been experienced before.  Despite this volatility, it seems that the markets are beginning to settle down and equilibrium is being restored.

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Whilst each of the major Forex trading floors, in Sydney, Toyko, London and, New York are individually only open for nine hours a day, their opening hours overlap to create a seamless 24 hour trading cycle.

In truth, the bulk of the trading takes place when the London and New York centres are open for business, London being the busier of the two, handling around 32% of Forex trades.

Sydney opens trading at 10pm (GMT) although little activity takes place until the Tokyo market opens at midnight, signalling the bulk of far-Eastern currency trades.

With Sydney closing 7:00am (GMT), Tokyo is left to trade alone before London opens at 8:00am.

As the trades pick up, Tokyo closes its doors at 9:00am to leave London as the sole trading floor until New York opens at 1:00pm. It is that overlap between the New York trading floor opening and the London floor closing at 5:00pm when the bulk of Forex trading takes place.

New York then closes at 10:00pm, just in time for the opening of the Sydney exchange at 10:00pm.

Forex Opening Times (GMT)

Sydney: 10:00pm - 7:00am
Tokyo: 12:00am - 9:00am
London: 8:00am - 5:00pm
New York: 1:00pm - 10:00pm

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Typically, a Forex quote will appear in the following format:

USD JPY 1/97.42

The number on the left of the slash is the base number. The base is always “1″ and represents, in this case, the US Dollar. The second number represents how much of another currency, in this case the Japanese Yen, can be bought for US$1. In this quote, $1 is worth ¥97.42.

When the number increases, it means that the US$ has strengthened against that particular currency. In other words, $1 would by you more of that currency than before. Conversely, a falling number indicates that the dollar has weakened against that currency.

Bid, Ask and Spread

When trading on Forex, you will be presented with two quotes; the ‘bid’ and the ‘ask’.

The ‘bid’ is the price at which you can sell the base currency whilst the ‘ask’, which is the higher number of the two, is the price that you buy the base currency. The difference between the two numbers is known as the ’spread’, and this represents the cost of trading on Forex markets. For example, in the quote EUR/USD = 1.2500/03, the ‘bid’ states that one Euro can be sold for $1.2500 whilst the cost of buying €1 (the ‘ask’) would be $1.2503. The spread is 0.0003.

Whilst the difference looks minimal, and indeed, Forex spreads are small, the nature of the market means that even the smallest change, known as a ‘pip’, can make a significant difference, with the majority of currencies experiencing around 100-150 pips per day.

The pip is the smallest amount a price can move in any currency quote. In the case of the U.S. dollar, euro, British pound or Swiss franc, one pip would be 0.0001. With the Japanese yen, one pip would be 0.01, because this currency is quoted to two decimal places.

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