Foreign Currency Convertible Bond (FCCB)

 

FCCB

 A
Foreign Currency Convertible Bond (FCCB) is a quasi debt instrument issued by any corporate entity or an international agency of any corporate entity or sovereign state to the
investors around the world to raise funds.

        Foreign Currency Convertible Bonds will be like equity-linked debt
security which is possible to be converted into shares or into depository receipts.

    The
investors of Foreign Currency Convertible Bonds have an option to convert the bonds into equity normally in
accordance with pre-determined formula and sometimes also at a pre-determined
exchange rate.

ü 
The
investor also has the option to retain the bond.

ü 
They
are denominated in any freely convertible foreign currency.

ü 
Euro
Convertible Bonds are usually issued as unsecured obligation of the borrowers.

ü 
The
FCCBs by virtue of convertibility offers to issuer a privilege of lower
interest cost than that of similar non convertible debt instrument.

ü 
By
issuing these bonds, a company can also avoid any dilution in earnings per
share that a further issue of equity might cause whereas such a security still
can be traded on the basis of underlying equity value.

ü 
The
agreement providing for the issuance of Foreign Currency Convertible Bonds normally carry less restrictive covenants
as they relate to the issuer.

ü 
Further, Foreign Currency Convertible Bonds can be marketed conveniently and the issuer company can expect that the
number of its shares will not increase until investors see improved earnings
and prices for its common stock. Same as Global Depository Receipts, Foreign Currency Convertible Bonds are can be easily traded
and the issuer will have no control over the transfer mechanism and ultimate
beneficiary cannot be known.

ü 
The
Finance Ministry vide Notification dated 20.6.1994 stated that w.e.f. this date
of notification Foreign Currency Convertible Bonds will be considered as an approved instrument as medium of
 accessing external commercial borrowings
as an another source of finance.

ü 
The
terms and conditions normally applicable to commercial borrowing will be mutatis
mutandis on convertible bonds.

ü 
This
would include restrictions on end-user who imports of capital goods and minimum
maturity for bonds. Priority for accessibility to this facility will be given
to firms with good foreign exchange earnings record or potential.

Advantages of Forex Trading .... !!!

Advantages of Forex 

Basically
in Forex one can begin trading with no real money at risk in a demo account... start
small with a mini-account, literally playing for 'nickle and dimes' as you
learn, then graduate to a larger account and trade for higher stakes. And
again, you set the size and the pace of all this activity on your own since all
the trading is done through software screens. There's no actual broker to call
and yell "buy... no, sell!" into the phone. Of course there is always
a phone number where you can call for support or to make a backup trading order
in the event you lose your internet access for some reason (computer crash,
storm blackouts, etc.) You can't really start small in the stock market because
lot sizes are both fixed and larger and there isn't remotely enough leverage available,
especially for the novice trader.

Outstanding Liquidity

Forex
is a computerized network that can handle a very large volume of transactions, representing
nearly 4 trillion dollars a day on average, as noted earlier. This means that buyers
and sellers are almost instantly available when you want to open or close a trade.
Any stock market trader can give you nightmare stories of not being able to get
an order filled at a price he wanted due to little or no action being available
for the particular stock or option he was looking to move.

Unbelievable Leverage

Unlike
the stock and futures markets where leverages are relatively small (5:1 ,
10:1... but only for the bigger players with lots of equity to collateralize),
Forex trading routinely allows for much higher leverages: as large as 50:1 max
after the regulatory changes of 2010. These new rules apply to US-based brokers
only -- many offshore brokers still offer 50:1+, but these are off limits to
US-based traders now anyway as those same rules require us to stick with
domestic brokerages. These new rules will likely remain in force for at least a
decade I would imagine, barring some economic disaster that might cause
Congress to go back in and make still more legislative changes to further
control the financial markets.

Regardless,
that's a lot of borrowing power. This is made possible because the relatively
small daily movements of currency prices (a 1% daily move would be considered
enormous, whereas stock prices can easily change 15-20% in a day under volatile
circumstances) make it safe for the broker to lend the trader a large block of cash
so that his pip value makes it worthwhile to trade. I'll explain how all the
math works in a moment to make this clearer. Just know that the high
leverage in Forex trading provides an entry point into the market for the small
trader that just doesn't exist in the stock, commodity and to a lesser extent
the futures markets.

Of
course, leverage can cut both ways and wipe you out as fast as it makes you a
fortune if you are reckless and don't manage your risk appropriately. It's this
leveraged potential that creates both the higher risk in Forex and the ability
to make a large amount of money starting with a small amount of seed capital.
Make sure you are clear on this concept.

24/7
Action

The
Forex market is operational around the clock for five days a week. It
effectively closes from about 3PM EST on Friday and re-opens at 5PM Sunday at
the start of the new trading week (which is Monday morning in Sidney and
Tokyo). This timeframe generally follows the schedule of the world's banking
industry. You can play with your Forex account early in the morning or in the
middle of the night. Somewhere on Earth the banks are humming along!

Simplified
Trading Choices

There
are approximately Four thousand Five hundred stocks listed on the New York Stock exchange. Another 3,500
are listed on the NASDAQ. Which one of these 8000 possible companies will you
trade? Ugh. In currency trading the majority of the market trades the 4-6 major
pairs. Keeping an Eye on four pairs is much easier than focusing on thousand of stocks.

No
Standard Commissions

Forex
brokers earn their money by setting spreads between the BID and ASK prices which
they buy and sell the various currencies at. I'll explain all this in a moment,
but briefly it works like this: when you open a trade with a BUY order, you
must purchase the currency at what is known as the ASK price. When you eventually
close this trade you will then sell back into the market at the BID price.

To
clarify, you can buy a currency at the market ASK price (you must
"give them what they're asking"), or sell it at the BID price (the
highest "bid" the market offers). This means that whenever you open a
trade you are automatically down by the spread -- and must recover this amount
to reach breakeven. From that point on it's all profit.

No
Insider-Trading 

Forex
trading is considered to be the perfect system of competition since all players
are presented with an equal and level playing field. Fundamental information
about a nation's economic policies and the scheduled release of economic news
that affects currency prices is all public knowledge and completely accessible
to every trader on the planet who cares to keep tabs on it, large or small.
This means that nobody can cheat by possessing "insider information"
of any sort. There's no such thing in Forex.

In
addition, the fact that financial decisions within banks and governments are
usually kept private until being executed with little or no prior warning makes
it impossible to know WHEN these price-effecting events will actually occur. We
can know when they are LIKELY to occur -- but can never know exactly when, for
instance, a banker in Sidney is about to dump 5 million Yen on the market or a
government official in Zurich has instructed his financial minister to buy up 2
billion Euros that afternoon. The private nature of money creates permanent
uncertainty about the movement of prices that can never be completely
eliminated, and therefore affects all players in the market equally.

The
trick is to analyze the market for signals that improve your odds of knowing
what's about to happen next -- but you can never be 100% certain. If that were
the case the market would collapse because it's essentially a zero sum game
requiring a loser for every winner.

What are Pips and Lots?

What
are Pips and Lots?

In
Forex Market those who are trading and those who want to trade should know
about Pips and Lots, PIP is Derived from derived from a sentence “Percentage In
Point”. A Pip or a Point is the smallest unit of currency movements. A pip
represents a 0.0001 variation (either increase or decrease) in currency pairs
based on four decimals and a 0.01 variation in currency pairs based on two
decimals. For instance, when the price of EUR/USD increases from 1.3740 to
1.3799, it means that the price increased by 59 pips. Different currency pairs
have different pip values which are fundamentally founded on the correlation
between the changing currency rates. The computation of a pip is different
where EUR is the base currency (such as EUR/USD) compared to a currency pair
where EUR is the quote currency (e.g. USD/EUR).

The
price movements of currencies are normally shown by the number of pips. Movement
of one pip is equivalent to a certain amount of profits or losses in real investment
you made in each forex trade. Normally, the rate of a pip varies based on the
particular currency pairs that are being traded. The rate of a pip will only be
similar for currency pairs that have USD as the quote currency (the 2nd
currency in the pair). The reason for this is that whatever the base currency
is (whether EUR, CHF or AUD), the USD quote currency will always fluctuate at
the same rate.

Each forex trading transaction is
completed through separate contracts, which are also referred to as “lots.” The
typical size of one contract or lot is 100,000 units. This signifies that if
you acquire one typical sized contract, you will be able to control a base currency
with a total quantity of 100,000 units. Each contract is then subdivided into “pips,”
which pertains to the minimum price increment. Standard lots or contracts normally
have a pip value of $10, but if you are just starting with forex trading, you
can try the mini-accounts that some forex companies offer, wherein the lot size
can be as low as 10,000 units with pips amounting to just $1 or even less.

 

Compared to the stock market, the
forex trading market requires quite a lower margin, especially when you know
how to take advantage of leverage. In forex trading, you are not obligated to
actually purchase a currency, so you are able to trade it a later time. You can
technically open a forex position to buy or sell a currency even if you do not own
any of that currency. You can open a normal forex account through an Internet broker
by setting up a minimum deposit of $200. With the minimum deposit, you can start
trading in the forex market with a 1:100 leverage. That means that you can open
a position amounting to $20,000, but with an investment of only $200 and the
remaining $29,800 as a credit.

What is a Marginal Trading..?

Forex
market is the biggest turnover market in this the investment need is also very
high even though we are having a chance of trading with a minimum amount of
funds, there are several forex brokers who offer a “mini-account” and “micro-account”
for a smaller investment amounting to $50. A mini-account can allow you to
control up a lot of up to $1,000 units of base currency with a margin deposit
of $10 only. This means that you can work with leverage of 2000:1. Your $50 the minimum investment can then allow you to trade up to a mini-lot. In other
instances, the leverage can go as high as 2000:1 or even 2500:1, which means
that you will be required to use a margin deposit lesser than $50.

The
leverage you can enjoy in forex trading is around fifty times higher than what
stock trading can offer. As mandated by United States laws, you can have an
intraday leverage of 4:1 in stock trading if you own an account of at least
$25,000. This is not to say that working with a high level of leverage is
always ideal, because it also involves a high level of risk. If you are willing
to take on that risk, you will have a higher level of flexibility in executing
various strategies in trading forex.

Because
of the leverage, you will be able to enter into speculative trading without having
to invest a lot of your own money. This type of trading is also referred to as “marginal trading.” For instance, your
analysis of the forex market tells you that the price of EUR will eventually
rise against USD. Because of this, you decide to open one lot (or contract) to
buy 10,000 units of EUR with a 1% margin, or leverage of 1:100 at the price
of 1.2760 USD per EUR (or a total of $127,600). After some time, you see that
your original analysis was correct so you decide to close your position at
1.2847 (or a total of $128,470) and earn 87 pips or a total of $870. Almost
all currencies traded in the forex market fluctuate on a daily basis, with an
average of one hundred to one hundred fifty pips. In some instances, the
fluctuation can be even higher than that.

What is Forex Market...?

The
foreign exchange (forex) market is a global market where one can buy and sell
any of the currencies of all countries in the world. The price of one currency will
have counter to another currency based on the law of supply and demand. The
huge quantity of forex trading transaction carried out every day in a nonstop movement
make the forex market one of the most liquid monetary markets in the world.

Based
on several research studies, the volume of money traded in the forex market amounts
to almost five trillion US dollars per day, You can conduct forex trading from
anywhere in the world through both telecommunication networks and the Internet. The stock market operates during the traditional business
hours, but in case of forex exchange market it operates 24 hours a day, five days each week.

For
better understand how forex transactions are quoted, you just need to remember
that a base currency is always quoted as a unit equivalent to the exchange rate
of the quote currency. For instance, if you see the quote EUR/USD = 1.3212, it
means that the base currency is the EUR, and one unit of EUR is equal to 1.3212
USD (which is the quote currency).

Each
forex trading transaction is completed through separate contracts, which are referred
to as “lots.” The typical size of one contract or lot is 100,000 units. This signifies
that if you acquire one typical sized contract, you will be able to control the base currency with a total quantity of 100,000 units. Each contract is then
subdivided into “pips,” which pertains to the minimum price increment. Standard
lots or contracts normally have a pip value of $10, but if you are just
starting with forex trading, you can try the mini-accounts that some forex
companies offer, wherein the lot size can be as low as 10,000 units with pips
amounting to just $1 or even less.

Volume Indicators

The
volume indicator is also a significant index aside from its own price. It is very
beneficial in the stock market because it shows how much stocks have been
traded (both selling and buying) at any given time. As it is systematized in Forex,
you cannot determine the figures as to the amount of money that has been bought
or sold during a particular time. You can determine the figures of the volume
indicator using the movement of the price as your base.

 

This
bar chart uses two different bars, the green, and the red bars. These bars are used
to show whether you have a greater value or a lower value. When you see a green
bar, it shows a greater value than what the bar previously indicated while the
red bar means the current value is lower than the previous value. With the bars
displaying a color green, it means that there are more people participating in
the stock market at that particular time.

 

The
volume indicator can analyze how strong the trend is. The price follows the trend,
whether it is going upwards or downwards. If the volume increases, it shows a strong
trend. However, when the price starts fluctuate while the volume begins to decrease,
then it shows a trend that is getting weaker and will probably stop. What follows
this is a reversal or a rather quiet market. Still, you will need other
indicators to confirm the current situation.

 

Volume
indicators are also used in sorting out the validity of breakouts. When a low
volume centralized market showed a single high bar in the volume indicator, it
can mean that a possible break out is expected at any moment. When it happens,
the volume indicator displays high values, which is considered more accurate.
When the indicator displays a low interest, the breakout is considered not
valid.

 

The
volume confirms the most significant movements in the market. When the traders’
activity becomes higher than usual, these are confirmed by having higher volumes.
Nevertheless, a volume indicator can be considered accurate and reliable if there
is access to the information from the actual turnover in the market.

Moving Averages

Moving Averages

Moving averages are tools that are designed to determine the direction of a
trend. Since prices in the Forex market tend to fluctuate around an average
value, it is easy to tell whether the prices are within or away the market
average value. In addition to telling whether the prices are within or away
the average value, you are able to calculate the prices that are above or
below the average value.

 

Usage of Moving Averages

One of the practical and efficient ways to measure a trending market’s
action is through moving averages. You can use crossovers, divergences, and
the trends of moving averages in order to examine and define the signals
that we extract from the action of the market. Afterwards, these can be
utilized to direct our succeeding decisions regarding trades.

Types of Moving Averages

·        
Simple Moving Average

·        
Exponential Moving Average

·        
Smoothed Moving Averaged

·        
Linear Regressed Moving Average

 

There is a sizable quantity of moving averages at the disposal of traders.
These are some of the examples:

Simple Moving Average

As one of the simplest tools, it tallies the costs within a particular
time, and split them based on span of time, extending to the indicator’s
value. There is no need for weighting or applying of smoothing factor.

Exponential Moving Average

This provides more value to up-to-the-minute prices by weighting in an
exponential manner. While we are moving to the charts left and in the
direction of past values, the weighting drops quickly relative to linear
progression. Thus, the most notable when it comes to resolving the
indicator’s value are the most current prices.

Smoothed Moving Averaged

This is comparable to EMA apart from the fact that it considers every data
available. The initial price values are not eliminated, rather they get
lesser weighting and play little role when it comes to concluding the
indicator’s value. It is usually utilized to have a smooth price action and
to eliminate the short-term variability. In this way, you have a better
comprehension of the long-term market action.

Linear Regressed Moving Average

This is comparable to MA, but it has linear weighting factors instead of
exponential. An example is that the earliest period’s price (n) is
multiplied by one. Next, the newer one (n-1) is multiplied by the factor of
two. The succeeding period is multiplied by three. This goes on to the
current period is reached. In this particular situation, the newer prices
have more emphasis, and the latest rising or falling fluctuations are
characterized by significant clearness that helps the trader decisions.
Despite the great number of makeshift and expertly made techniques for
moving averages, three common methods form the foundation of a majority of
such strategies

 

Crossovers

Crossovers take place when the price moves up or down a moving average,
which indicates the start or conclusion of the current trend. These are part
of the most usual incident within technical trading, and do not allow a
significant amount of the anticipated power when it comes to the analysis of
market action. These are most useful when combined with additional
techniques and tools if we want to examine price action more
confidently.

Trends of Moving Average

Moving averages can include its particular trends from time to time, too.
It is plausible to make good use of such trends in order to determine
the entry or exit points. Even though its reliability is not comparable to
the price trend when used on its own, it can still be an effective way to
verify the price action if we use it together with the latter.

Divergence/Convergence

Divergence happens when a trend dominates, but a moving average decline.
Meanwhile, convergence arises when a market trend falls down, but moving
average counters it by recording top highs. Such circumstances are deemed to
signify a subsequent reversal. At a time that indicator values contradict
the price action, it is expected that a market is soon to exhaust its
energy, which could be a fine time to start a counter-trend position. It is
crucial to keep in mind that timing is vague in such formations, and the
expected reversal may not even happen ever. It is usually noted in the
phenomenon of divergence/convergence emerges steadily without resulting in a
single significant reversal, particularly in powerful trends. However, it is
the most favored technique configurations when it comes to interpreting
moving averages.