Host Obtaining

Web hosting is often provided as part of a general Internet access plan; there are many free and paid providers offering these services.

A customer needs to evaluate the requirements of the application to choose what kind of hosting to use. Such considerations include database server software, scripting software, and operating system. Most hosting providers provide Linux-based web hosting which offers a wide range of different software. A typical configuration for a Linux server is the LAMP platform: Linux, Apache, MySQL, and PHP/Perl/Python. The webhosting client may want to have other services, such as email for their business domain, databases or multi-media services for streaming media. A customer may also choose Windows as the hosting platform. The customer still can choose from PHP, Perl, and Python but may also use ASP .Net or Classic ASP.

Web hosting packages often include a Web Content Management System, so the end-user doesn't have to worry about the more technical aspects. These Web Content Management systems are great for the average user, but for those who want more control over their website design, this feature may not be adequate. You can always use any content management system on your servers and modify them at your will. A few good examples include wordpress, Joomla, Drupal and mediawiki.

One may also search the Internet to find active webhosting message boards and forums that may provide feedback on what type of webhosting company may suit his/her needs.

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Shopping cart softwares

Shopping cart software is software used in e-commerce to assist people making purchases online, analogous to the American English term 'shopping cart'. In British English it is generally known as a shopping basket, almost exclusively shortened on websites to 'basket'.

The software allows online shopping customers to accumulate a list of items for purchase, described metaphorically as "placing items in the shopping cart". Upon checkout, the software typically calculates a total for the order, including shipping and handling (i.e. postage and packing) charges and the associated taxes, as applicable.

Technical definition

These applications typically provide a means of capturing a client's payment information, but in the case of a credit card they rely on the software module of the secure gateway provider, in conjunction with the secure payment gateway, in order to conduct secure credit card transactions online.

Some setup must be done in the HTML code of the website, and the shopping cart software must be installed on the server which hosts the site, or on the secure server which accepts sensitive ordering information. E-shopping carts are usually implemented using HTTP cookies or query strings. In most server based implementations however, data related to the shopping cart is kept in the Session object and is accessed and manipulated on the fly, as the user selects different items from the cart. Later at the process of commit, the information is accessed and an order is generated against the selected item thus clearing the shopping cart.

Although the most simple shopping carts strictly allow for an item to be added to a basket to start a checkout process (e.g. the free PayPal shopping cart), most shopping cart software actually provides additional features that an Internet merchant uses to fully manage an online store. Data (products, categories, discounts, orders, customers, etc.) is normally stored in a database and accessed in real time by the software.

Shopping Cart Software is also known as e-commerce software, e-store software, online store software or storefront software.

Components

Shopping cart software typically consists of two components:

• Storefront: the area of the Web store that is accessed by visitors to the online shop. Category, product, and other pages (e.g. search, best sellers, etc.) are dynamically generated by the software based on the information saved in the store database. The look of the storefront can normally be changed by the store owner so that it merges with the rest of the Web site (i.e. with the pages not controlled by the shopping cart software in use on the store).

• Administration: the area of the Web store that is accessed by the merchant to manage the online shop. The amount of store management features changes depending on the sophistication of the shopping cart software chosen by the merchant, but in general a store manager is able to add and edit products, categories, discounts, shipping and payment settings, etc. Order management features are also included in many shopping cart programs. The administration area can be:
  • Web-based (accessed through a Web browser)
  • Desktop-based (a desktop application that runs on the user's computer and then transfers changes to the storefront component).

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Blog Hosting Service

Weblog software (also called blog software or blogware) is software designed to simplify the creation and maintenance of weblogs. As specialized content management systems, weblog applications support the authoring, editing, and publishing of blog posts and comments, with special functions for image management, web syndication, and moderation of posts and comments.

Server models

Many weblog applications can be downloaded and installed on user systems. Some of these are provided under free-software and open-source licenses, allowing them to be used, modified, and redistributed freely. Others are proprietary software which must be licensed.

Other weblog applications are offered only through their developers' hosts, either free of charge or for a fee. Services are typically limited to hosting of the blog itself, but some services offer the option of using the hosted software to update a blog published elsewhere.

Clients

Maintenance through the Internet is a nearly universal feature of weblog software. This is usually done through a browser-based interface, enabling authors to create and update content on the site. Most software also supports the use of external client software to update content using common APIs such as the MetaWeblog API and the Atom Publishing Protocol. Third party developers have created many such clients, allowing bloggers to publish entries using desktop software rather than the web-based interface. The WordPress website has an extensive list of clients that support most APIs (not just WordPress).^[1] Examples include ecto and MarsEdit.

Post and comment management

All weblog software supports authoring, editing, and publishing of entries in the following format.

• Title, the main title, or headline, of the post.
• Body, main content of the post.
• Permalink, the URL of the full, individual article.
• Post Date, date and time the post was published.

Blog entries can optionally include the following:

• Comments – Comments allow readers to discuss blog entries, correcting errors or otherwise expressing their opinions on the post or the post's subject.
  Services like coComment aim to facilitate discussions through comment tracking.
• Categories (or tags) – indexes to subjects discussed by the entry
• Trackback and or pingback – links to other sites that refer to the entry

Other features

Most weblog applications also have various linking and web syndication features. Web syndication is usually offered in the form of RSS or Atom. This allows other software (such as feed aggregators) to maintain a current summary of the blog's content. Some services and organizations also offer extended features to aid communication, such as the wiki capabilities in Socialtext and Traction TeamPage.

Many weblog applications allow the user to define static pages which can be placed into a hierarchy or tree. Such pages are often used to present information about the blog and its authors. Extensive use of pages can result in a blog that looks more like a website.^{[citation needed]}

Most weblog applications support English and many other languages. The user selects a language during installation.

Post moderation requires users to register before commenting, or requires individual posts or comments to be approved by a moderator or administrator before they appear in the blog. Weblog applications use various user account systems that allow readers to post comments to a particular blog. For instance, users with Blogger accounts may comment on any Blogger blog. Other weblog applications allow users to post content or comments only to blogs where they have an account.

The posting API varies among different weblog applications. The typical interface is a form to be filled out online, with a varying number of fields. Applications such as Movable Type offer a greater number of form fields and choices than applications such as Blogger. Some applications also have plugins for Firefox that integrate into the browser's menus so that right clicking on selected text on any given web page brings up a small window that allows the user to post directly to their blog.

Most types of blogware support adding thumbnail images within blog posts. Photo blogging is a separate genre of blogging that deals primarily

Documentation and support

Different blogware packages feature varying levels of community support and documentation. Because the installation of some types of software requires an advanced knowledge of computer administration, community support and documentation can be very helpful. The web servers and database software can be more difficult to install than the blogware itself. Also a strong and active community surrounding the blogware gives advice on integrating the blogware into a personal site.

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Video hosting services

A video hosting service allows individuals to upload video clips to an Internet website. The video host will then store the video on its server, and show the individual different types of code to allow others to view this video. The website, mainly used as the video hosting website, is usually called the video sharing website.

Impetus

Because many users do not have unlimited web space, either as a paid service, or through an ISP offering, video hosting services are becoming increasingly popular, especially with the explosion in popularity of blogs, forums, and other interactive pages.

The mass market for camera phones has increased the supply of user-generated video. Traditional methods of personal video distribution, such as making a DVD to show to friends at home, are unsuited to the low resolution and high volume of camera phone clips. In contrast, current broadband Internet connections are well suited to serving the quality of video shot on mobile phones. Most people do not own web servers, and this has created demand for user-generated video content hosting, which the likes of YouTube are catering to.

Purpose of video hosts (for users)

• Save on bandwidth costs, often eliminating costs entirely
• Creating a common place
• Make a hassle-free experience, where uploading a video and streaming or embedding would normally require advanced programming knowledge. It is now commonly achieved through a web browser, with little or no programming experience.
  

Copyright issues

Wikipedia hosts around 200 videos in the Ogg format on its servers. Wikipedia actively discourages non-free videos and formats: videos added to Wikipedia are supposed to be freely available for reuse. This contrasts with video hosting services such as YouTube, which can hold copyrighted material, though some rights must be given up to such companies in return for the hosting.

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Image hosting services

An image hosting service allows individuals to upload images to an Internet website. The image host will then store the image onto its server, and show the individual different types of code to allow others to view that image.

How it works

Typically image hosting websites provide an upload interface; a form in which you specify the location of an image file on your local computer file system (using a browse button). After pressing a “Submit” button the file is uploaded to the image host’s server. Some image hosts allow you to specify multiple files at once, in this form, or the ability to upload one ZIP file containing multiple images. Additionally, some hosts allow FTP access, where single or multiple files can be uploaded in one session using FTP software or an FTP-capable browser.

After this process, your image is hosted on their server. Typically this means it is available on the web (to the public). You may also be allowed to make inline links to the hosted image, to embed it on other websites e.g.

• Linking with HTML code
• Linking with BBcode
• A clickable thumbnail that is linked to the full image

Usually, the image host will put restrictions on the maximum image size allowed, or the maximum space or bandwidth allowed per user. Due to bandwidth costs, free services usually offer relatively modest size limits per image when compared to paid services, but allow users hotlinking their images. Individuals needing to host large images should consider purchasing image hosting services or purchasing webhosting services, so that they may operate their own website.

Tools

Image hosts also allow tools such as the ability to create photoblogs/galleries with your images, or add them to a slideshow for easier viewing. Some offer more advanced tools such as the ability for an individual to add notes to an image they uploaded, sideloaders, or browser sidebars. Other hosts have introduced novel features such as the ability to automatically resize images down to a user-selected size. A Flickr tool allows you to upload photos using a camera phone with email capability.

Cost

Many image hosts are free. Of the free image hosts, the vast majority are supported by advertisement, mostly on their top pages, thumbnail pages, or 'not found' pages. Showing advertisements to users has enabled image size and bandwidth limits to increase.

Some free hosts have optional paid image hosting functions, while other hosts offer only paid services. Features and storage available are generally better for paid services, while cost is still much less than the cost of purchasing webhosting to operate a website. Paid services often allow users to have password protected photo albums, customizable skins, and customized subdomains. There are many other paid services available that offer different packages of features, options, and costs.

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File hosting service Info

Software file hosting

Authors of Shareware, Freeware and Open Source/Free software often use file hosting services to serve their software. The inherent problem with free downloads is the huge bandwidth cost. These hosts also offer additional services to the authors such as statistics or other marketing features.

Personal file storage

Personal file storage services are aimed at private individuals, offering a sort of "network storage" for personal backup, file access, or file distribution. Users can upload their files and share them publicly or keep them password-protected.

Prior to the advent of personal file storage services, off-site backup services were not typically affordable for individual and small office computer users.

Sometimes people prefer hosting their files on a publicly accessible HTTP server. In this case, they generally choose paid hosting, and use their hosting for this purpose. Many free hosting providers do not allow the storage of files for non-website-related use.

Storage

Most online file storage services offer space on a per-gigabyte basis, and sometimes include a bandwidth cost component as well. Usually these will be charged monthly or yearly. Some companies do offer the service for free, relying on advertising revenue. Some hosting services do not place any limit on how much space your account can consume. Some services require a software download which makes files only available on computers which have that software installed, others allow users to retrieve files through any web browser. With the increased inbox space offered by webmail services, many users have started using their webmail service as an online drive. Some sites offer free unlimited file storage but have a limit on the file size.

Increasingly, organizations are recognizing the benefits of co-locating their mission-critical equipment within a data centre. Colocation is becoming increasingly popular because of the time and cost savings a company can realize as a result of using shared data centre infrastructure. Significant benefits of scale (large power and mechanical systems) result in large colocation facilities, typically 5,000-10,000 m² (50,000 to 100,000 square feet). With IT and communications facilities in safe, secure hands, telecommunications, Internet, ASP and content providers, as well as enterprises, enjoy less latency and the freedom to focus on their core business.

Additionally, customers reduce their traffic back-haul costs and free up their internal networks for other uses. Moreover, by outsourcing network traffic to a colocation service provider with greater bandwidth capacity, web site access speeds should improve considerably.

Major types of colocation customers are:

• Web commerce companies, who use the facilities for a safe environment and cost-effective, redundant connections to the Internet
• Major enterprises, who use the facility for disaster avoidance, offsite data backup and business continuity
• Telecommunication companies, who use the facilities to interexchange traffic with other telecommunications companies and access to potential clients

Most network access point facilities provide colocation.

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Types of Web Hosting

Internet hosting services can run Web servers; see Internet hosting services.

Hosting services limited to the Web:

Many large companies who are not internet service providers also need a computer permanently connected to the web so they can send email, files, etc. to other sites. They may also use the computer as a website host so they can provide details of their goods and services to anyone interested. Additionally these people may decide to place online orders.

• Free web hosting service: Free web hosting is offered by different companies with limited services, sometimes advertisement-supported web hosting, and is often limited when compared to paid hosting.
• Shared web hosting service: one's website is placed on the same server as many other sites, ranging from a few to hundreds or thousands. Typically, all domains may share a common pool of server resources, such as RAM and the CPU. The features available with this type of service can be quite extensive. A shared website may be hosted with a reseller.
• Reseller web hosting: allows clients to become web hosts themselves. Resellers could function, for individual domains, under any combination of these listed types of hosting, depending on who they are affiliated with as a provider. Resellers' accounts may vary tremendously in size: they may have their own virtual dedicated server to a collocated server. Many resellers provide a nearly identical service to their provider's shared hosting plan and provide the technical support themselves.
• Virtual Dedicated Server: also known as a Virtual Private Server (VPS for short) divides server resources into virtual servers, where resources can be allocated in a way that does not directly reflect the underlying hardware. VPS will often be allocated resources based on a one server to many VPSs relationship, however virtualisation may be done for a number of reasons, including the ability to move a VPS container between servers. The users may have root access to their own virtual space. This is also known as a virtual private server or VPS. Customers are sometimes responsible for patching and maintaining the server.
• Dedicated hosting service: the user gets his or her own Web server and gains full control over it (root access for Linux/administrator access for Windows); however, the user typically does not own the server. Another type of Dedicated hosting is Self-Managed or Unmanaged. This is usually the least expensive for Dedicated plans. The user has full administrative access to the box, which means the client is responsible for the security and maintenance of his own dedicated box.
• Managed hosting service: the user gets his or her own Web server but is not allowed full control over it (root access for Linux/administrator access for Windows); however, they are allowed to manage their data via FTP or other remote management tools. The user is disallowed full control so that the provider can guarantee quality of service by not allowing the user to modify the server or potentially create configuration problems. The user typically does not own the server. The server is leased to the client.
• Colocation web hosting service: similar to the dedicated web hosting service, but the user owns the colo server; the hosting company provides physical space that the server takes up and takes care of the server. This is the most powerful and expensive type of the web hosting service. In most cases, the colocation provider may provide little to no support directly for their client's machine, providing only the electrical, Internet access, and storage facilities for the server. In most cases for colo, the client would have his own administrator visit the data center on site to do any hardware upgrades or changes.
• Cloud hosting: is a new type of hosting platform that allows customers powerful, scalable and reliable hosting based on clustered load-balanced servers and utility billing. Removing single-point of failures and allowing customers to pay for only what they use versus what they could use.
• Clustered hosting: having multiple servers hosting the same content for better resource utilization. Clustered Servers are a perfect solution for high-availability dedicated hosting, or creating a scalable web hosting solution. A cluster may separate web serving from database hosting capability.
• Grid hosting: this form of distributed hosting is when a server cluster acts like a grid and is composed of multiple nodes.
• Home server: usually a single machine placed in a private residence can be used to host one or more web sites from a usually consumer-grade broadband connection. These can be purpose-built machines or more commonly old PCs. Some ISPs actively attempt to block home servers by disallowing incoming requests to TCP port 80 of the user's connection and by refusing to provide static IP addresses. A common way to attain a reliable DNS hostname is by creating an account with a dynamic DNS service. A dynamic DNS service will automatically change the IP address that a URL points to when the IP address changes.

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Hosting reliability and uptime (Web Hosting)

Hosting uptime refers to the percentage of time the host is accessible via the internet. Many providers state that they aim for at least 99.9% uptime (roughly equivalent to 45 minutes of downtime a month, or less), but there may be server restarts and planned (or unplanned) maintenance in any hosting environment, which may or may not be considered part of the official uptime promise.

Many providers tie uptime and accessibility into their own service level agreement (SLA). SLAs sometimes include refunds or reduced costs if performance goals are not met.

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Service scope on Web Hosting

The scope of hosting services varies widely. The most basic is web page and small-scale file hosting, where files can be uploaded via File Transfer Protocol (FTP) or a Web interface. The files are usually delivered to the Web "as is" or with little processing. Many Internet service providers (ISPs) offer this service free to their subscribers. People can also obtain Web page hosting from other, alternative service providers. Personal web site hosting is typically free, advertisement-sponsored, or cheap. Business web site hosting often has a higher expense.

Single page hosting is generally sufficient only for personal web pages. A complex site calls for a more comprehensive package that provides database support and application development platforms (e.g. PHP, Java, Ruby on Rails, ColdFusion, and ASP.NET). These facilities allow the customers to write or install scripts for applications like forums and content management. For e-commerce, SSL is also highly recommended.

The host may also provide an interface or control panel for managing the Web server and installing scripts as well as other services like e-mail. Some hosts specialize in certain software or services (e.g. e-commerce). They are commonly used by larger companies to outsource network infrastructure to a hosting company.

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Housing Starts

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

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How to Trade Forex

Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the Forex markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank online trading system, SaxoTrader.

The benchmark of its service is efficient execution, concise analysis and expertise – all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets – gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.

The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.

Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and real-time account overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements.

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Durable Goods Orders

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders.

Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.

Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.

Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

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Retail Sales

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.

Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.

Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.

Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

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Payroll Employment

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity.

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.

Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

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Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator.

The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend.

Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.

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Producer Price Index

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation.

The PPI is considered important because it accounts for price changes throughout the manufacturing sector.

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

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Trade Balance

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

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Gross Domestic Product

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity.

GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.

As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.

A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

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Forex trading examples

Example 1

An investor has a margin deposit with Saxo Bank of USD 100,000.

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.

The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.

Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.

Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.

Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.

Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.

As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.

This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.

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Example 2:

The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).

The dealer quotes 112.05-10. The investor sells EUR at 112.05.

Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.

He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.

Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.

The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.

This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.

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Example 3

The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:

He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.

Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.

After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.

Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.

Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.

The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.

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Interest Rate Differentials

Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.

Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!

Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.

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