forex: cashflow for currencies | rich dad education
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FOREX:Cashflow With Currencies
The Cash Flow Quadrant and Rich Dad trademarks are owned by Rich Dad Operating Company, LLC and any such use is under license.
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THE STRATEGIES SHOWN IN THE FOLLOWING SLIDES ARE RISKY AND SHOULD ONLY BE EXECUTED WITH PROPER EDUCATION ANDS INSTRUCTION.
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Get to Know the Global Currency Market
• The global currency market is the largest and most liquid market in the world.
• The global currency market is known as:– Foreign Exchange
(Forex)
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Understand the Forex Market
• Trade one foreign currency for another.
• Foreign currencies are traded in pairs.– Base Currency– Counter Currency or
“quote currency”• A currency quote
compares…– the relative value of the
base currency vs. quote currency.
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Understand a Currency Quote
British Pound & U.S. Dollar
GBP / USD
U.S. Dollar
Quote Currency
British Pound
Base Currency
1 GBP costs $1.51 USD
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Currencies fluctuate in fractions of a dollar called A “PIP”
(Price Interest Point)A PIP is the last decimal of a quote.
GBP/USD 1.5186
1.5188 … + 2 PIP’s
1.5184 … - 2 PIP’s
$ 1 . 5 1 8 6
Understand Forex: “PIP’s”
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In 1997, over 80% of the world oil market was financed in USD.In 2008, less than 50% of the world oil market was financed in USD.
Dollar Demand
Dollar Supply
Price of Dollars
Commodity Prices
Inflation
Understand the Changing Value of the Dollar
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How Big is the Forex Market?
• Over 4 Trillion U.S. Dollars change hands every day.– Forex dwarfs all other financial markets• U.S. Stock Market averages about $153 billion
daily • U.S. Bond Market averages about $800 billion
daily
• Add some perspective– Canada’s annual GDP in 2008• 1.5 trillion• Worlds 10th largest economy
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The Financial Tip of a Lifetime
• Where are the current U.S. interest rates?– Federal Funds Rate
is .25
• Which way do you think U.S. interest rates will go from here?
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