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Home » Education » Forex Glossary » Page 8

Toxic Flow in Forex Business

by Fxigor

Everything You Ought To Know Regarding Toxic FX Flow

What Exactly Is Meant By Toxic FX Flow?

It is a fact that any particular flow which might appear to be toxic for any particular market maker might end up being rather beneficial for another person out there. At present, technology has become the center of the FX businesses, and it has a significant role to play when it comes to controlling the rules and regulations of the game to a great extent. The term “Toxic FX Flow” has directly connected on most occasions with the technology, which is actually behind this liquidity factor.

However, the question here might arise regarding what exactly is the toxic flow in FX? Unfortunately, it is not possible to answer this question simply. In fact, the answer demands lots of things to take into consideration. Different types of forms can be taken by toxic flow right now. It might be in the form of trading on some unacceptable market prices, trading in the very same direction across more than one trading venue simultaneously at the very same time, or even trading on the inadequacies of any FX technology which is not sophisticated by any means. In general, one can view Toxic flow as any predatory or unwelcome stuff. Still, here we would like to mention that although something might appear to be rather toxic to any particular market maker, this does not imply that it will be the same for any other person out there. In fact, it might be rather beneficial for him in the long run.

Similar types of problems will be encountered by all those traders in the margin FX space who attempt to implement similar techniques that have been employed by them in the futures and the stock markets in recent times. The reason for this is the fact that there is an absence of any backup in the form of genuine items, and also, there isn’t any central exchange whatsoever. Under normal circumstances, when some person is winning, the other will be losing out; however, irrespective of this, one can expect that all of the participants in the market will be playing by the regulations to maintain proper law and also avoid any undesirable incident and chaos out there.

However, the unfortunate thing here is that you will come across individuals now and then who like to pose challenges for the system or would like to take advantage of its weaknesses and drawbacks. In the subsequent paragraphs, we have provided a few examples of Toxic FX Flow that you should consider going through.


1. “Picking-Off” The Feed Or Latency Arbitrage

This can be considered a sort of trading at present designed specifically to capture any deviation of the price. This is meant to involve placing trades on the application of technology, which is known to be slow or latent to the market. After that, covering all these positions at a particular profit once the provider can catch up to the genuine market.

Instead of trading on the marketplace, it is actually trading on somebody else’s incompetent technology and is a fantastic instance of predatory flow.

There is no secret that lots of market makers function at present without any sophisticated pricing engine and, because of this, it might become slow when it comes to updating the prices. This will leave ample room for every type of arbitrage out there.

2. Impact Made With The Market On Multiple Orders

A market maker can stream liquidity to more than one price venue simultaneously, and this might, therefore, be vulnerable to getting “hit” at the identical price by the same customer, at the identical time, on more than one platform.

For instance, any financial institution might agree to offer “top-of-book” liquidity of as many as EURUSD 10 million to 5 platforms, presuming that all those venues will stream their prices to a bigger and diverse customer base. Somebody (being aware that the price depicted here is only valid for EUR 10 million) might use this to their advantage and strike all of the 5 platforms in EUR 10 million simultaneously. Therefore, rather than presuming a EUR 10 million position, the financial institution will be offered EUR 50 million at a top-of-book rate, which was actually meant only for the EUR 10 million. Here, it has been possible for the customer to create at a particular price that had been “off-market” for one EUR 50 million trade.


3. New Trading

It will be possible to make the financial institutions crazy by sending more than 1 or bigger-than-usual trades once the markets move on any particular news release or due to a global event that took place unexpectedly. At times, this might be possible by figuring out the precise timing of the price movement.

As many as 32 to 100 price updates are sent by the banks every second every currency pair, the top-notch trading systems will be possible to identify the market’s direction within only the initial few updates. They can also place the trades accordingly. Financial institutions that have to face this kind of situation might not have adequate time for covering themselves in the marketplace before prices begin to move in their direction. As a result, they will fight against this kind of trading technique by either modifying or discontinuing their pricing to the customer, particularly before any significant news release.

Is it possible for the primary liquidity market makers (financial institutions) to reverse trades? Will they request the liquidity distributors to put an end to the trading? Obviously, they can. How frequently is this performed? The answer, in this case, will be “very seldom.”

These above-mentioned facts are simply a few instances of what can be regarded by many individuals as toxic flow. There is no doubt that lots of innovative and interesting cases are arriving on the scene every day, and it will be really intriguing to see what is in store for us shortly.

Filed Under: Education, Forex terms

How to Use NAV and RNAV (Revalued Net Asset Value) to Value Real Estate Stocks

by Fxigor

There are multiple ways that retail investors can determine the market value for each property held by a real estate developer. These include Net Asset Values (NAV) and Revalued Net Asset Value (RNAV). The following will explain them and how to value real estate stocks.

What is RNAV?

This method is conducted after each property projects’ market value has been determined. The RNAV method is more complex as it requires using the net asset value (NAV), deducting the liabilities to find the Revalued Net Asset Value of the real estate developer.

The process:

1. Value changes within the company’s held investment property
2. Surplus value of the held property for development
3. Company’s NAV shown on the balance sheet.

Therefore, the only surplus and change values considered are the property book values within the portfolio. These are the figures shown on the balance sheet, used for adding the company’s NAV to calculate the Revalued Net Asset Value of the company.

Additionally, some may refer to RNAV as “Revised Net Asset Value.” In either case, there will typically be a premium or discount added to the RNAV, which accounts for factors including the management size, quality, and the company’s overall track record, business risk, and reputation.

Below is an example RNAV calculation:

Surplus Value: Property 1 ($$ m) 20.0
Surplus Value: Property 2 ($$ m) 10.0
Surplus Value: Property 3 ($$ m) 5.0
Total Surplus 35.0
+ Company Nav ($$ m) 210.0
+ Shareholders Funds ($$ m) 700.0
RNAV ($$ m) 945.0
Discount to RNAV 20%
Discounted RNAV 756.0
Number of Outstanding Shares (m) 800.0
RNAV per share ($) 0.95

What is NAV?

In theory, any financial product or business entity with asset and liability accounting operations can have a Net Asset Value (NAV). When discussing business and company entities, the gap between the asset and liabilities is commonly referred to as the company’s capital, net worth, or net assets.

NAV has become a popular industry trend associated with fund pricing and valuation, which is calculated by dividing the company assets and liabilities by the total number of units or shares that investors hold. Therefore, the NAV of funds reflects the value per share. This is a simple method to use to value and transact shares of the fund.

NAV Formula

Calculating the Net Asset Value of a mutual fund is simple, for example:

Meanwhile, the funds’ assets and liabilities should include the proper qualifying items.

Using NAV with Mutual Funds

While common stock prices are constantly changing one second to the next, mutual funds are not priced in real-time but based on the assets and liabilities when the day ends. Therefore, the mutual fund assets include the total market value when combining the mutual fund’s cash, investments, accrued and receivables income, and cash equivalents. Meanwhile, the market value is determined daily depending on the closing price of securities held within the portfolio.

Because funds can have a specific amount of capital as liquid and cash assets, those are calculated under the heading of cash or cash equivalents. Accrued income includes money earned but not received by the fund. Receivables refer to items such as interest payments or dividends applied during that day. Finally, all these and the qualifying variations are combined to determine the sum of the fund’s assets.

Generally, mutual fund liabilities include pending payments, a range of fees owed to different associated entities, or money owed to banks. Also, funds can have foreign liabilities, which could include dividends or income to non-residents that are pending, or shares held by non-residents, along with proceeds that are pending repatriation. These can be classified further as short-term or long-term liabilities based on the length of payment.

For calculating NAV for a certain day, all the different items are categorized as assets or liabilities.

Example:

Suppose a mutual fund has $200 million in total investments across multiple securities, based on each asset’s closing price that day. Additionally, it holds $8 million in cash or cash equivalents, $5 million receivable, and the days accrued income was $100,000. Meanwhile, the mutual fund also has $3 million long-term and $14 million short-term liabilities, while the days accrued expenses was $12,000 with 6 million outstanding shares. The following formula is used to calculate the Net Asset Value:

NAV = [($200,000,000 + $8,000,000 + $5,000,000 + $100,000) – ($14,000,000 + $3,000,000 + $12,000)] / 6,000,000 = ($213,100,000 – $10,988,000) / 6,000,000 = $33.69

How is RNAV Different from NAV?

The RNAV is a more complex calculation requiring knowledge of additional company information. At the same time, NAV is a simpler calculation that divides company assets and liabilities by the number of outstanding shares held by investors.

The RNAV method requires knowledge of the development of property or company value, revaluation surplus, and outstanding shares held by investors. Additionally, any RNAV discounts are needed to calculate the Revalued Net Asset Value correctly.

Generally, a retail investor cannot easily use the RNAV method for valuing real estate developments because of the information requirements. Furthermore, acquiring the data to calculate each property’s market value a developer holds can be costly. Therefore, analyst reports remain the best retail investors approach when analyzing the developer because they already have access to the information.

How to Value Real Estate Stocks?

Before purchasing a property, it is recommended to figure out the value to ensure a fair price and transaction. This rule applies to real estate stock as with any other. There are three methods of analyzing real estate, depending on the property type and data availability.
1. Income
This method is used for estimating property value depending on the revenue generated. This method is frequently useful for properties that are producing income. This approach uses capitalization rates – the real estate property’s potential ROI – along with net operating income for estimating the property’s value. Additionally, discounted cash flow is a factor that can help derive property value.
The following is a basic example of the capitalization approach.
a. To find the property value based on capitalization rates, determine what the net rentals realized or net operating income is. Then, operating costs (minus monthly mortgages) are deducted from the total rental revenue to determine the net operating income.

b. Figure out the ROI you would like, along with the expected monthly rental. Then, using the following formula, we can determine the property value:

Thus,

For example:
If you’re looking to purchase a condo and use it for a rental property that rents for $1,100/month and generates a 5% ROI, you will use the following to calculate the amount to purchase the property at (or below).
($1,100 x 12) / 5% = $264,000

2. Market or Sales Comparison Method
This method estimates the property value by evaluating the recent sell price of other similar properties within the area. The sales comparison method is often used to determine the value of family homes. Although two different properties will never be the same. Therefore, adjustments will be required for ensuring the sell prices are similar to that of the property features. When a property offers features not available on the comparison properties, the selling price is adjusted upward or downward when the subject property lacks a feature of a comparison property.
To determine real estate value using the market method:
a. Locate similar properties in the area sold recently.
b. Adjust based on differences in quality, quantity, size, location, etc.

3. Cost Method
This method estimates property value based on the costs of building or replacing the property. The cost method is frequently for purchasing recently constructed properties, requiring knowing the cost for materials and construction. The method is frequently used for purchasing properties that have hard to find comparisons sold recently while not currently generating an income. Typically, the cost method considers the land value while including the cost to build structures while subtracting depreciation.

Reproduction refers to the expenses to fully duplicate the property’s structure.
Replacement refers to the cost to build a similar structure with updated materials and construction methods. Therefore, replacement costs are more common due to being based around current construction costs.
To estimate the replacement or reproduction cost, there are three common approaches:
1. Comparison or Square-foot approach is based on comparing recently developed properties based on cost-per-square-foot, multiplying it by the subject property’s total square footage.

2. Unit-in-Place approach is a modified version of a quantity survey. However, rather than analyzing the costs for every item used in construction, it calculates the costs of materials, labor, entrepreneurial profit, and overhead for each section of the property—for instance, cost per sq. ft. of walls roofs.

3. Quantity Survey approach combines the total cost of itemized materials, labor, entrepreneurial profit, and overhead. Appraisers rarely use this approach due to the time and in-depth work required.

Filed Under: Forex Glossary

What Does TTM Stand For In Finance

by Fxigor

Very often, in contracts or when we analyze companies’ performance, we can see the TTM abbreviation

What Does TTM Stand For In Finance?

In finance, TTM stands for trailing twelve months, and it represents a company’s financial performance in the last 12 consecutive months. For example, if the financial statement is created on March 12. 2020. than financial report and the dollar values used to prepare the statement will be created as trailing twelve months from 1. April 2019 till 31. March 2020.

It provides a look at the past twelve trailing months (TTM) of revenue. Companies can be analyzed, and new information can be gleaned in short order. The smart investor will be glad that they took that perspective. It could make all the difference for the new trader hoping to succeed. The market is challenging, and TTM Revenue can make sense of a lot of new information in time.

TTM Example

How to calculate trailing twelve months :
Suppose the Financial statement is headed on month X where X= 1…12. Then TTM will be from X-12 months till the end of month X.

If the financial statement is created on March 12. 2020. than Financial Report and the dollar values used to prepare the statement will be created from 1. April 2019 till 31. March 2020. This is trailing twelve months.

TTM revenue has been widely discussed in some key ways. New traders can take a page from the experts when they research. TTM Revenue is an important consideration for many reasons these days.

TTM Revenue data

First, it helps to research what the TTM Revenue data will mean. That provides a limited scope for the data analysis now in effect. The research is detailed, and new firms are analyzed with that helpful information insight. The trader should research any move that they make on the market. The TTM Revenue program is held in high esteem because of the dedication now involved. New traders are eager to learn more about the TTM Revenue information being posted. That helps people understand the daily trade actions made on the market. Get up to speed with all the new info as well.

TTM Revenue changes

Then it will be helpful to follow the TTM Revenue changes. The market is known to change rapidly, and people want to follow with great interest. The revenue changes can teach traders what they need to do next. The TTM Revenue sources are amazing to new traders on the market. Investors are willing to put in a lot of information to get work done right. The TTM Revenue is popular as a means of analyzing the market. See what new trading tools are on the future table for the investing firms. They can lead the way in a lot of respects.

Take a newfound effort to renew the TTM Revenue concepts. The reviews can bring traders to a new level of expertise. The projects are worth a new look, and people want to follow with great interest. Write new reviews to offer up some feedback to the leading companies.

Check out the returns based on the TTM Revenue concept. The concept is gaining steam, and many new corporations offer some insight. Advanced traders will want to give the idea a chance. It can bolster the revenue source that people want to secure. The TTM Revenue options are sure to impress people who give it a chance. Take time to explore the choices and make good options possible. The TTM Revenue is helping traders make good choices in the long run. Think through the investment schemes to make the projects possible.

What does TTM mean in texting?

TTM in texting means “Talk To Me” OR “Text To Me.” In urban internet slang, the TTM message in the text means that somebody wants or needs to hear back from you as soon as possible. However, it is a different meaning than in finance, where TTM means trailing twelve months.

Filed Under: Forex terms

Association Cambiste Internationale

by Fxigor

Association Cambiste Internationale ACI

Definition of Association Cambiste Internationale:
Association Cambiste Internationale, ACI is a leading, global association of wholesale financial market professionals, contributing to market development through education, market practices, technical advice, and networking events. It is an examining body internationally recognized by the practitioners working in the Foreign Exchange and operations of the Money Market. This works with several numbers of main authoritarian bodies. The association Campsite Internationale has headquarters in Paris. It is regarded as an umbrella association for several national associations consisting of foreign dealers and other members working in the financial institutions. The members of the Association Cambsite Internationale are engaged in the trading in the financial market that represents the Foreign Exchange, securities, interest rate items, costly metal and products, and their different types of derivatives. Association Cambiste Internationale is a popular association of wholesale market professionals. This Cambsite Internationale consists of about 13,000 members belonging to different countries.ACI was founded in Paris in 1955 as Association Cambiste Internationale and had a proud and illustrious history of involvement in helping its membership through various market interactions. The specific market promotes best market practices with the help of better learning programs and a collection of the globally accepted market practices with the help of learning programs and a collection of the worldliest collection of market standards. It was established in Paris and had a valued background in the International Markets.

Bruno Langfritz, ACIFMA Chairman said:

“Throughout its long history as a non-profit making institution ACI has emphasized membership, community and a determination to enhance financial industry ethical conduct. As the world of financial services develops and changes faster there is ever more need for ACI education and training services, both for individual personal development and code and regulatory adherence.”

Filed Under: Forex Glossary

Trader Slang – forex glossary slang

by Fxigor

What is the slang definition?

Slang is the term that denotes a set of particulars words and expressions that are unusual of non-official communications for some group of people in the society. The language of cultural societies, geographic places, and representatives of various professions had had its peculiarities that reflect the people’s views and, in fact, points out their status and society. Jargon or slang is different from the literary speech norms, but usually, most slangs make communication easier. Like other people, traders have their slang words because they also keep a good imagination and a sense of humor.

In the below mention list the detail of all the main terms of slangs is presented . Market traders in their non-formal communication usually use these slangs. This list of slangs will help the newcomer on the market for getting into the trading swiftly.

Bull market “bullish”: when the market is upward.

Bear market “bearish”: when the market is downward.

Margin call: When losses exceed margin, a margin call is given at that moment either you have to refill your account or reduce some open trades.

Tick, Item: It is a small step that brings a change in the prices.

Long (position): Whenever some traders buy something with an assumption of an increase in price in future time

Short (position): when traders sell something on the assumption of a price drop.

Heat: When they talk about the big risks in trades.

Range: Whenever the market is stagnant, it means no down or upward trend for a while.

Flat (Square): When traders sell all stocks.

Setup: a specific environment for trading.

Gap: It is a difference between the last period’s close price and the next period’s open price.
Whipsaw: It is a position of volatile markets, and in this condition, a movement in price is sharp followed by the same sharp reversal.

Rally: It is a recovery period after the decline in the market.

Profit (Gain): Earned money gained after selling stock.

Loss: Lost money after selling stock.

Pip (Point): The last digit, like, in Euro/USD one point=0. 0001.

Slippages: It is the execution of the order when the market is fast, but the broker has low liquidity, and due to this, he cannot execute your order.

Drawdown: It is in the Forex trading account value.

Squeeze: It is an action for raising the money price by any central bank.

Limit: When they place orders for buying or selling currencies at a particular price or more.

Lock: When you open 2 positions for one stock with one specification and size in diverse directions.

Majors: It means the most famous pairs of currencies are available to trade. Like AUD/USD, USD/CAD, USD/JPY, GBP/USD, and EUR/USD. On the contrary, ‘Exotics” are less traded pairs.
Cable: British Pound, GBP.
Aussie: Australian Dollar, AUD.
Swissie: Swiss Federation franc, CHF.
Kiwi: New Zealand dollar, NDZ
Loonie: Canadian Dollar, CAD.
Holy Grail: It is a consistently profitable trade system.

There is much more slang contently growing with the span of time, so it cannot be said that it is a complete list.

Filed Under: Education, Forex Glossary

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