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Forex Information: How To Draw DeMark Trendlines

2009-03-15T17:07:00.000-07:00

When searching for Forex information on the internet you are likely to find articles relating to trendlines and trendline analysis.

Tom DeMark is a specialist in the field of technical market analysis and his best-selling book "The New Science of Technical Analysis" released in 1994 spells out some innovative techniques when it comes to the use of trendlines.

Much Forex information on the internet is of a general nature, and many articles are written about Forex by individuals who are not traders themselves. Tom DeMark on the other hand has had a long career with institutions trading stocks, futures, currencies and options.

His guidelines on the use of trendlines are very specific and they can be helpful to the newer trader who is searching for reliable Forex information on how to use standard indicators.

Here is a brief step-by-step description of how to draw DeMark trendlines:

Note: The term swing high and swing low (also called cycle high and cycle low) refers to the following:

In An Uptrend: A swing high is the wick of a candle that is higher than the wick of the candle to the left and right.

In A Downtrend: A swing low is the wick of a candle that is lower than the wick of the candle to the left and right.

Obviously the more candles to the left and right that are higher in a swing low or lower in a swing high makes the swing or cycle more significant.

An uptrend is where price is making higher highs and higher lows. A downtrend is where price is making lower highs and lower lows.

Drawing DeMark Trendlines

Drawing Trendlines In An Uptrend

1. Examine the bottoms of the candles on your chart and identify the most recent candle wick that is lower than the candle wicks to the immediate right and left of it.
2. Look left on the chart, and identify the previous low candle that has candle wicks higher to the immediate right and left of it which is lower than the current low candle.
3. Now draw a line from the current lowest candle to the previous lowest candle (drawing from right to left).
4. Now take the end of the newly drawn line which stops at the current low candle and extend it forward some distance (drawing from the present position to the right).

Drawing Trendlines In A Downtrend

1. Examine the tops of the candles on your chart and identify the most recent candle wick that is higher than the candle wicks to the immediate right and left of it.
2. Look left on the chart, and identify the previous high candle that has candle wicks lower to the immediate right and left of it which is higher than the current high candle.
3. Now draw a line from the current highest candle to the previous highest candle (drawing from right to left).
4. Now take the end of the newly drawn line which stops at the current high candle and extend it forward some distance (drawing from the present position to the right).

You have now drawn a Tom DeMark trendline.

This can now be a reference point for future price action. It will often be observed that price will come and check this level. If it breaks through, it can mean a change in direction, the significance of which will depend on the time frame being used.

Trendlines drawn on 5 minute or 15 minute charts have much lesser significance than trendlines drawn on higher time frames such as the 1 hour, 4 hour, or daily.

Caution Required

Much Forex information extols the virtues of trendlines as an indicator of possible future price action.

Mr. DeMark certainly has made this a science and his detailed approach to drawing trendlines is certainly more accurate than just drawing general trendlines along the bottoms and tops of trends according to the way the eye sees.

However, trendlines in themselves do not indicate where high probability trades can be taken.

It is important to use a variety of indicators before pulling the trigger. Examining previous levels of support and resistance is probably far more significant in determining where price is likely to hesitate that watching trendlines.

However, they can be useful. If you find a key support or resistance level also coincides with a Fibonacci retracement or extension level which is also at an intersection with a trendline, then you have built a reasonably solid case for a trade.

Use this Forex information on DeMark trendlines wisely, with caution, and it can be another useful addition to the Forex day trader's toolkit!

Trading Trend And Ranges In Today's Forex

2009-03-15T17:04:00.000-07:00

First what is Forex: The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.

When you choose to start trading in the Forex market, which is often called the foreign exchange market, you will need to know a little trading vocabulary. Learning specific terms and what they mean are essential before you even think about using real money to trade. You would never get into a pilot's seat and try to fly a plane without ever having taken flying lessons. The same goes for foreign exchange market trading. You need to be fully aware of what you are doing. This is a market that is not quickly learned, so you should never assume that once you jump into it, you will learn as you go. While some people opt to do that, they typically end up losing an adequate sum of money because they were not as prepared as they should have been. Knowing the importance of trading trends and ranges in Forex trading is very important. If you are thinking of trading in the Forex market, be sure you know what these terms mean and their implications.

Trading Trend

When price moves consistently in one direction in the Forex, a trend occurs. When the direction is higher, the trend is often called bullish. When the direction of the price is moving lower, the trend is often called bearish. These terms are relative of course. When you define a trend, you should always remember that price peaks and troughs are in the same direction. When you are dealing with a bearish trend, remember that price highs and lows are moving lower. Likewise when you are dealing with a bullish trend, they are moving higher.

Often when trends occur, it is possible to draw support lines under one that is moving higher (an uptrend). You can also often draw resistant lines above one that is moving lower (a downtrend). Once you see these lines break, it can be assumed that the trend is complete. At this point there is a possibility that the trend will begin to reverse. When it does reverse, you will need to know the pattern of what that entails.

Trend Reversal

When you hear of a trend reversal, it simply means that the direction of market prices is changing. Often you will see trend reversals following a four step pattern. Usually, this includes the market making a new high, the trend line being broken, the market making an intermediate low, and a new rally that does not match the first high. Many times you will see prices break the previous low however. You may come across terms such as Double, Triple Tops, and Bottoms, which are all trend reversal patterns. Head and shoulders patterns are also popular reversal patterns.

Trading Range

The trading range is actually a sideways chart pattern. It is often used to represent a resting period before the original trend is resumed. You may see these when you are charting trends and should know what they imply.

Often trends are very important to investors. Those who engage in trend-following are people who look at major trends and make decisions in the direction of the trend. This can be a good strategy, but you must know a great deal about trends and the market in general in order to use this technique successfully. Beginners are not usually very good at tracking trends and using trend-following techniques. One thing that you should also note is that some price movements are trendless. This means that they have no clear direction, which makes trend-following nearly impossible.

Remember, that in order to fully understand trends, you must be educated in the ways of the market and foreign exchange in general. Beginners should not rely heavily on foreign exchange market trend tracking. Once you get more experience you can begin looking into tracking more and more. However, be aware that different things affect and influence the Forex. These influences can change what people expect trends to be. Therefore, you should be a seasoned trader in order to rely on the trends and ranges alone. Educate yourself on these terms and learn to recognize them in the actual market. After all, learning the terms is one thing and being able to see them in reality is different.

What's the .382 Fibonacci Ratio in Forex Trading?

2009-03-15T17:01:00.000-07:00

It was mentioned in a past article that Fibonacci forex trading is the basis of many forex trading systems used around the world by profitable forex traders. These systems are all based on the famous Fibonacci ratios (.236, .50, .382, .618, etc.) and each of them can specialize in a particular ratio along with other minor indicators in order to make the pinpointing of the entry and exit levels as accurate and profitable as possible.

One of the widely used Fibonacci ratios is the 0.382 ratio. As it can be easily seen on any forex chart, currency prices are continually changing and they follow an oscillatory pattern with peaks and valleys. The limit of the peak is usually called a resistance level while the valley is usually called a support.

In order to find the 0.382 ratio level what you do is, first; measure the size of the drop or rise over your time of interest. Once you have that value you multiply this by 0.382. Now depending on what you are looking at, a rise or a drop on the price of the particular "currency pair" you are trading, you will add the last value you calculated to the total drop or subtract the value from the total rise.

These operations will give you the 0.382 Fibonacci ratio level, either for a rise or a drop on the chart you are analyzing. Once you have the value you can then start planning the strategy you will follow in order to make a high probability profit from this valuable information. For the 0.382 ratio level calculated for a recent rise in the "currency pair" exchange price, your calculated level will be a highly probable support and for the case of a level calculated for a recent drop of the prices your level will be a highly probable resistance.

Knowing this ahead of the market and having the proper secondary indicators, will give you a huge advantage over most forex traders, and that's something any trader would like they could count on. That's why Fibonacci trading is so widely accepted over the world, and of course, why it's so profitable and successful.

Pivot Points in Forex: Mapping your Time Frame

2009-03-15T16:58:00.000-07:00

It is useful to have a map and be able to see where the price is relative to previous market action. This way we can see how is the sentiment of traders and investors at any given moment, it also gives us a general idea of where the market is heading during the day. This information can help us decide which way to trade.

Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.

As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can't break the pivot point, a possible bounce from it is plausible.

Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.

Pivot Points

In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.

Why PP work?

They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.

Calculating pivot points

There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).

Pivot point (PP) = (High + Low + Close) / 3

Take for instance the following EUR/USD information from the previous session:

Open: 1.2386
High: 1.2474
Low: 1.2376
Close: 1.2458

The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439

What does this number tell us?

It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.

Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.

Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

Support 1 (S1) = (PP * 2) — H
Resistance 1 (R1) = (PP * 2) — L
Support 2 (S2) = PP — (R1 — S1)
Resistance 2 (R2) = PP + (R1 — S1)

Where, H is the High of the previous period and L is the low of the previous period

Continuing with the example above, PP = 1.2439

S1 = (1.2439 * 2) — 1.2474 = 1.2404
R1 = (1.2439 * 2) — 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 — 1.2537) = 1.2537
S2 = 1.2439 — (1.2636 — 1.2537) = 1.2537

These levels are supposed to mark support and resistance levels for the current session.

On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.

S1, S2, R1 AND R2...? An Objective Alternative

As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.

We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today's chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.

LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.

These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.

The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don't know the reason, and we don't need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.

What is important about his approach is that support and resistance levels are measured objectively; they aren't just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.

How To Spot Forex Fraud

2009-03-15T16:55:00.000-07:00

As the popularity of Forex increases so do the number of scam artists attempting to cash in on the Forex gravy train. Since Forex involves trading money internationally, often over the Internet, a whole new breed of scams have come about. Ironically many of these scam artists are finding their marks through newspaper, television or other print media advertisements.

While these scams are generally easily spotted by experienced traders, new speculators may have problems knowing the difference between what is real and what isn't. It is absolutely essential to thoroughly research Forex trading, and any potential companies you may trade with before making an initial investment. The last thing you need is to find out that the company you have invested with is under investigation by the SEC for fraud. In this type of circumstance it can often be impossible to retrieve your money as the claims from all fraud of participants will be higher than the total payouts the government can guarantee.

One way to spot a scam on Forex is when someone promoting a Forex system guarantees no risk. It is a fact that there is risk with Forx trading, and generally anyone who claims otherwise is a liar, or more likely a criminal. Trading in Forex successfully requires knowledge, discipline, and a trading strategy. But there is no magic software or no risk way to assure that you will make money.

Another red flag indicating a sure sign of a Forex scam is a web site that guarantees profits. Nobody can guarantee profits and Forex trading. It is up to you as an investor to perform. If it were possible to guarantee profits in Forex trading then nobody would need to start a business showing others how to make guaranteed profits. The profit potential for anyone who could guarantee profits would be so enormous in Forex trading, that they would quickly become a billionaire by trades. So why would they waste time teaching others?

Another common tactic of Forex scam artists is to promise employment opportunities for people using their system. This is usually a trick to get you to spend your money with them. They are fishing for people with capital who can fund their enterprise. They typically promise to offer firm money to people using their system. But why would they do this? Instead what happens is they lure people into their training systems and convince people that they have done so well in the training session that they should start using their real money in order to make a fortune.

All reputable Forex trading web sites will be a member of the CFTC or the NFA. Make sure to check the company's claims out and assure that they are members of one of these organizations before dealing with them.

Keep in mind that Forex is a relatively unregulated system of exchanging money. In many cases Forex scams can become highly technical, involving brokers manipulating prices in ways that cannot be tracked by the average trader. Because of this is essential that you not become a mark for such brokers.

In the United States the CFTC is the federal agency responsible for regulating the trade of Forex currency. If you suspect that you have been a victim of some type of fraud contact the CFTC. They have jurisdiction for investigating and enforcing the laws.

Sending Signals For Trading In FOREX

2009-03-15T16:51:00.000-07:00

Forex signals are sent by a forex firm to their subscribers in order to buy and sell currencies. These signals are called entry and exit signals for the forex dealers. The firms, which send this forex signal, do so after tedious and meticulous research and analysis into the currencies that their dealers are trading in. For example a firm may send the entry and exit signals at designated time frames in real time. These will remain valid for a short period only after which they are going to be different.

Let's say that there is a forex trading company say Acme Forex traders who send entry and exit signals to their clients in the following way

The first signal is provided to the trader at 08:30, and this signal is going to remain actual till 12.30

The trader will receive the second signal at 12.30, which would remain actual till 16.30.

The last signal would be sent to the trader at 16.30.

The transactions are given according to GMT. Please adjust for local time changes. The transaction shall be calculated till the signal is actual. The charges would be $300 per month per trader.

Forex dealers and experts provide forex-trading information and data to both institutional clients and individual investors and provide these kind of signals. Investors like to subscribe to credit worthy forex dealers / companies since their information and data would be genuine and more accurate. In fact many forex dealers would kill to get information before the rest of the market gets the same information. As forex dealing is a very competitive business.

These signals or forex indications are given to the forex dealers through the forex trading platform or hub. The signals or forex indicators are the specific entry and exit strategies. Therefore when you enter a currency trade buying currencies at lower price and then selling at higher price, you book a profit. currency pair. For example the forex dealer is trading in GBP/USD. The rate is for GBP/USD is .9800 . If you expect that Euro is likely to go up in the future you would buy the Euros today to sell them off at a later date thereby booking a profit. If you expect the dollars to appreciate, then you would buy the dollars selling them off at a later date to book profits.

Most forex dealers will get the information via email or straight on their computer screens. It is then up to the forex dealers to decide whether they want to sell / buy / hold the currencies till further information is given to them.

Those who contribute in giving the information on currency dealing are hedge managers, foreign exchange dealers located in the major financial markets of the world, professional stock brokers, finance managers and a host of other finance professionals. They make it their business to collect, analyze and disseminate information in such a way, that can be used by forex dealers to buy / sell / hold the forex.

Therefore the companies take extreme care to send the forex signals for the currency dealers.

Finding Reliable Forex Signals

2009-03-15T16:47:00.000-07:00

You guys know how hard it's to find a reliable forex signals and most of the forex signals services are very expensive ranging from $199 to $500 per month. And worse of all, there's no guarantee of this.

To find a good service, you must make sure that you get their free trial before you really subscribe to the service. 1 to 2 weeks is good enought to prove that whether they are reliable or not.

Avoiding Forex-Related Frauds and Scams

2009-03-15T16:44:00.000-07:00

A lot of people have been 'burnt' from scam operations on the Internet. Their sites may look so perfectly legitimate that you doubt whether they would have gone through all that trouble building a trading platform just to steal your money. Beware.

The first thing I look for is the geographical location of the broker. If I find that they are based in a country where the financial industry is, in my opinion, relatively unregulated and under-developed, I quickly forgo signing up. This is terrible news for honest brokers in those countries, but your job as a trader is to protect your capital. If you lose that, then you cannot trade. The onus is on them to convince you that they will do the right thing by you as an investor.

I started out with an Australian broker. Currently I am using an American one. I have not tried UK-based brokers but the British financial industry is one of the best. Companies that are based in countries such as Japan , Germany and France are probably just as good too, if their website speaks your language.

Notice any license numbers that they may have registered with regulatory bodies that act like government watchdogs who oversee the finance and investments industries. These are organisations that impose strict rules to safeguard your investment. Some of these rules may include the requirement that brokers segregate all customer funds from the operational funds of the business. Your money is required to be put in highly-reputable banks and the funds are only withdrawn from these accounts upon specific withdrawal requests.

Take note that there are some fake regulatory bodies being thrown around in cyber-space as well. Take a look at how long they have been operating for. Try and search out any reviews or comments made about them. See if you can find forums where traders have discussions about their brokers.

Below is a list of things to keep in mind to help you avoid being a victim of a scam:

Stay Away From Opportunities That Sound Too Good To Be True

There are people who may have just acquired a large amount of money just and recently are the same and are shopping around for safe investment vehicles. These may include retirees who have access to their retirement funds. It is understandable why retirees would be drawn to 'high-return, low-risk investments'. This is also what makes them very vulnerable. If you identify yourself to be one of these people, be careful. A lot of deceitful characters are after your money. Furthermore, only allocate a tiny amount of your money to trading until you can start growing it. Not all people can trade successfully, so it is a venture you should take on haphazardly. It is your life savings at risk.

Avoid Individuals Or Organizations Who Claim To Predict Or Guarantee Large Profits

Any form of trading is hard. Trading currencies is no different. Be wary of statements that make it sound easy. Statements like:

"Whether the market moves up or down, in the currency market you will make a profit";

"Make $1000 per week, every week";

"We are out-performing 90% of domestic investments";

"You'll make returns of 70% a year";

"Here is a no-risk strategy".

If they could make such returns, why would they even bother letting you know about it.

Be Wary Of Companies Who Downplay Investment Risks

Hold your wallet tight and zip up your purse when companies say that written risk disclosure agreements are routine formalities imposed by the government. Watch out for statements like:

"With a $10,000 deposit, the maximum you can lose is $200 to $250 per day";

" We promise to recover any losses you have ".

Be Wary Of Companies That Claim To Trade In The 'Interbank Market'

Do not believe it when some people say that they have access to the 'Interbank market' or that they can give you access to trade in that market because that's where bargain prices can be obtained. This is not true. The 'interbank market' is not a place, it is not a physical building. It is simply a loose network of currency transactions that are negotiated between big financial institutions and other large companies.

Ethnic Minorities Are Often Targeted

Ethnic newspapers and television 'infomercials' are sometimes used to attract Russian, Chinese and Indian minorities. Sometimes these ads offer so-called 'job opportunities for account executives to trade foreign currencies', whereby the recruited 'account executive' is expected to use his own money to trade currencies and would often times be encouraged to recruit members like their friends and family to do the same.

Seek Out The Company's Background

Check any information you receive to be sure that the company is who they claim to be. If at all possible, try and get the background of the people operating the company. Do not rely solely on oral statements and promises made by the company's employees.

If You Are In Doubt, It Is Not Worth Risking Your Money

If after trying to solicit information and at the end of it all, you are still in doubt about the credentials of a particular company, my suggestion is to start looking elsewhere.

You may find further information by contacting government 'watchdogs' because they keep up to date with trends and reports regarding scams and other fraudulent activities. Please check the resource section of this site for the information of organizations that regulate the securities industry, sorted by country. There is also a list of brokers that you may want to look at.

Why Forex Trading is an Ideal Home Business

2009-03-15T16:41:00.000-07:00

Advantages of Forex trading as a home-based business.

There are several advantages of Forex trading including:

- You can adapt your participation to your own schedule

The Forex market is open for trading 24 hours per day, Monday through Friday, unlike the stock market or any other business in which you must work around "business hours". With Forex trading, you can work in the middle of the night if you want.

- Large marketplace

Forex trading is the largest marketplace in the world. It shadows all other markets, even the stock market. That means there is opportunity for anyone to participate. The daily trading volume is nearly 4 trillion dollars!

- Low barrier to entry

It takes less than $100 to get started Forex trading. If you can scrape together that amount of cash, even if it takes a garage sale or selling some of your extra stuff on eBay or Craigslist, you can jump into Forex trading.

Some pitfalls to watch out for.

Be aware of these potential problems if you decide to enter the Forex market:

- Investing decisions based on emotion rather than logic

As with any type of investing, it's very easy to get caught up in the prospect of making big money. Place some limits on yourself so that you don't use money you need for living expenses.

- Investing without a solid knowledge of the playing field

No serious athlete would step out onto the baseball diamond or basketball court without thoroughly understanding the "rules of the game", and neither should you venture into any type of investing without the same level of understanding.

- Trading too frequently

Although there are no "commissions" when trading Forex, you will be responsible to pay the "spread", which is the variance between the ask price and the bid price. If you do very many trades, these "spreads" can really add up. Just make sure you understand the cost of your trades before you make them.

Conclusion

Forex can be an ideal avenue for you to make extra money, or even as a foundation for a home-based business. It is wide open for anyone: you don't need to have any specific credentials or background. Why not take a share of this market today?

The Pros and Cons, of Trading a Forex Trading Demonstration Account

2009-03-15T16:37:00.000-07:00

Trading is a skill that takes time to learn. Think of it like Boxing it's also a skill that takes time to learn. If you get into a professional boxing ring without any training, you'll get beat up physically! If you get into the Forex ring without any training, you'll get beat up financially!

The similarities are that both the examples are Skills, and both require psychological preparation. The difference is that one is physical and the other is financial.

We can get over a physical beating usually in a few days or weeks, BUT a financial beating can be devastating and easily affect us for the rest of our lives, not only does it hurt our hip pocket but it can cause problems with our relationships and family. So when we get into the Forex ring we have to be prepared.

The Professional Boxer

When a professional boxer gets in the ring he has already been practicing in a safe environment usually for years, this safe environment is where he can make mistakes without having medical treatment. He can also spar with other opponents that have more skills and experience then he does and he learns from them. He also has someone there to watch him and give advice and guidance. Then when he is ready, he gets into the ring and boxes for real, he's accepted the risk and KNOWS that he can get hurt, but he's also studied his opponent and done his home work, so he KNOWS he has a good chance. He can still lose this round but if he wins most of them he will take the money home. BUT! What about the psychological side? Does he fear getting into the ring? Sometimes! But he's aware of it and he can control how it affects him in a way that is beneficial. Will he be thinking about the money he'll make? Or will he be thinking about the fight as is happens and planning his next moves during the breaks? He'll be analyzing the results from the previous rounds and making changes in his strategy for the next round.

The professional Trader

Can you see what's coming next? If so than, you've learnt to analyze what you read and form a projection into the future. (A very valuable skill for the FOREX Trader) A forex trader, like the professional boxer, will not get into the Forex trading ring without being prepared first. He might not spend years practicing in the Demonstration Account, but he will at least have spent a month or two or three, sparing with the Forex Market in a safe environment that he won't get beat up in. He'll practice trading forex against all the other traders and learn from them, and he'll also have someone watching him and giving advice, and guidance. Then when he is ready, he'll get into the Forex trading ring and trade forex for real, he's accepted the risk and KNOWS that he can get hurt, but he's also studied the Forex market and done his home work, so he KNOWS he has a good chance. He can still lose on this trade but if he wins most of the trades he will take the money home. BUT! What about the psychological side? Does he fear getting into the forex trading ring? Sometimes! But he's aware of this fear, but he can control how it affects him, in a way that is beneficial to his forex trading. Will he be thinking about the money he'll make? Or will he be thinking about the things that are influencing the market as is happens and planning his next trades while he waits for the results? He'll be analyzing the results from the previous trades and making changes in his strategy or continuing with the one that's working, and planning for the next Forex Trade.

So it's easy to see that trading with a Forex Trading Demonstration account is something everyone should do before getting into a live Forex Trading account.

The practice account will give the trader MOST of the skills necessary, to be able to trade profitably, giving them the training ring to spar in.

BUT A BIG WARNING!!!

Like the Boxer the Forex trader has learnt to manage his emotions, this is often overlooked by new Forex Traders. BUT is probably what separates the successful investor from the ones that keep getting beat up! If you are considering getting into the Forex trading Ring, then be sure to practice first, and find all the information you can about controlling your emotions. Fear, greed, impatience, are the main culprits of financial bashings, so keep an eye out for them, and learn how to beat them before you get in the ring with them. Understanding these emotions will enable you to use them to your advantage in understanding the market, the market is influence by these emotions and if you understand them you can have them on your side, thus giving you an advantage.

Forex Trading, What Hours Should I Be Ready For Trading?

2009-03-15T16:34:00.000-07:00

Once you have decided to enter the Forex trading world you will find that FX trading has many advantages over other capital markets. Including among others; very low margins, free trading platforms, high leverage and around-the-clock trading.

It is my main concern in this article to let you know what hours you should be ready and focus for start trading, so you can expect the highest profits in your trades, and not just consider that around-the-clock trading means you should randomly trade through out the day.

In short, it is important to know what the best hours to trade are because if you want to find an appreciable number of profitable trades you need to enter the forex market at the best period of time, i.e., when the activity, the volume of transactions, is the highest.

At any given time; somebody, somewhere in the world is buying and selling currencies. As one market closes, another market opens. Business hours overlap, and the exchange continues as day becomes night and night becomes day. Giving you 5.5 entire potential trading days.

Forex Trading begins in New Zealand at Sunday 5pm EST, and then is followed by Australia, Asia, the Middle East, Europe, and America in this order and through out the day and through out the week until Friday 4pm EST when the American market closes.

Other important facts every Forex trader should know are: the US & UK markets account for more than 50% of the forex market transactions; Forex major markets are: London, New York and Tokyo. Nearly two-thirds of NY activity occurs in the morning hours while European markets are open. And maybe one of the most important characteristics; Forex Trading activity is heaviest when major markets overlap.

So, the answer to the question; "What hours should I be trading?" is dictated by this last characteristic, you should trade when the major markets overlap. Now, when do they overlap?.

Considering the different time zones of the world and open and close times for Australian, New Zealand, Japan, America and Europe markets. We can arrive to the conclusion that there are two major time gaps when two of the major markets overlap during trading hours.

These hours are between 2 am and 4 am EST (Asian/European) and between 8 am to 12 pm EST(European/N. American).

So if you want to catch the best trading opportunities of the day and you are in the American continent you must be ready to wake up early or go to sleep late some times. Of course things change around the world. What's the best region where to trade from if you can't wake up early?... Maybe the Ukraine.

The Prime Time For Daily Forex Trading

2009-03-15T16:32:00.000-07:00

Investors and traders can trade currencies worldwide, in any trading zone, 24 hours a day, in today's foreign exchange market. London, Japan and New York top the top three currency traders among the currency dealers. These currencies are being traded 24 hours a day. The only time that currencies stop trading is on Friday when the Japanese market shuts its doors. There is a one day window after Japan closes before Europe steps in on Monday morning to open for business.

The majority of trading comes from banks, brokerages and investment companies. Companies that sell and buy foreign currencies as part of their business, like independent brokers and currency dealers, make up only a small part of the foreign exchange currency trading. The Forex market will continue to develop and grow at a steady pace as more currency traders become aware of the foreign exchange markets potential for earning and raising capital. The Forex market reaches an average daily turnover 30 times higher than any other U.S. market.

Added to the drive for supply and demand, the Forex market presses on as the enormous scope for profit potential among the currency dealers is steadily rising. The Forex market also uses the free floating system that is considered more practical for today's foreign exchange market which can experience a change in the currency rates at an estimated 4.8 seconds. The Forex market is taking on a prodigious role in the country's economy, after developing from connective financial centers to one unified market. Having expanded worldwide, the Forex market is reflecting the constant growth of all international trades and their countries. When you consider the size of the foreign exchange market, it would be important to understand that any transactions that are made with a future trading broker or an independent broker, can lead to more transactions. This can be due to the brokerage businesses as they work to readjust their positions.

Understanding your overall portfolio and its sensitivity to market unpredictability is necessary in order to be an effective day trader. This is especially important when trading foreign exchange currencies, because these currencies are priced in pairs and no single pair will trade completely independently of the others. Gaining an understanding of these correlations and how they can change will help you use them to your advantage to control your portfolio's exposure.

Correlations Defined

There is a reason for the interdependence of foreign currency pairs. For instance, if you were trading the British pound (GBP) against the Japanese yen (JPY) or GBP/JPY pair, then you're trading a type of derivative of the USD/JPY and GBP/USD pairs. Therefore, the GBP/JPY must be slightly correlated to one or both of the other currency pairs. Even so, the interdependence amongst these currencies will stem from more than the fact that they are in pairs. While there are some currencies that will move one right behind the other, the other currency pairs can move in different directions often resulting in a more complex force. In the financial world, correlation is the statistical measure of a relationship between two securities.

Then there is the correlation coefficient that ranges between -1 and +1. The correlation of +1 indicates that two currency pairs can move in the same direction nearly 100% of the time. While the correlations of -1 indicates that two currency pairs are likely to move in the opposite direction 100% of the time. If the correlation is zero, this indicates that the relationships between the currency pairs will be completely at random.

Correlations are not always stable. Correlations change, just as the global economic system and other various factors can change on a daily basis, making the ability to follow the shift in correlations very important. The correlations of today may not be in line with the long-term correlations between any two-currency pairs. This is why it's suggested to take a look at the past six months trailing correlation to provide a more clear perspective on the average relationship between the two currency pairs. This change is the result of a variety of reasons — the most common reasons being a currency pair's predisposition to commodity prices, the diverging monetary policies and unique political and economic circumstances.

The Forex Market And Its Three Distinctive Elements

2009-03-15T16:19:00.000-07:00

Although there are many distinctive elements of the Forex market, there are three that can be highlighted as helping new traders learn exactly what the foreign exchange market is all about. These distinctive elements are those that every new trader should know long before they make their first trade. The Forex system is one that is made to encompass the entire globe. It can be difficult to interpret and even more difficult to successfully trade within. The first step to being a successful trader is knowing how the system works. Before you even think about opening a Forex account, be sure that you are familiar with the foreign exchange market's three distinctive elements: geographical, functional, and participant.

Geographical

The Forex is a huge market that encompasses the entire globe. This is a market that spans from North America to Europe, to China, and back. There is no area it doesn't touch which makes the market so popular. There is simply something for everyone within the Forex market. Its easy 24 hour a day access makes it even more attractive for investors. No matter what time of day you want to trade, there will be someone trading in some distant location around the world. Although there is trading in the Forex in every corner of the globe, the major exchanges are Singapore, Hong Kong, Tokyo, Bahrain, London, New York, San Francisco, and Sydney. The geographical element of the foreign exchange market can help new traders realize the size and volume of the Forex. It is simply unmatched in volume and size making it a powerful tool for investors everywhere.

Functional

The entire Forex market functions to transfer purchasing power between countries. When trades are made, partners are converting currency revenues into their domestic currency. When one country's purchasing power is strong, another country's purchasing power may be weaker. The Forex market also functions to obtain and provide credit for international trade and to avoid an exchange rate disaster. When it comes to international trade, the Forex is helpful because it helps the movement of goods between countries and offers credit for financing.

Participant

There are two main parts to the foreign exchange market. The first part is the interbank, which is often called the wholesale market. The second part is the client, which is often called the retail market. In these two categories are approximately five different types of participants. The first type of participant being the bank and non-bank foreign exchange dealers who buy at bid prices and sell at asking prices. This helps the efficiency of the market as a whole. An interesting thing to note is that by trading currencies, banks often make up to 20% of their profits.

The second type of participants is made up of individuals, and commercial and investment firms. This group consists of importers, exporters, tourists, and other portfolio investors. They use the market to help them invest. These are often the participants who use the Forex to hedge, which is a way to reduce their risk.

The third group type that seeks to profit from the foreign exchange market are s speculators and arbitragers. These people are out to make money for themselves. They are acting in their own self-interest. They seek profitable rate changes in order to help them profit and try to profit with the least possible risk involved. Large banks are sometimes a part of this group.

Also involved in the Forex are central banks and treasuries. They use it to change the value of their own currency, or to at least attempt to do so. This is something that they do with reserves. Their motive is not to profit but to influence the market. They want the value of their domestic currency to benefit their interests.

Foreign exchange brokers are the last of the five groups involved in the participant element of the Forex. These participants are those who facilitate trading but are not partners in the transaction. They typically charge a fee for their service, which is most often on a commission scale. They are often seen as go betweens for large traders.

What Is Rollover Interest In The Forex Market?

2009-03-15T16:12:00.000-07:00

In the spot forex market, all trades must be settled in two business days. A rollover refers to the process of closing open position for today's value date and the opening of the same position for the next day's value date at a price reflecting the difference in interest rates between the two currencies.

In accordance with international banking practices, Forex brokers automatically rolls over all open positions to the next date at 5 PM EST for settlement.

Rollover involves exchanging the position being held for a position expiring the following settlement date. For example, for trades executed on Monday, the value date is Wednesday.

However, if a position is opened on Monday and held overnight, the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest.

Trades with a value date that falls on a holiday will also incur or earn additional interest. Forex Traders can earn interest on rollovers, depending on the direction of their positions and interest rate differential between the two currencies involved.

For instance, the primary interest rates in Great Britain are much higher than in Japan, so if a trader buys GBP, he/she will earn interest at 5 PM EST time. on the other hand, if he/she sells GBP in this currency pair, he/she will pay interest at 5 PM EST time.

Overnight Interest/Rollover is automatically paid to a client's account after buying a currency with greater Interest Rate in its country, and charged to a client's account if the country issuing this currency has smaller Primary Interest Rates.

Currency Trading Is Not The Monopoly Of The Nerds And The Geeks

2009-03-15T16:02:00.000-07:00

The general perception is that any and every person who is involved in the business of trading of currency or foreign exchange is a person who has a super high IQ. To hear words and phrases like liquidity ratio, central bank intervention and inflationary demand makes us feel as if we are back in the boring and inherently avoidable lecture on economics that we were forced to attend in our college.

However, all these preconceived notions apart, forex or currency trading is not the domain for the super intelligent alone.

There is no doubt that you need brains to get involved in forex trading. Then, I bet you cannot name a single sphere of human activity that does not need the application of one's mind. A bit of brains and lot of research can help you make a tidy sum in currency trading.

Till recently, the forex trading market was not open to individual investors. To take part in the process of buying and selling of currency, you either had to be a big bank with lots of deposits and assets under your belt or you had to be a big financial institution that carried out the business of trading in forex as its primary activity. Today you do not need a lot of capital to earn money in currency trading. A few thousand dollars as the initial capital is sufficient to get you started.

The advantages of trading in currency are manifold. The biggest advantage is that the currency trading market is a market that remains open round the clock. No other financial market stays open and operation twenty-four hours a day. This round the clock functioning results in constant and immediate reflection of economic, political and social events. A smart investor can take advantage of the fluctuation to make huge profits.

Further, the forex market works without any centralized exchange. There is direct interaction between the persons involved in currency trading over the telephone or electronic network.

However, just because it is easy to enter the currency trading market does not mean it is easy to make profit in the currency trading market. It is very important to possess knowledge of the forex market. You will have to grasp and establish your command over basic concepts. You will have to understand the significance of the technical indicators of the functioning of the forex market. Trying to gain complete knowledge of the currency market without actually entering into the field is like trying to learn swimming without entering the water.

By arriving at a judicious combination of knowledge, instincts and risk, one can make a lot of money in the currency trading market, or the forex market as it is known as, with very little initial investment.

Shoes Or Forex?

2009-03-15T15:54:00.000-07:00

Most people, who want to establish a financially-secure future, choose to start their own business by trading goods like shoes, art, crafts, clothing or antiques.

A friend of mine set up a trading business in Indonesia . We met when we were still earning our degrees in Melbourne , Australia . He imports steel and plastic from China and distributes them to his home country. It took him two years before his business stabilized and he is now making a good living out of it.

Even though there is now an ocean between us, we manage to talk once a year over the telephone. He asked me once if I wanted to meet him in a trade show in China . He learnt how to speak Mandarin so he finds it easy to get around China . With his ability to communicate with the Chinese, he offered his assistance to me if I ever wanted to start my own import or export business.

I had the option of trading in whatever goods I wanted. According to my friend, it could be 'anything you can think of'. Had I taken the option, I would have traded shoes because I can vary my investment size according to my financial capability. With limited funds to invest, I can buy only a few pairs of shoes. If I can find a lot of money to invest, I can order big too. I had a couple of months to decide. So I did some thinking.

Readers of this article may not be considering trading shoes, but I will use it as an example to help you decide about the choices available to you.

RESEARCH & INFORMATION

For someone to trade shoes, you would have to:
1. Research the local market for shoes,
2. Find out more about the big players in the shoe business,
3. Get acquainted with the different types of shoes and how much they are selling for,
4. Find out what costs are involved in importing shoes and
5. Determine how you can market and distribute them.
6. When I trade currencies, I have all the information I need by looking at a chart. It takes a long time to learn to do this well, but so does selling shoes.

INITIAL CAPITAL

To order a thousand pairs of shoes, you would require a lot more money than what it takes to start trading forex: usually, anything between $200 to $300 is sufficient. (In my book: The Part-Time Currency Trader , I discuss the costs of trading forex).

LEGALITIES

To start, you would have to establish the paperwork necessary to ensure that you get familiar with the legalities of the goods you wish to import and distribute.

What if a particular shipment of shoes does not sell, because even though they may have been popular in other countries, consumers in your country might not like it? Do you have more money to order another batch?

What if the stock you buy is defective and the seller does not want to have anything more to do with you? You can take them to court, but can you muster the resources to do so? You can threaten them by not doing business with them ever again, but would they care when they have other businesses to deal with?

PASSION

Successful entrepreneurs have taken at least two years to stabilize their business. Others take a lot longer. When starting and building a business, your expectations need to be set for the long term, because it will take time.

Harrison Ford — the famous American actor — had a strategy. He saw that many of the actors, who came to Hollywood with dreams of becoming superstars, gave up because it was too hard. So he figured that he could succeed one day, if he could only persevere with all the hardships associated with his endeavour.

Your ability to stay focused on a task long enough to attain success would be greatly improved if you liked what you do. Would you enjoy being surrounded with things related to shoes for most of your life, or would you hate it?

CONVENIENCE

The forex market is open 24 hours a day. You can buy and sell currencies in your pyjamas at midnight if you like and the transaction is complete before you go back to bed.

BENEFITS OF TRADING FOREX OVER SHOES

There are advantages in trading shoes, but I could see more benefits in trading currencies. You do not need to worry about the process of importing or exporting, transporting goods, defective items, marketing and distribution as well as ensuring that you are complying with the law. Furthermore, in forex, you do not have to invest too much just to 'test the waters'.

ONE MONTH LATER

A month later, I rang my friend and told him that I might take him up on his offer in the future, if it was still available. However for the moment, I explained that I had more passion for currencies than I had for shoes. He laughed and we agreed to meet one day so that I can tell him more about currencies.

Internet Marketing VS Forex Currency Trading

2009-03-15T15:45:00.000-07:00

Have you noticed that when someone's trying to sell you something — such as a system for making money — they always make it look far easier than it is?

Let's look at two Internet businesses, almost as diametrically opposed as it's possible to be — Internet Marketing and Forex Currency Trading.

You've probably heard the old Internet adage — build a better website and they will come. Well it ain't true!

You could put up a site advertising dollars for a dime and they still wouldn't come — because they wouldn't know where to look!

Let's look at what you need to have in place in order to build a successful Internet marketing business.

First of all, you need a product. If you've been reading the recent Internet marketing blurb you'll know you need a niche product.

Actually, the new thing is sub-niche but whatever they call it, you need a product for which there is high demand but low supply.

Finding a suitable niche is the hardest part of the whole process but let's say you have a killer product, what else do you need?

The List.

Ask any Internet marketeer and they will say that the most important part of your business is your opt-in list.

For people to join your list you usually have to give them something of value such as a free eBook or report on a subject related to your main product line.

To keep them interested, you need to keep in touch with them offering them additional information, advice and tips.

Website.

To promote your opt-in list you need a website (although there are other ways of promoting your list, too) with features that will encourage people to sign up to your list.

You also need a killer website with killer copy to describe — and sell — your killer product. This may or may not be the same as the one you use for your opt-in list.

Killer copy.

Maybe you're not a good copywriter. There are many eBooks on the subject that can help you or you can pay someone to write copy for you.

You need a domain name, preferably one with some relation to the product but good domain names are becoming increasing difficult to find.

Ads.

To get people to visit your website in the first place you need to register it with the search engines.

SEO (Search Engine Optimisation) is an art in itself. You can mug up on the subject or pay someone to do the job for you (but be aware that not all experts are!).

You might also want to place ads for your list in newsletters and ezines. The better ones will charge you although you might get a free ad in return for an article.

Autoresponder.

To automate your business you need an autoresponder. These clever devices automatically send emails to everyone on your opt-in list at predetermined intervals, and contain predetermined copy.

For example, you could create a series of emails containing, say, five parts of a free course to be sent one a day over the first five days.

Then emails would be sent once a week advertising a different product each time.

Whenever anyone signs up to your list they automatically start at the beginning so everyone gets the full cycle of marketing material.

We haven't even looked at affiliate sales and marketing but I'm sure you get the picture.

The basic idea of selling over the Internet sounds good but there's a lot more to it than most people realise.

Forex Currency Trading

Someone said that trading is the last frontier, the last place where men and women can stand up and pit themselves against the world.

It sounds very Wild Westish but most of it is true! You win or lose entirely by your own efforts and if you win, it's like having your very own bank.

However, even owning a bank is a business and you still have to work hard to put the money there — and to keep it!

Unlike Internet marketing where all your efforts, in one form or another, are geared towards making people join your list and then selling them stuff,

Currency Trading has no customers. That's worth repeating — with currency trading, you don't need customers.

No customers means you don't need any of the associated accoutrements that go with Internet marketing such as:

Products
Web site
Domain name
Opt-in list
Ads
eBooks and reports
Autoresponder
Any other marketing aids

So far so good, but what do you have to do and what do you need? Well, you need to know what currency prices are doing.

You can get a list of prices at the close of each trading day free from many web sites. If you want to trade during the day — intraday trading, you can get real-time prices for a nominal fee from several data suppliers.

In the foreign exchange currency market, commonly called forex, you can get this data and charting software free from many web sites.

Okay, that's the easy bit. In order to trade currencies, you need to analyse the data and determine which way price is heading.

In other words you need a system and this will require study and dedication.

There's lots of other stuff you have to know, too — trading terminology, margin, leverage, money management, order types, trader psychology and more.

But all of this is available in eBooks and courses and on the Net.

You also need some money upfront to fund your trading account. With forex you can begin with as little as $300-500 although you would be advised to start with more.

So while you don't have the ongoing quest for new customers, new products and inventive sales techniques, you do need some sort of education or training before you begin and you need discipline while you're trading.

Making money takes work whether it's online or off. Make sure you know what's involved before you start and remember that the more you put into a business, the easier it gets.

Forex Trading — Understanding Commissions, Spreads and Trading Costs

2009-03-15T15:37:00.000-07:00

The forex market is quickly becoming one of the most popular markets for trading.

Not only are the experienced traders looking to this market to maximize their trading returns, but many new, individual investors are now able to trade the Forex market — just as they do stocks and futures.

More and more individuals are seeing Forex not only as a new way to diversify their portfolio, but are also finding that it is becoming the most profitable component of their investments.

And that's because of the many advantages Forex offers over other markets like stocks or commodities. Here's what you will typically see advertized about Forex:

— Unparallelled liquidity. It is the largest financial market in the world by far. Almost $2 trillion being traded daily!

— Excellent leverage potential. Individual investors have access to leverage of 100:1 and even 200:1

— No Commissions (more on this later on)

— Low trading costs.

And yes, the Forex market really does offer all these advantages.

But the last two points above talk about costs, and that's what we'd like to focus on in this article.

Like any trading, there are costs involved, and, while these may be much lower than they used to be, it is important to understand what those are.

Let's start by looking at stock trading, something that most of us investors are pretty familiar with.

When trading stocks, most investors will have a trading account with a broker somewhere and will have investment funds deposited in that account.

The broker will then execute the trades on behalf of the account holder, and of course, in return for providing that service, the broker will want to be compensated.

With stocks, typically, the broker will earn a commission for executing the trade. They will charge either a fixed dollar amount per trade, or a dollar amount per share, or (most commonly) a scaled commission based on how big your trade is.

And, they will charge it on both sides of the transaction. That is to say, when you buy the stock you get charged commission, AND then when you sell that same stock you get charged another commission.

With Forex trading, the brokers constantly advertise "no commission". And, of course that's true — except for a few brokers, who do charge a commission similar to stocks.

But also, of course, the brokers aren't performing their trading services for free. They too make money.

The way they do that is by charging the investor a "spread". Simply put, the spread is the difference between the bid price and the ask price for the currency being traded.

The broker will add this spread onto the price of the trade and keep it as their fee for trading.

So, while it isn't a commission per se, it behaves in practically the same way. It is just a little more hidden.

The good news though is that typically this spread is only charged on one side of the transaction. In other words, you don't pay the spread when you buy AND then again when you sell. It is usually only charged on the "buy" side of the trades.

So the spread really is your primary cost of trading the Forex and you should pay attention to the details of what the different brokers offer.

The spreads offered can vary pretty dramatically from broker to broker. And while it may not seem like much of a difference to be trading with a 5 pip spread vs a 4 pip spread, it actually can add up very quickly when you multiply it out by how many trades you make and how much money you're trading. Think about it, 4 pips vs 5 pips is a difference of 25% on your trading costs.

The other thing to recognize is that spreads can vary based on what currencies you're trading and what type of account you open.

Most brokers will give you different spreads for different currencies. The most popular currency pairs like the EURUSD or GBPUSD will typically have the lowest spreads, while currencies that have less demand will likely be traded with higher spreads.

Be sure to think about what currencies you are most likely to be trading and find out what your spreads will be for those currencies.

Also, some brokers will offer different spreads for different types of accounts. A mini account, for example may be subject to higher spreads than a full contract account.

And finally, because the spreads really are the difference between bid prices and ask prices as determined by the free market, it is important to recognize that they are not "guaranteed". Most brokers will tell you that there may be times during periods of low demand, or very active trading when the spreads widen and you will be charged that wider spread.

These do tend to be rarer situations because the Forex market really is so large and demand and supply are generally quite predictable, but they do occur, especially with some of the lesser traded currencies. So it's important to be aware of that.

In summary then, when trading Forex, understand that the "spread" is truly your most important consideration for trading costs.

Spreads can vary significantly between brokers, account types and currencies traded. And small differences in the spread can really add up to thousands of dollars in trading costs over even just a few months.

So be sure to understand what currencies you are going to be trading, how frequently, and in what type of account and use those factors to help decide which broker can offer you the best trading costs.

Forex Trade: Main Drawbacks of a Forex Trader

2009-03-15T15:33:00.000-07:00

Why is it that very few traders succeed in the Forex trading environment while the grand majority of traders fail to achieve success? Although there is no hard answer to this question, there are a few things that will put you one step ahead and will definitely put the odds in your favor.

The main purpose of this article is to guide you through some important aspects of Forex trading. But in a different way, instead of telling you what to do or the best way to do it, it will tell you what to avoid. Sometimes it is better to identify the main drawbacks on a discipline and then isolate them so we have the best results at a certain level of development.

The search for the Holy Grail

Many traders spend years and years trying to find the Holy Grail of trading. That magic indicator or set of indicators, only known by a few traders, that will make them rich in a short period of time.

Fact: Well, there is no magic indicator, nor a set of indicators that will make anyone rich in a short period of time. The main reason of this is because market changes, every single moment is unique. Every Forex trading system will fail from time to time. Our work here is to find a Forex trading system that fits our personality as traders, otherwise the trader will find it hard to follow it.

Looking for Easy Money

Unfortunately most traders are attracted to the Forex market for this reason. Mainly because of the publicity showing or rather trying to show how easy is to trade and make money in the Forex market.

Fact: Yes, it is very easy to trade, anyone can do it. It is as hard as one click. But the second part of it isn't that easy. Making money or achieving consistent profitable results is hard. It requires lots of education, patience, discipline, commitment, and this list could go to infinite. In a few words, it is possible to have consistent profitable results, but definitely it is not easy.

Looking for Excitement

Some other traders are attracted to the Forex market or any other financial market because they think it is exciting to be a trader.

Fact: Yes, it is very exciting to trade the Forex market. But if this is the main reason you are still trading the Forex market, sooner or later you will discover the most expensive adventure you have ever known. Do some thinking on it.

Not Using Money Management.

Most traders forget about this important aspect of trading. They think they shouldn't be using money management until they achieve consistent profitable results. They totally forget about the risk side of trading.

Fact: Money management allows your profits to increase geometrically, but also limits your risk on every single trade. Money management tells you how much to risk on each trade. Using money management is a must if you want to achieve your trading goals. By using money management you make sure you are going to be able to trade tomorrow, the next week, month and the following years.

Not Being Psychology Tuned

This is one of the most underestimated subjects when it comes to trading. One of the main principles of financial markets is that the price of each instrument is based on the perception of each individual participant "the crowd." In other words the price of each instrument is determined by the fear, greed, ego and hope of all traders.

Fact: Being aware of all psychological issues that affect the decisions made by traders will definitely put the odds in your favor.

Lack of Education

Education is the base of knowledge on every discipline. As lawyers and doctors require several years of college until they get their degree, Forex traders also require long years of study. It is better to have someone experienced to guide you through your trading, since some information could take you in the wrong path.

Fact: The market teaches us invaluable lessons on every single trade made. The process of education for a Forex trader could take for ever. That's right, we never stop learning. We should be humble about the markets and our knowledge; otherwise the market will prove us wrong.

These are some of the most important barriers every trader faces when trying to trade successfully.

Trading successfully the Forex markets is no easy task, it requires a lot of hard work to do it right, but with the right education, you will put yourself closer to your trading goals.

The 6 Advantages Forex Trading Has Over Other Investments

2009-03-15T15:21:00.000-07:00

There are many different advantages to trading forex instead of futures or stocks, such as:

1. Lower Margin

Just like futures and stock speculation, a forex trader has the ability to control a large amount of the currency basically by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value of the stocks, the margin requirements for forex is about 1%. For example, margin required to trade foreign exchange is $1000 for every $100,000. What this means is that trading forex, a currency trader's money can play with 5-times as much value of product as a futures trader's, or 50 times more than a stock trader's. When you are trading on margin, this can be a very profitable way to create an investment strategy, but it's important that you take the time to understand the risks that are involved as well. You should make sure that you fully understand how your margin account is going to work. You will want to be sure that you read the margin agreement between you and your clearing firm. You will also want to talk to your account representative if you have any questions.

The positions that you have in your account could be partially or completely liquidated on the chance that the available margin in your account falls below a predetermined amount. You may not actually get a margin call before your positions are liquidated. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit downside risk.

2. No Commission and No Exchange Fees

When you trade in futures, you have to pay exchange and brokerage fees. Trading forex has the advantage of being commission free. This is far better for you. Currency trading is a worldwide inter-bank market that lets buyers to be matched with sellers in an instant.

Even though you do not have to pay a commission charge to a broker to match the buyer up with the seller, the spread is usually larger than it is when you are trading futures. For example, if you were trading a Japanese Yen/US Dollar pair, forex trade would have about a 3 point spread (worth $30). Trading a JY futures trade would most likely have a spread of 1 point (worth $10) but you would also be charged the broker's commission on top of that. This price could be as low as $10 in-and-out for self-directed online trading, or as high as $50 for full-service trading. It is however, all inclusive pricing though. You are going to have to compare both online forex and your specific futures commission charge to see which commission is the greater one.

3. Limited Risk and Guaranteed Stops

When you are trading futures, your risk can be unlimited. For example, if you thought that the prices for Live Cattle were going to continue their upward trend in December 2003, just before the discovery of Mad Cow Disease found in US cattle. The price for it after that fell dramatically, which moved the limit down several days in a row. You would not have been able to leave your position and this could have wiped out the entire equity in your account as a result. As the price just kept on falling, you would have been obligated to find even more money to make up the deficit in your account.

4. Rollover of Positions

When futures contracts expire, you have to plan ahead if you are going to rollover your trades. Forex positions expire every two days and you need to rollover each trade just so that you can stay in your position.

5. 24-Hour Marketplace

With futures, you are generally limited to trading only during the few hours that each market is open in any one day. If a major news story breaks out when the markets are closed, you will not have a way of getting out of it until the market reopens, which could be many hours away. Forex, on the other hand, is a 24/5 market. The day begins in New York, and follows the sun around the globe through Europe, Asia, Australia and back to the US again. You can trade any time you like Monday-Friday.

6. Free market place

Foreign exchange is perhaps the largest market in the world with an average daily volume of US$1.4 trillion. That is 46 times as large as all the futures markets put together! With the huge number of people trading forex around the globe, it is very hard for even governments to control the price of their own currency.

Disgruntled Trading -Trading Plans

2009-03-12T18:06:00.000-07:00

The following situation happens quite often to many traders. Look it over and see if it has been happening to you:

You have been faithfully following your trading plan and the rules you’ve set for trading. By following them you are now in a trade that doesn’t look so good. At the same time, by following your trading plan, you see that you’ve missed a beautiful move in a different market, one that could have made you a lot of money.

You are in a bad trade and you’ve missed out on a great trade. You become disgruntled. You think to yourself that your trading plan must not be so great. You think there must be a better methodology that you should use that will prevent this from happening. You think to yourself, "Yes! That’s it, I’ll change the way I do things." So you create a new rule or modify an old one so that such a rule would have let you capture the trade you missed and avoid the one you took. Have you been making this mistake?

Here’s another way it can happen: You are in a trade, and your rules cause you to be stopped out with little or no profit. Shortly after you exit the trade according to plan, prices take off and move to where, had you stayed in, you would have made substantial profits. The move leaves you sitting there thinking you are stupid. You reason that there must be something wrong with the way you do things.

Your rules, your plan, or both must not be right. So you change what you are doing, or make a new rule so that the next time this happens, you won’t be left behind.

You have just abandoned all of the hard work you’ve previously done that enabled you to successfully trade futures. You’ve abandoned your education and learning. You’ve abandoned the wisdom that will enable you to be consistently successful as a trader. You’ve just started trading history, and you are supposed to be trading on the future movement of prices. You are trading what happened, not what will happen. By not being willing to be left behind, you are setting yourself up for being left out.

If you’ve been having thoughts, or have been acting as we’ve just described, you have a terrible problem with greed. Why? Because greed can never get enough. You can’t satisfy greed. Greed wants more, and yet more.

Not every trade is your trade. Not every trade has to work out for you. You have to be satisfied with getting a reasonable share of trades that fit your description of a good trade. Some of those trades will turn out to be great trades, others are good trades, and a certain percentage of your trades will be bad. There’s no way around it.

Not every good trade will turn into a great trade. When you enter a trade according to your rules and trading plan, you have no idea whether or not it will turn out to be a good trade, much less a great trade. The reality of trading is that, try as you might, you cannot know the future.

Whenever we miss a big move and then try to find some pattern, indicator, rationale, or modification to make to what we are doing so that the next time we will not miss the "big" move, it is a part of the hunt for something magic ¾ a continuation of our quest for the holy grail of trading.

What a terrible mistake to allow yourself to make. Winning as a trader consists of making some small profits and some larger profits on a regular basis. Obviously, there will be some losses. We regularly want to keep losses small, but there are times when a loss will get away from us and turn out to be bigger than desired.

If adversity causes you to become disgruntled, then you really need to examine your thinking and your approach to trading. Your trading plan must allow for disappointment and loss.

You’ve got to believe in what you are doing and be able to trade from the knowledge that when you follow your rules and your plan, you will make money from your trading.
When you become disgruntled and begin to change your plan, your rules, or both, you are setting yourself up for almost certain failure and the worst thing that can happen to a trader ¾ you will lose the courage of your convictions. Without it you cannot trade with any level of confidence.

This is why we encourage you to write out the reasons and rationale for every trade you make, even if you have to do it after you have completed the trade. You must develop a keen recognition of the trades that are your trades. Write out your trading plan every day and for every trade you intend to make. If you did not have time to plan every trade, be sure to review those you did make without pre-planning. Then you can go back over your trading and be able to see why and when you are successful.

Reminder: Here are some steps to take before the market opens.

· View major formations on the charts of those futures you intend to trade. View potential congestion areas, get the big picture from the longer term charts.

· Write down all potential entries as you see them on the chart.

You need to go through this exercise every day that you trade. This takes discipline. However, doing so will help you develop the kinds of habits that will mold you into a great trader.

If you are too busy to be disciplined, then you are too busy to trade. If you don’t discipline yourself, you will soon disappear from the trading scene.

W.D. Gann Trading Methods - Genius Trader or Overrated Guru

2009-03-12T18:03:00.000-07:00

W.D. Gann is one of the most famous traders of all time, and has a huge devoted following - however the fact is, Gann never made the huge profits many of his disciples claim.

He did not have a success rate of 90%, as is often claimed - the logic his methods are based upon are unsound, and his predictive methods don’t predict - they leave everything to subjective opinion!

Let’s examine his theories of investment in more detail and see.

Let’s look at some common myths about how great a trader Gann actually was:

Many sources quote Gann’s trading profits at $50 million dollars, however this is not true.

An interview that Alexander Elder had with his son tells the truth.

Firstly, his son confirmed that when his father died in the 1950s his estate was valued at just $100,000 - and that included his house.

Secondly, his son confirmed that Gann was unable to make enough money from trading, and therefore supplemented his income by writing and selling courses.

W.D. Gann’s Predictions

Many sources quote he had a success rate in all his trades of over 90% - again not true. We can easily deduce this from the value of his estate.

If he could make money trading and had a 90% success rate, he would have made hundreds of millions in his trading career - and he clearly did not - that’s why he had to sell books and courses.

The only evidence of a 90% success rate came from a small number of trades - and was not representative of them all.

Gann’s Methods are Predictive

Gann came to the conclusion that all natural phenomena are cyclical - including financial markets. This is true, but this is an obvious statement - we all know we’re going to die but when exactly?

A predictive theory is not a predictive theory if it can’t predict.

If Gann’s theory really is predictive, then there would be no market - as we would all know the price in advance!

Gann’s theory is subjective - and he really had no way of predicting the future with accuracy. It’s all subjective analysis and this is NOT a predictive theory.

Gann’s Logic

The basis of Gann’s theory is the principle that price and time must balance.

His methods are based on the squaring of price with time - this occurs when a unit of price equals a unit of time.

Gann for example would take a prominent high in the market, convert that dollar unit into a specified period of time and project it forward. When that time is reached, price and time are squared - and a market turn is due.

What? - How can one unit of price equal one unit of time? If you think about and answer this question for yourself, you will see how absurd the connection is.

This isn’t the only inconsistency used in his analysis - we also have the legendary Fibonacci numbers which are supposed to work with stunning accuracy - but they don’t, and neither do all sorts of astrology and geometry, that appeals to the far out investment crowd.

As we have seen, Gann was a trader who had modest success, and claimed to have discovered a predictive theory - which predicts nothing with accuracy.

Finally, we have so many subjective indicators cobbled together, that the theory can prove anything in hindsight, but if you want a tool to trade the markets look elsewhere.

For those of you still not convinced - I recently saw on the Internet, Gann’s trading methods selling for under $1,000!

Sounds like a bargain to get trades with 90% accuracy - I wonder how many serious money managers have it on their bookshelf.

Trading with Strategy

2009-03-12T18:02:00.000-07:00

Trading successfully is by no means a simple matter. It requires time, market knowledge and market understanding and a large amount of self restraint. ACM does not manage accounts, nor does it give market advice, that is the job of money managers and introducing brokers. As market professionals, we can however point the novice in the right direction and indicate what are correct trading tactics and considerations and what is total nonsense.

Anyone who says you can consistently make money in foreign exchange markets is being untruthful. Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very ’fast market’ which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders’ timing will be off. Don’t expect to generate returns on every trade.

Let’s enumerate what a trader needs to do in order to put the best chances for profitable trades on his side:

Trade with money you can afford to lose:

Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are ’involved with your money’ the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.

Identify the state of the market:

What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that’s forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.

Determine what time frame you’re trading on:

Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind’s eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you’ll be ’scalping’ (trying to get a few points off the market) trading intra-day, or going longer term. This will also determine what chart period you’re looking at. If you trade many times a day, there’s no point basing your technical analysis on a daily graph, you’ll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.

Time your trade:

You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that’s already underway. Timing your move means knowing what’s expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.

If in doubt, stay out:

If you’re unsure about a trade and find you’re hesitating, stay on the sidelines.

Trade logical transaction sizes:

Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM’s case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don’t trade amounts that can potentially wipe you out and don’t put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.

Gauge market sentiment:

Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term ’the trend is your friend’, this basically means that if you’re in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.

Market expectation:

Market expectation relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been ’discounted’ by the market, alternatively if the adverse happens, markets will usually react violently.

Use what other traders use:

In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.

The Seven Most Traded Currencies in FOREX

2009-03-12T18:01:00.000-07:00

Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD - The US Dollar EUR - The currency of the European Union "EURO" GBP - The British Pound JPN - The Japanese Yen CHF - The Swiss Franc AUD - The Australian Dollar CAD - The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.

Some of the common PAIRS are:

EUR/USD Euro / US Dollar "Euro"

USD/JPY US Dollar / Japanese Yen "Dollar Yen"

GBP/USD British Pound / US Dollar "Cable"

USD/CAD US Dollar / Canadian Dollar "Dollar Canada"

AUD/USD Australian Dollar/US Dollar "Aussie Dollar"

USD/CHF US Dollar / Swiss Franc "Swissy"

EUR/JPY Euro / Japanese Yen "Euro Yen"

The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you’re in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.

So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

The FOREX Market- Trade with your head not your heart!

2009-03-12T17:59:00.000-07:00

Sounds simple…right? In actuality, this is the number one reason why day traders lose their shirts. They let their emotions get the best of them and end up doing something real stupid. Trust me I’ve done it.

When trading currency, you need to take yourself away from the platform and look at your trades in actual bills not numerical values on a computer screen. For example, let’s say you short the USD/JPY for a 50 mini-lot right before a data release and it tanks. The USD/JPY goes down about 50 some odd pips and now you’re up $2500 in about thirty seconds.

Now, if you were smart, you would close the position and take your profit, but you’re not and you decide to let it ride. The market goes down about another 10 pips. So, now you’re up $3000 and you still won’t close it. You think that it’s going to keep tanking and that you could make 5-6k on this one trade…wishful thinking.

All of sudden the market retraces and shoots back up 20 pips, your still up about $2000, but now you tell yourself, I’ll wait until it goes back down a few pips and then close it. Too late, the market ignites and now you’re break-even and then you’re negative. In the end you take a $500 loser, which isn’t too bad, but considering you were up $3000 it’s like you lost $3500.

Now, let’s pretend you did this same trade with actual, physical dollar bills. Now or days most people trade from a three wide spread, so let’s say that you gave a trade booker $150 cash to place a short USD/JPY 50 lot. The data is released and this man keeps giving you $50 bills and before you know it you have $3000 in your hands. In order to keep this money all you have to say is close.

You decide to press your luck and wait and the market continues to trend down and now you have $3500 cash. All of sudden, the market begins to retrace and this nice young man starts taking $50 from you each pip it retraces. How many pips does the market have to retrace before you say close? Maybe, ten pips? Once you saw actual dollar bills being taken away from you, you would throw in the towel. So, how does one improve their money management skills?

First of all, realize that you are trading real money. I’m sure you realize that the money you are trading is real money, but do you conceptualize it? When you make a few hundred or a few thousand dollars trading, do you feel like someone just handed you cash? Of course not! Every time you’re trading, no matter if you are profitable or not profitable visualize and grasp the outcome. Don’t just watch your balance and equity fluctuate; you need to relate your loss and gains to every day life.

For example, let’s say you have a 10k account and in the first week you doubled that to 20k. You need to step back and understand what you just accomplished; you just made 10k in one week by sitting in front of your computer and trading currency. Now, let’s take that money and put it to everyday use. If you were handed a free 10k, what would you do with the money?

Would you pay of some debt, by a car, put money down on a home, go on a vacation, put it towards school, I think you get the gist. All I’m saying is that 10k is yours, you own it and there is no reason you have to keep in the FOREX. You are that 10% that succeeded this week, but the law of averages states that you are most likely to be the 90% next week. If not next week then the week after and if not then, eventually you will.

If you invest 10k and your account doubles to 20k, why would you pull out 15k leave in 5k and go for the gusto? If you lose your remaining 5k who cares you still made 5k in a week at your computer. Tell me another investment where I can make 50% on a 10k investment in one week. Turn around the following week pull my initial investment and my profit and still have 5k to play with. If I hadn’t experienced this first hand then I would have never believed it. DO NOT GIVE YOUR WINNINGS BACK TO THE MARKET! It’s not worth it.

Risk Arbitrage

2009-03-12T17:57:00.000-07:00

In economics, arbitrage is the practice of taking advantage of a state of imbalance between two (or possibly more) markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the market prices. A person who engages in arbitrage is called an arbitrageur.

For example, if you can buy items at one price at a factory outlet and sell them for a higher price on an internet auction website such as eBay, you can exploit the imbalance between those two markets for those items. The term "arbitrage", however, is usually applied only to trading in money and investment instruments (such as stocks, bonds, and other securities), not to goods, and the difference in prices is usually referred to as "the spread", so arbitrage is often defined as "playing the spread" in the money market.

Arbitrage has the effect of causing prices in different markets to converge. As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets all tend to converge to a fixed price. The speed at which the prices converge is one measure of the efficiency of a market. Arbitrage tends to reduce price discrimination by encouraging people to buy an item where the price is low and resell where the price is high. Sellers of goods and services often attempt to prohibit or discourage arbitrage.

Traditionally, arbitrage transactions in the securities markets involve high speed and low risk. At some moment a price difference exists, and the problem is to execute two or three balancing transactions while the difference persists (that is, before the other arbitrageurs act).

In the 1980s a practice with the oxymoronic name of "risk arbitrage" became common. In this form of speculation, one trades a security that is clearly undervalued or overvalued, when it is seen that the wrong valuation is about to be corrected by events. The standard example is the stock of a company, undervalued in the stock market, which is about to be the object of a takeover bid; the price of the takeover will more truly reflect the value of the company, giving a large profit to those who bought at the current price—if the merger goes through as predicted.

The transaction involves a delay of weeks or months and may entail considerable risk if borrowed money is used to magnify the reward through leverage. One way of reducing the risk is through the illegal use of inside information is obvious, and in fact risk arbitrage with regard to leveraged buyouts was associated with some of the famous financial scandals of the 1980s such as those involving Michael Milken and Ivan Boesky.

Examples
Here’s a theoretical example: Suppose that the exchange rates (after taking out the fees for making the exchange) in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = £6 = $10. Converting $10 to £6 in Tokyo and converting that £6 into $12 in London, for a profit of $2, would be arbitrage.

One real-life example of arbitrage involves the stock market in New York and the futures market in Chicago. When the price of a stock in New York and its corresponding future in Chicago are out of sync, one can buy the less expensive one and sell the more expensive. Because the differences between the prices are likely to be small (and not to last very long), this can only be done profitably with computers examining a large number of prices and automatically exercising a trade when the prices are far enough out of balance. The activity of other arbitrageurs can make this risky. Those with the fastest computers and the smartest mathematicians take advantage of series of small differentials that would not be profitable if taken individually.

Risks
Arbitrage transactions in modern securities markets involve fairly low risks. Generally it is impossible to close two or three transactions at the same instant; therefore, there is the possibility that when one part of the deal is closed, a quick shift in prices makes it impossible to close the other at a profitable price. There is also counter-party risk, that the other party to one of the deals fails to deliver as agreed; though unlikely, this hazard is serious because of the large quantities one must trade in order to make a profit on small price differences. These risks become magnified when leverage or borrowed money is used.
Another risk occurs if the items being bought and sold are not identical and the arbitrage is conducted under the assumption that the prices of the items are correlated or predictable. In the extreme case this is risk arbitrage, described earlier. In comparison to the classical quick arbitrage transaction, such an operation can produce disastrous losses.

Long-Term Capital Management (LTCM) lost $100 billion mis-managing this concept in September 1998. LTCM had attempted to make money on the difference between different bond instruments. For example, it would buy U.S treasury bonds and sell Italian bond futures. The concept was that because Italian bond futures had a less liquid market, in the short term Italian bond futures would have a higher return than U.S. bonds, but in the long term, the prices would converge. Because the difference was small, large amount of money had to be borrowed to make the buying and selling profitable.

The downfall in this system began on August 17, 1998, when Russia defaulted on its rouble debt and domestic dollar debt. Since the markets were already nervous due to the Asian crisis, investors began selling non-U.S. treasury debt and buying U.S. treasuries, which were considered a safe investment. As a result the return on U.S. treasuries began decreasing because there were many buyers, and the return on other bonds began to increase because there were many sellers. This caused the difference between the returns of U.S. treasuries and other bonds to increase, rather than to decrease as LTCM was expecting. Eventually this caused LTCM to fold, and a bailout had to be arranged to prevent a collapse in confidence in the economic system.

An ironic footnote is that they were right long-term (the LT in LTCM), and a few months after they folded their portfolio became very profitable. However the long-term does not matter if you cannot survive the short-term, and that they failed to do.

Money Management

2009-03-12T17:55:00.000-07:00

We get a lot of questions about various complex money management (MM) formulas and our preferences. We don’t comment on this subject very often because money management is such a personal issue that it would be impossible to give any universal advice that would be specific enough to have value. Everyone seems to have different goals and tolerances for risk, not to mention varying amounts of capital for trading.

However we do have some basic thoughts and opinions that might be helpful in picking a suitable MM strategy that will help you to become a winner.

Be careful about trying to use formulas that are designed to optimize the returns. In my experience I have found that the most successful traders, over the long run, are not seeking to maximize their returns. The best traders are always seeking to carefully control their risks and to achieve as much consistency as possible. They look for methods to achieve consistent returns with low drawdowns and they are willing to accept smaller returns in the process. My policy has always been to worry about the risk and the consistency first and then to accept whatever returns that prudent approach will allow. I’m sure I will never win any trading contests and I have never bothered to enter one. In my opinion, no one should ever trade like the winner of a trading contest. I apologize for getting off on a different subject here. Lets get back on track and talk about trading in the only contest that matters - the trading that you do every day.

In recent years the strategy of risking a small percentage of capital on each trade has become quite popular and deservedly so. This MM strategy, often referred to as fixed fractional trading, reduces our dollar amount of risk as we experience losses and increases our risk level as we earn profits. The possibility of ever going to zero with such a strategy is virtually nonexistent. However this strategy has an inherent weakness that tends to constantly work against us. If we assume an equal number of winners or losers in a sequence this popular strategy produces net losses if the winners are not larger than the losers. To keep things very simple lets just look at a series of five wins followed by five losses with the wins being equal to the amount we risk. Lets also keep the math really simple and begin with starting capital of 100 and risk 5% of our current capital on each trade. I think that most traders would assume that if they had five losers followed by five winners they would be even. Unfortunately that is not the case.

Here are the numbers: Risk is always 5% of current capital. (I’m going to round the numbers to two decimals.)

Capital $ Risk W/L Account balance
100.0 5.00 L 95.00
95.00 4.75 L 90.25
90.25 4.51 L 85.74
85.74 4.29 L 81.45
81.45 4.07 L 77.38

OK we are already tired of losing. Let’s have five winners in a row and see if we can get our money back.

Capital $ Risk W/L Account balance
77.38 3.87 W 81.25
81.25 4.06 W 85.31
85.31 4.27 W 89.58
89.58 4.48 W 94.06
94.06 4.70 W 98.76

As you can see we had an equal number of winners and losers yet somehow we lost money. Perhaps it is because we had bad luck and got started in the wrong direction. Lets reverse the sequence of trades so that we start out on a winning streak instead of losing. Maybe that will help.

Capital $ Risk W/L Account balance
100.00 5.00 W 105.00
105.00 5.25 W 110.25
110.25 5.51 W 115.76
115.76 5.79 W 121.55
121.55 6.08 W 127.63

Looks good so far. Starting off with winners looks much better than starting with losses. But now we have five losers coming up.

Capital $ Risk W/L Account balance
127.63 6.38 L 121.25
121.25 6.06 L 115.19
115.19 5.76 L 109.43
109.43 5.47 L 103.96
103.96 5.20 L 98.76

Hmmm. It doesn’t seem to matter if we start out with a string of winners or a string of losses. Somehow we wound up losing the same amount of money either way.

Obviously we don’t have a very good system at work here but it is not a losing system. With the proper MM strategy we should break even. Our winning trades are only equal to our risk and to have a winning system the winners need to be bigger than the losers. We are winning on only half of our trades and we would be profitable if we could win on more than half. Even though our system is not a good one you would think that it would at least be a breakeven proposition (we haven’t included any costs) because the winners are always equal to the amount at risk and we win 50% of the time. That sounds like a breakeven system, doesn’t it? But if we employ the popular money management strategy of risking a fixed percentage of our current capital we manage to turn the system into a loser. However, if we risked a fixed dollar amount on each trade the system results would improve and we would break even.

The fixed percentage of risk approach to MM is a good one because it keeps us from going broke and it compounds our profits rapidly. Both of those are desirable characteristics but we need to be aware that they come at a price. We should realize that our recovery from drawdowns might not be as fast as we would like and that we can give back profits even faster than we made them.

One strategy that can help solve the problem of giving back the profits too rapidly is to periodically sweep some of the profits out of the account and place them in some other place where they are adding to our diversification and reducing our risk. Now and then we should take some of the profits out and spend them on something that improves our quality of life. This important step gives the dollars at stake a new meaning and boosts our morale tremendously. What is the point of winning and losing and accumulating profits only to give them back at some later date? If we make it a practice to routinely sweep some of the profits our account will continue to grow but it will be compounding at a slower rate than if we left our profits at risk. However if we stumble into a losing streak we will be glad that we took out some of the profits and reduced our bet size.

If we are good traders and we make it a practice to withdraw some of our profits on a regular basis we will eventually reach the point where we have taken out more than we started with. There are very few traders, particularly in futures, who can claim that they have truly beaten the market. Until you have taken out more than you started with the market can still beat you. Trading futures is a zero sum game and winners are few and far between. Taking out profits now and then rather than getting carried away trying to optimize the gains to infinity is contrary to what is being taught these days. Everyone is obsessed with finding formulas to optimize the returns. We need to remember that the trader who has the optimum gains today could easily be tomorrow’s biggest loser. That is a game we don’t need to play.

I think we all need to take a step or two back and look at the big picture. Trading is not really just a game. The money is real. Lets make sure that we are true winners and not just habitual players. Take some profits now and then and put them out of harms way. When we have done this I can assure you that the game is a lot more fun and our trading will improve. Nothing builds confidence like knowing for sure that you are indeed a winner.

Forex Trading System: Discretionary vs. Mechanical Systems

2009-03-12T17:53:00.000-07:00

There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? We will first analyze the pros and cons about each system approach.

Mechanical systems

Advantages
This kind of trading system can be automated and backtested efficiently. It has very rigid rules. Mechanical traders are less susceptible to emotions than discretionary traders.

Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data. The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same. A trading system that worked successfully the past year doesn’t necessary mean it will work this year.

Discretionary systems

Advantages
Discretionary systems are easily adaptable to new market conditions. Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.

DisadvantagesThey cannot be backtested or automated, since there is always a thought decision to be made. It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.

Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won’t play an important role in your system. You only take the trades that your system signals.

If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.

On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.

Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.

Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:

1. You need to make sure the Forex trading system you are using totally fits your personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to follow them.
3. Take your time to build the perfect system for you. It’s not easy and requires time and hard work, but at the end, if done correctly, it will give you consistent profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go for the second option, since psychological barriers will be present.)

Forex Technical Analysis

2009-03-12T17:50:00.000-07:00

The difference between forex technical and forex fundamental analysis is that forex technical analysis ignores fundamental factors and is applied only to the price action of the market. Forex technical analysis primarily consists of a variety of forex technical studies, each of which can be interpreted to predict market direction or to generate buy and sell signals. The technical analysis works by correlating the results and moves of current markets to create a short-term outlook for currencies. The rolling data that is produced throughout the trading day creates the interest in the markets and informs traders of the strong markets to back.

The Trend is Your Friend

Forex technical analysis is largely based around forex market movement trends, thus creating the widely used phrase ’the trend is your friend’ amongst traders. Buying and selling at the right time is the key in maintaining good levels of profits, following a trend is also about knowing where to entry a trade and more importantly where to exit.

Support and Resistance

Support and resistance is the basic of forex technical analysis. Support and resistance levels are points where a chart experiences recurring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly or annually), whereas a resistance level is the high or the peak point of the pattern. Buying and selling at the support and resistance points makes a greater profit margin as long as they remain unbroken.

History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms of price movement. The repetitive nature of price movements is attributed to market psychology; in other words, market participants tend to provide a consistent reaction to similar market stimuli over time. Forex technical analysis uses chart patterns to analyze forex market movements and understand trends. Although many of these charts have been used for more than 30 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.

Forex Software - Choosing the Best

2009-03-12T17:49:00.000-07:00

When it comes to forex trading the forex software you choose is essential. There are so many forex trading companies all competing for your business that choosing the right forex software can be quite a difficult task. Most of the forex software products available offers live online forex trading platforms but what other components are vital when it comes to your forex software.

Key Elements For Your Forex Software

Before purchasing any forex software there are a few essential items that should be included. The most important is security and your online forex trading software should include a 128 bit SSL encryption which will prevent hackers from accessing any of your personal details and information such as your account balance, transaction history, etc.

Providing the best security for your forex trading will include a company that provides 24 hour technical server support for your forex software, 24 hour maintenance should anything go wrong, daily backups of all information, and a security system that has been designed to prevent any unauthorized access. Along with these security protocols there are also some forex trading companies that use smart cards and fingerprint scanners to ensure that only their employees can have access to their servers.

Another important factor when it comes to choosing your forex software is to check what the company’s downtime is like. When it comes to trading forex and particularly your online forex trading you need to ensure that the forex software you choose is reliable and available 24 hours a day. The forex software you choose for your forex trading should also have technical support available at all times should your session be cut short.

Ensuring that all the above features are listed in the forex software you choose will help to ensure your forex trading success.

Forex Signal Trading Gives the Traders One More Analytical Tool

2009-03-12T17:48:00.000-07:00

Forex signal trading has emerged as an important support service for forex traders. This service is run either by forex brokers or by independent analysts who monitor and analyze the forex market. These analysts identify forex trends using several indicators. Based on this analysis, they suggest profitable entry and exit points to forex traders for a fee.

Most analysts offer signals for only the most popular currency pairs, such as EUR/USD, USD/JPY, GBP/USD and USD/CHF. However, there are some specialty services also that offer signals for the lesser-traded pairs.

The charges for these services vary from analyst to analyst, and depend upon the range of services bought by the trader. For instance, a basic subscription service offers email alerts of entry/exit opportunities to traders while a more comprehensive service provides this information through SMS, cell phone or pager alerts also.

Some signal trading services also provide live charts for the traders to make their judgment. Irrespective of the level of service, a trader should be prepared to pay a minimum subscription fee of $100 a month.

However, the success of a forex signal service should not be measured in isolation or over a relatively short period of time. The traders should use these signal services only as an extra indicator, as one more tool in their trading toolbox. A good way to judge the analytical skills of signal trading service is to ask for historical data. This can expose the claims of trading signal service.

The biggest benefit of signal trading services is that they save the traders the bother of analyzing or crunching data. However, this does not mean that the traders should depend upon them exclusively to maximize their profits or minimize their losses. This should happen only when the traders develop sufficient trust in certain signal trading services. Otherwise, the traders should use their own judgment and market grapevine to decide the trades.

While Forex signal trading gives the trader’s one more analytical tool, each trader must use his or her best judgment before making the trade. Forex signal trading software is a great tool, but should never be used solely to base the trade decision upon. You would be better off relying on your past experience and gut instinct when analyzing signal trading data. You will also want to rely on your basic fundamental analysis. Forex traders using fundamental analysis rely on news reports to gather information about unemployment rates, economic policies, inflation, and growth rates.

Forex Fundamental Analysis

2009-03-12T17:46:00.000-07:00

The two primary approaches of analyzing Forex markets are technical analysis and fundamental analysis. Fundamental analysis comprises the examination of economic indicators, asset markets and political considerations when evaluating a nation’s currency in terms of another. The focus of fundamental analysis lies on the economic, social and political forces that drive supply and demand. There is no single set of beliefs that guide forex fundamental analysis, yet most fundamental analysts look at various macroeconomic indicators such as economic growth rates, interest rates, inflation, and unemployment.

Here we look at some of the major Forex fundamental factors that play a role in the movement of a currency:

Economic Indicators

Economic indicators are reports released by the government or a private organization that detail a country’s economic performance. These economic indicators can be released on a weekly basis, but the more common report is monthly. Indicators are based around a number of economical situations, of which the two primary factors are that of International trade and Interest. Subsidiary factors also include Consumer Price Index (CPI), Purchasing Managers Index (PMI), Durable goods orders, retail sales and Producer Price Index (PPI).

Currency’s Interest Rates

One of the major indicator factors, Interest rates, are a key economic function of any nation. Generally, when a country raises its interest rates, the country’s currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country’s stock market when there is a hike of interest rates.

International Trade

The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. A trade deficit can be an economic disaster for a government and a currency. A deficit may appear when a country is importing more than it is exporting, meaning that more money is leaving and less is coming in. In some ways, however, a trade deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.

Differences between Spread Betting and Share Trading

2009-03-12T17:45:00.000-07:00

Good Differences - Spread Betting Versus Trading

No taxes

Right now, there are no taxes on spread betting profits. No stamp duty, and no capital gains tax if you are fortunate enough to have a gain. This situation could change. The authorities in a number of jurisdictions are studying spread betting with a view to bringing it under the auspices of the same agencies that regulate mainstream investments. When this happens it is reasonable to expect that there will be some political pressure to impose taxes as well.

Going short is the same as going long

Short selling is when a trader takes the view that the market, or a particular stock, is in a downward trend, or the price is about to collapse for some reason. There are a number of mechanisms to allow this belief to be exploited. The most common are short selling of the share, and the purchase of PUT options. Of course, if you already owned the share it is open to you to simply sell it, or if you wanted to retain the stock you could sell covered CALL options.

Where short selling or the purchase of PUT options is contemplated, the trader will immediately come up against a number of obstacles. In order to sell short, the broker must be able to borrow the required number of shares to sell, until such time as the trader decides to close his or her short position and buy them back. This could prove to be difficult. In addition, certain shares will not be eligible for short selling at all. These will be securities that are already at a low price to begin with. In Europe, in particular, many brokers will not allow anyone to sell short.

As far as options are concerned, things are not always equal with regard to PUTs and CALLs. Very often, the most liquid market exists on the CALL side and, while you will not normally have great difficulty in purchasing your PUTs, there could be a problem in finding a market when you want to sell them. You could, of course, keep them to maturity, but this increases the risk.

In spread betting, all other things being equal, there is no difference between playing the long side and the short side, except that in one case you want the price to go up, while in the other you want it to go down.

Bad differences - Spread Betting Versus Trading

Transaction charges

It is often claimed that one of the advantages of spread betting is that there are no transaction charges like there would be if you were to deal with a normal stockbroker. This is true, but in many cases you would actually be better off financially to pay the broker.s charges, because spread betting effectively disguises the charge within the spread. We deal with the whole idea of the spread below.

Finite lifetime of the contract

This is a difficulty that also exists in regard to options, of course. Both spread betting contracts and option contracts will expire on a certain date. With options you get to choose the date, but for a price (of course). You can buy options with expiry dates that are more than a year away (these are known as LEAPs), or for certain months in between. The more liquid options can be purchased for expiry on almost any month of the year, while the less traded will have expiries in about three month cycles.

With spread betting there is normally only one expiry month available at any one time but, one way or another, the fact that a time will arrive, and in the near future, when your whole position could expire worthless, is something to bear very much in mind.

Limited securities where spread betting can be used

Financial spread betting companies are more interested in taking bets on the various stock market and other indexes than in the value of the shares of individual stocks. This limits the scope for their customers. One of the advantages of trading individual company stocks is that the trader can make quite informed judgments about the potential of the company.s share price performance based on its assets, cash and cash flow position, the markets it sells into and so on. Where indexes are converned, the only meaningful criteria are broad based economic indicators, such as interest rates and consumer sentiment. The individual investor.s potential for standing out from the crowd, so important for success in investing, is largely not present.

The spread betting companies make the rules

If you buy shares with the purpose of holding them for a relatively short period of time and then selling them, you will be engaging in the activity known as trading. The trader is set apart from the type of person who buys shares with the intention of holding them for a long period, perhaps forever, with the expectation of benefiting over a long period by having an income from dividends with a large capital gain in many years time.

As a trader, you will only have to worry about what the market does. There are very clear definitions of what you can expect to get when you decide to open or close your position. True, you will have a spread to contend with (the price at which you can buy from the market maker will not be the same at a given instant in time as the price at which he will buy from you) but this will be, to a large extent, transparent to the normal trader in a market with normal liquidity.

You will, in effect, be pitted against, and find yourself interacting with, the great body of other traders who are interested in the same securities as yourself. The market will dictate the outcome, for better or worse.

When you start dealing in equity or index options, the position changes. The spread then becomes a significant item, and you will be up against option contract expiry dates, as well as the market as a whole, but at least you are still dealing in a real market, unlike in spread betting.

What makes a good Trading Strategy?

2009-03-12T17:43:00.000-07:00

Ask most NEW traders, and they will tell you about some moving average or combination of indicators or a chart pattern that they use. This is, as the more experienced trader knows, an entry point and not a strategy.

Any trader who is more experienced will say a strategy should also include money management, risk control, perhaps stop losses and of course, an exit point. They might also say that you must let your profits run and cut your losses short. A well-read trader will also tell you that your strategy should fit with your trading personality.

BUT there is one other vital ingredient that many traders forget - and that is to fully understand the "personality" of what you trade. Some traders specialise in say, gold or Brent crude or currencies or they might specialise in a particular index such as the FTSE 100 or the Dow but many traders choose to trade shares. Indeed some traders dabble in a bit of everything. I think this is the area that causes many traders to fail or at least not reach their full potential.

In my view: You absolutely MUST specialise.

I am sure that on the surface most people would say that sounds sensible but here is why it is a MUST!

Superficially, many charts look the same. I bet if you had not seen the charts for some time and someone where to show you a chart of Brent Crude over 6 months and then a chart of Barclays PLC over the same 6 months you would be hard pushed to say which was which purely on the look of the chart.

However, I bet that if you found a trader who trades ONLY Barclays day in and day out and also found someone who trades ONLY Brent Crude day in and day out, both of them would easily identify which was which. WHY?

Because every share, index or commodity has it’s own "personality".

Some will be volatile intra-day, some will follow their sector or the main index (market followers), some will do their own thing, some will spike up and down regularly, some will stop at key moving averages and some will just plough through. Some will move by 5% on average before they retrace and some by 2%. Some will gap up or down regularly, some will not. You get the idea!

Therefore, no matter how good you are at analysing indicators, moving averages, trends and patterns, the same strategy WILL NOT work for everything. I would go so far as to say that a strategy that works well for Bovis Homes, for example, is likely NOT to work for BT Group - they have very different "personalities".

So let’s return to our question: What makes a good trading strategy? Let me answer with a series of ten questions that you need to find answers to, in order to build a REALLY GOOD strategy.

1. What do you want to trade (share, index, commodity, currency, etc)? If your answer is shares (plural) I would urge you to pick one typical share at this stage to really specialise. You can add more later.
2. What "personality" does that share, index etc have?
3. What entry system is the most reliable for that share?
4. What stop loss system is the most effective for that share?
5. What average risk will a typical trade carry?
6. What exit system works well for that share?
7. What is your trading personality (attitude to risk, losses, discipline, how much do you worry etc) and can you trade that strategy without overriding it?
8. What timescale do you want to trade? (Using intra-day or end of day data)
9. How much data do you keep on past trades to help identify strategy weaknesses?
10. How does all this fit with your trading objectives?

Once you have an answer to each question you need to do one final thing. Make sure all those things fit together and complement each other. For example, if the ideal stop loss position represents a big average risk and conflicts with your own attitude to risk, you need to start again. If you will override your exit point because greed makes you hang in for more, you need to think again. Perhaps you shouldn’t trade that stock in the first place - look for one with a different "personality" which will lead to a strategy you can trade comfortably.

It is a long and sometimes painful iterative journey. You might need to go round and round in ever decreasing circles over a long time. Testing and refining, testing and refining before you can truly have a reliable and repeatable strategy that REALLY WORKS for you.

THEN, you can look for other things to trade that have the same "personality" as your specialist stock, index, commodity or currency.

But if it were easy, everyone would be doing it right?

Good luck and enjoy your trading.

What is The Law of Charts™?

2009-03-12T17:42:00.000-07:00

The Law of Charts defines four basic formations known as 1-2-3 lows and highs, Ross hooks, trading ranges, and ledges. These occur in all time frames because the depict human action and reaction vis-à-vis price movement.

What makes these formations unique is that they can be specifically defined. The ability to formulate a more precise definition sets these formations apart from such vague generalities as "head and shoulders," "coils," "flags," "pennants," "megaphones," and other such supposed price patterns that are frequently attached as labels to the action of prices.

A 1-2-3 high or low comes at the end of a trend or swing. It forms as the result of a change in the direction of prices. The 1-2-3 low forms as the result of buying pressure overcoming that of selling pressure. The 1-2-3 high forms as the result of selling pressure overcoming buying pressure.

A Ross hook™ always forms as the result of profit taking in an trend or swing.

A ledge forms as a result of profit taking, uncertainty about future price direction, or both. You might consider it as a pause in the overall movement of prices in a single direction.

A ledge is the smallest of a number of consolidation formations: it never consists of more than 10 or less than 4 price bars. It is denoted by containing two matching or nearly matching highs and two matching or nearly matching lows.

A consolidation consisting of eleven to 20 price bars is called a congestion, and a consolidation consisting of 21 or more price bars.

As simple as these definitions are, the have been found to constitute a "law." Any data that contains both a high and a low, will form these patterns; even data that has nothing to do with markets and trading.

Learn more about The Law of Charts, it is a free resource on our website. Study it as much as you want. And while you are visiting take a look at the Traders Trick™ entry.

Planning: A Key to Successful Trading

2009-03-12T17:39:00.000-07:00

From time to time I get some very interesting confessions. Here is a very recent one, along with a solution.

"Hey Joe! I had been looking at a profitable trade setup all day. I studied indicator after indicator looking for confirmation, even though I know many are correlated and redundant. But I just kept on searching. I thought, ’Maybe I missed something.’ My account is now so small that I just wanted to be sure that this was the right trade. My thought was that I must take into consideration anything and everything that could cause this trade to fail. I can’t afford to lose any more money. What should I do?"

Well, my friend, you need to be able to make a decision, but you can’t do it if you are trading undercapitalized and making your trading decisions out of fear and uncertainty.

You are suffering from too much analysis. You are looking at so many things, you no longer can see straight. If you keep on over-analyzing your trades, it may develop into a deep-seated psychological problem.

Carefully analyzing the possible consequences of your trading decisions is healthy, but it becomes unhealthy when it is overdone. When it comes to trading, it’s important to have a clearly defined trading plan. You want to be sure that any given trade is not going to wipe out your trading account. That is one of the reasons we want you to use a time stop in addition to a money stop. When you use both types of stops you are clearly defining the signs and signals that indicate your trading plan is not working, suggesting that you should close out the trade to protect your capital.

Trading, by its very nature, is uncertain. There is little that can be described as security for traders. Every trade is a new event, and every entry is an entirely new business. A trader does not have the luxury of living from his past accomplishments.

If you have an unquenchable thirst for certainty, then trading is not for you. Uncertainty in trading is co-equal with insecurity. If money represents security to you, you have a real problem as a trader. Losing money not only costs you your financial security, but also your emotional security.

At many of my seminars and private tutorings I tell people that I have completely divorced myself from the money involved in trading. I don’t even know until the end of the month whether I have won or lost. I trained myself to think of trading as an endeavor in which I strive to make points. Only later are those points translated to dollars. In that sense, for me trading is a game. But I never lose sight of the fact that trading is also a serious business.

Insecurity in traders who over-analyze manifests in searching for the holy grail of trading, desperately seeking the right indicator or the perfect trade setup. The problem you’re having is that even when you see something, you are not sure it is sufficiently perfect for you to act on. Why? Because you lack confidence in your ability to trade what you see. Because you lack confidence in yourself. And because you fear the pain of another loss.

Here’s how I was taught to do my analytical work.

First, I went through all my charts to get an overview of the markets. During that time, I looked for trending markets. Trend lines were placed on the charts as long as they had a 30° or greater angle. Until I became used to what that looked like, I used a protractor to determine the angle. This action got me used to identifying the trend. These days it is easily done with your software.

Next, I went through all my charts again looking for "against the grain" moves-the intermediate trend that went against the longer term trend. This alerted me to markets that might soon resume trending.

Then I went through all my charts looking for Ross hooks™. I marked each hook with a bright red "h". Then, in light of the size of my margin account, I tried to select those markets that appeared to have the greatest potential, and I placed order entry stops just above or below the hooks. These were resting orders in the market. I tried to never miss a hook. I phoned my orders in daily.

How did I know which markets had the greatest potential? The answer is simple. I selected those markets that had the strongest trend lines.

Now there was a trick to this. I didn’t want too steep an angle, because in a rising market that often signals that the end of a move is near. Markets that break out too fast and go straight up rarely give an opportunity for entry before they start to chop around in congestion. Markets that have been going up at a steady angle, and suddenly that angle steepens-goes parabolic, are giving a warning that the move may soon be over.

In down markets I was willing to allow a steeper angle, because often a market will move down a lot faster than it moved up.

What I most wanted was trending markets that were making a retracement. Then I could attempt an entry as the market retraced, when it reached the proximity of the trend line, and then seemed to resume its trend, and when it took out the Ross hook™ created by the retracement.

Sometimes I had to wait for weeks before the markets started trending. The same is true today; nothing has changed other than that intraday it can happen a lot sooner. There will usually be at least a couple of markets in that condition, but there are times when there are none.

Yet I did my homework every day. The only way to know when an important breakout, the beginning of a trend, would occur, was to perform my daily analytical work.

Finally, I would set my work aside and take a break for dinner. After dinner, when my head had cleared a bit, I would look at my charts again. I would then do my best to come up with a trading plan. I would try to think through what I was going to do. I would ask myself a million "what if’s." I tried to anticipate what might happen in the market.

Often that kind of thinking would cause me to eliminate some of my potential trades. Also, a second look at times resulted in "why didn’t I see this before?"

For instance, what if you look at a market that is approaching its trend line. Isn’t it reasonable to ask yourself, "If this market breaks the trend line, what would I do?" Ask yourself how such an event would change the picture. If you had a position, would you still want to hold it? If you had no position, would this cause you to take a position opposite what was the trend? If it would, then why not place an order entry stop with limit, just the other side of that trend line? Very often, when prices approach a trend line from what has been a trending channel, they are already in a counter trend within the channel. That means a breakout of the trend line would be a continuation of this newly formed trend.

Finally, I would put my work aside and go to bed. In the morning I would look at my charts once again. Then I would write out scripts for the orders I wanted to place.

I would rehearse how authoritatively I was going to give these orders.

I did all this and more before I entered a trade. But do you know what most traders do? They do their analysis after the trade is made. Too often, they do it when the trade is already going against them.

How many times have you entered a trade, and then said to yourself, "Oh no, why didn’t I see that before?" How could you have seen it if you hadn’t looked, and looked again, and thought about it, and then perhaps looked one more time?

Also, many traders do their analysis after entering the trade in search of a justification for having entered. "Now I’m in the trade, let’s see if I can find out a couple of good reasons as to why!"

If you want to be a successful trader, you have to be hard. Hard on yourself and hard on your broker. I don’t mean that you have to be a rat, or be impolite, or be contemptuous. You just have to be firm in all that you do. You can’t afford to be "Mickey Mouse" about the way you do things. This is a business; you must be businesslike in conducting your affairs.

As a business person, you must manage your business. One of the main functions of management is planning. You have to plan your trades. Other things to look for as you go through your charts are: One-two-three formations, cups with handle, matching congestions, reversal bars, and Doji’s. These should all be part of your plan.

Some people give more thought to choosing which flavor ice cream to eat than to which market to enter and how and when to do it.

By not taking the time for preparation, you end up not having enough time to weigh the pros and cons or really familiarize yourself with what you are getting into.

You don’t have time to realize that prices have supported two ticks away from your entry about forty times in the past. You don’t have time to see that you are trading right into overhead selling. You don’t have time to notice that if prices break out of yesterday’s high, they will also probably take out a Ross hook. You don’t have time to see where prices are in relation to the trend line. You don’t have time to really grasp the overall trend, or the wave that is going counter trend. You don’t have time to really consider where you will place your stop. You don’t have time to read the market and to see what it might be telling you.

All of these things can be done ahead of time. If you do not do your homework, you will end up chasing markets in a desperate attempt to get into "the big move."

How to Make Consistent ProfitsTrading Futures Part III

2009-03-12T17:38:00.000-07:00

A lot of traders are trading the stock indexes like the FTSE, the DAX, the S&Ps, NASDAQ and the DOW, but rather than use futures they are using spread betting firms. The reasons for using these firms is that they require very small amounts of capital to get started, a trader can trade very small amounts (like £1 a point on FTSE as opposed to £10 for FTSE futures) and these firms make opening an account so easy. I understand the lure of being able to open an account with very little money and trading small amounts, but I have some serious considerations about using spread betting as a realistic vehicle for professional trading.

The two biggest selling points are no commissions and no capital gains tax. There are many different costs to trading, commissions are one and the spread is another (especially when you have to trade at the market as you do with spread betting, with futures you have the choice of joining the bid or the offer). Commissions are important for an active trader and as an active trader you can get them very low, but lets assume they are £8 per round turn for futures and lets assume that the spread in FTSE futures is an average of 2 points. If the spread with a spread betting firm for FTSE is 6 points and assume that we are trading £10 a point we can compare the two trading vehicles.

Last week (written Nov 2001) I made an average of 2.42 points per contract traded and I traded 48 times. That is, for each contract I bought and sold I made £24.20 before commissions, assuming my commission rate is £8, I made a profit of £16.20 per contract traded, which is £777.60 net profit if my average size per trade is one contract.

Had I had the same success trading with a spread-betting firm, with a 6-point spread, I would have lost £1718.40! Now I would rather pay tax on a profit that no tax on a loss.

There is one other very important reason for trading the futures market rather than a non-exchange traded market such as those offered by spread betting firms. The futures markets are exchange traded and this means that they are fully transparent, i.e. everything is visible and above the table, I can see every single trade that happens. Imagine the trading pit, as it used to be when traders stood physically in a ring trading with each other.

When a trade is entered, the order goes into the pit and is represented there, free to be taken by any other market participant. We can all see what is happening, we trade with the same information and with the same advantages/disadvantages. Now assume you are a trader who can only trade with one broker in the pit, you can trade as much as you like, any size you like, but he sets the spread he is willing to offer you and you have to trade at market (i.e. buy at his offer and sell at his bid). This broker doesn’t want to loose money, naturally, so he always makes his spread wider than the real market spread, he also, naturally, puts his interests before yours, so he won’t always be willing to trade when the market is moving fast and he is uncertain.

Remember whenever you make money he loses, so he is very careful to maintain his advantage at all times. Who wouldn’t want to be in this brokers position (he isn’t really a broker, though he claims to be)? When you trade with a real futures broker, all the broker does is facilitate your trade; he gives you the ability to have you orders represented in the pit. A real brokers concern is that they execute your order as efficiently as possible, that is their job, they do not take positions and they do not take the opposite side to you.

They naturally want you to make money because by making money you become a client who will continue to pay them commissions. Trading with a spread betting firm is absurdly costly, spread betting firms are like amusement arcades, they can be fun, but to imagine you are going to make your living from slot machines is illusory.

How to Make Consistent ProfitsTrading Futures Part II

2009-03-12T17:37:00.000-07:00

Direct Access Electronic Trading

The issue of direct access is an important one and it becomes more important the more short term your trading is. The market can change from a state of seeming paralysis to one of shocking volatility and activity in a flash. The length of time it takes between you deciding to enter an order and the order actually being in the market is obviously important. When I first started trading I used a phone broker and was dismayed that my fills would often be so far from the price the market was trading when I first entered the order.

The first time I visited the trading floor, I discovered why. When I called in an order, first my discount(!) broker would check my account equity, then he would call a phone booth on the floor, the phone broker on the floor would then write the order down and pass it on (by phone) to a booth next to the appropriate pit, at that booth my order would be written down again and then signaled to a broker in the pit to be executed.

As you can imagine this would take quite a long time, even longer of course if the market was very active, as this would mean that the broker in the pit would be too occupied to take new orders. Compare this to my experience of trading as a pit trader. In the pit I was in the heart of the market and could observe every single order as it was executed (there was no delay in my price feed!). To initiate a trade, whether it was to buy or sell at the market, or join the bid or the offer, all I had to do was open my mouth. You can start to see the huge advantage that trading on the floor gave me over off floor traders; and that doesn’t take into consideration the fact that my round trip costs fell by 96%.

Now the floor no longer exists, not in Europe at least, so why talk about the advantages of pit trading? Well the level playing field is now open to all, but very few take advantage of it. Trading with an electronic trading platform is exactly the same as trading in the pit, except I can sit down, it is much quieter and there are no crude jokes flying around. I can trade with the click of a mouse; my order shoots to the exchange, enters in the market and appears back on my screen before I have time to blink. I think the advantages of direct access trading are clear and any futures trader still using a phone broker should move to direct access, they will also find their commissions are less (around £8 for private client traders).

The next question that arises is why trade futures? That is an important consideration given that there are a variety of alternatives vying for your trading capital (spread betting, CFDs and options), but in my opinion, futures are the only option (no pun intended) for successful short term trading.

How to Make Consistent Profits Trading Futures Part I

2009-03-12T17:36:00.000-07:00

One of the mistakes I consistently made in my early years as a trader was to try to make too much money in relation to my trading capital. To make £1000 a day while Futures Trading with £10,000 is absurdly ambitious; of course I have done it many times, as would anyone with this intention, but I have also gone bust on more than one occasion. To have the aspiration of taking £1000 out of the market each day, when trading with £10,000 or under is, I think, a quick route to the poor house.

So what is a reasonable objective for a day / futures trader?

A few weeks ago I visited an ex-floor trader who has set up a trading operation backing young aspiring traders. I was interested to find out from him how he trains his team. The essence of his approach is to give them a grounding in discipline and confidence. He believes that confidence is one of the primary keys to success in futures trading and that confidence is a by-product of taking money out of the market.

One of the reasons he has chosen to work with young futures traders is that he wants people who have minimal financial commitments. He knows it will take a while for them to start earning an income from the business. So his belief is that if his traders can regularly take small amounts of money out of the market, their knowledge, skills and confidence will grow and in time they will become bigger traders. What is critical about this approach is that his traders do not grow in size until they have achieved consistent, regular success on a small scale; and we are talking small, I mean £25 or £50 in a day.

What can we learn from this low risk approach? Well first let me ask you: what is more important, to make money today, or to become a consistently profitable trader? Because if we want to become consistently successful traders we need to take a different tack than if we are just out to make as much money as we can today.

So back to the question, what is a reasonable objective for a day trader? Well let’s look at bringing our daily target right down to £100, with £10,000 of trading capital, i.e. 1%. Now £100 a day, trading a market like the FTSE seems an achievable target to me. That is a net profit of 10 FTSE points a day. Can you come up with a system that trades 5 times a day and has an average net profit of 2 points? Or a system that trades 10 times a day with an average net profit of 1 point?

Is that a yes I hear? Because if you can make an average of £100 a day you will double your money in 100 trading days i.e. 20 weeks or about 5 months. If you double you position size every time you double your money, your account will grow to £1,000,000 in 140 weeks, which is less than 3 years! Of course this does not take into account the impact of tax; but my point is that by taking a low risk, conservative approach to trading objectives, we give ourselves the chance to grow and develop into traders, while also availing ourselves of the possibility of a deceptively good return.

If at this point you are tearing your hair out and screaming at the screen that I am a fool for suggesting that you can trade a strategy that averages a few points a trade, I assume that you are not familiar with the benefits of direct access trading. Direct access trading effectively gives everyone and their uncle the same low costs, immediate trade execution and access as was exclusively enjoyed by the floor traders before the advent of the electronic market place. To learn about the advantages of direct access trading..

Achieving Trading Perfection

2009-03-12T17:23:00.000-07:00

Achieving Trading Perfection - Trade quality, not quantity. Take the best of the best. Get the big picture. If you haven’t previously come across such advice, or if you have and are not following it, it is time that you take these words to heart. But how?

Trade selection and adequate planning go hand in hand. This is where most would-be professional traders miss the boat.

Much more money is made as a result of proper planning than from sitting and trading everything that comes along or "looks" good.

It’s difficult to fully understand why people think they have to trade so much. It’s difficult to truly grasp why people think that they have to take as many trades as they do.

Just the opposite is true. There is a correct approach to each and every trade. That is what achieving perfection is all about.

It all starts with proper management: planning, organizing, delegating, directing, and controlling.

These facets of management must be woven together into your trading; they do overlap.

Although planning is the major management function involved in achieving perfection, you can’t possibly plan well unless you are organized to do so.

You must have your tools at hand: your trading software, your data, the proper equipment. All of the rudiments for planning must be in place, which in itself is a part of organizing.

You must be physically fit when you plan: well nourished, properly exercised, well rested and mentally alert - all part of having your life organized, all part of achieving perfection as a trader.

To be a winning trader, you have to be among the best. There can be no middle ground. There are only winners and losers, and to be a winner you have to be a champion. And, just like any champion, you must have discipline, self-control, and a willingness to train, train, train.

There are no runners-up in trading, you either get the gold or you give the gold. Often, while others are busy going to parties or watching sports events, you are busy poring over charts, studying, thinking, planning. When others are listening to music or watching TV, you are busy practicing your trading, practicing trade selection, working hard to become a more astute trader.

Part of achieving perfection involves the diligent study of charts. The data, as presented on your screen and preserved as charts, are, for the most part, all you have for making trading decisions. They are a picture, a visualization of what is taking place in the reality of the market. Your job in achieving perfection and becoming an adequate trader is to picture and imagine in your mind what makes prices move and form the way they do. Ask yourself, "How does what I see in front of me relate to the supply and demand for the underlying?" Ask yourself, "Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?"

Supply and demand are not what makes prices move or fail to move most of the time. The sooner you realize that fact, the better off you will be. Markets are engineered, manipulated ¾ you need to know that.

But there’s more to a chart than merely price patterns. Reflected in the chart are the emotional reactions of human beings. Reactions to rumors and news; to national and world events; to government reports - these, too, are on the charts.

You might say that price movement, or the lack thereof, is the net effect of all the perceptions of all the traders who are participating in the market for a particular futures.

There is something else on the charts, something that too few take into account. That something is the manipulations from and by the insiders, the market movers, and by commercials holding large inventories of the underlying you are attempting to trade.

In achieving perfection as a trader, you must train yourself to look for evidence of any and all of these things as you study your charts. It is the cumulative action of all perceptions which causes patterns to form on a price chart.

You must learn to look for the truths in the markets. There are certain truths which are self-evident; they are always true. For instance, take the phenomenon of a breakout. When prices break out, no one can change the fact that they did break out. It is a fact and it is true. The breakout may turn out to be a "false" breakout, but nevertheless it is a breakout. As part of achieving perfection in your trade selection skills, you have to learn to tell which breakouts are most likely true breakouts, and which ones are most likely false. How can you know? By the price patterns on the chart.

And what about trend? Your job in achieving perfection as a trader is to master how to trade a trend. A trend is a trend, is a trend. It is a trend until the end, and part of your job is to know when a market is not trending.

The trend is the trend while it lasts. While a market is trending it is telling the truth. The trend can change, but the truth is the truth. If prices are rising, the trend is up. If prices are falling, the trend is down. The truth can be found in the trend. It is an immutable fact. You are to learn to make my money by trading with the trend. You are to learn what constitutes a trend. You have to learn to spot trends early so that you can make the most out of the market while it is trending. Your job in achieving perfection as a trader is to learn to recognize when a trend will most likely begin, and just as important, to learn to be even more adept at deciphering when a trend is ending.

In achieving perfection, you must learn to recognize "your" trade(s), and to take only "your" trades. Trade the formations and patterns that you can easily recognize and identify.

You must learn to trade using tips and tricks that you are shown and to accumulate and keep a collection of techniques that result in the selection of high probability trades.

How are you to do all this? Practice, practice, PRACTICE. Practice recognition of congestion areas. Practice recognition of high probability breakouts. Practice trend recognition. Practice and more practice. Just like anyone who wants to achieve perfection at anything, there must be total dedication, study, practice and more practice. You are to become a trading virtuoso. You are to practice, yet always realizing that you will never attain true perfection, that there is always room for improvement. There is usually a way to refine: ways that you can do things better, more efficiently, and with greater speed and finesse.

Forex Swing Trading with Elliott Wave

2009-03-11T18:27:00.000-07:00

When evaluating the forex market for swing trade opportunities the focus is placed on predicting directional changes or continuations for a given currency pair. For this we rely on technical analysis.

In technical analysis, just as in fundamental analysis, there are lagging indicators and leading indicators. One of the most reliable tools used to predict forex market swings is Elliott Wave analysis. Elliott Wave analysis can be used to identify trends and countertrends, trend continuation or exhaustion and to evaluate the potential price targets of a trend.

You can apply Elliott Wave analysis to both long and short position swing trade set ups for your currency pairs.

Elliott Wave theory is named after Ralph Nelson Elliott, who concluded that the markets moved in a repetitive pattern of waves. He attributed this action to the mass psychology of the market.

Elliott concluded that the market¡¯s movement was a direct result of the mass psychology of the time and that the stock market is a fractal. A fractal is an object that is similar in shape, but at different scales. A great example of a fractal in nature is a stalk of broccoli. The stalk and the individual branches look exactly the same; just the branches are smaller in scale.

Fractals just happen to form in accordance with Fibonacci ratios. Is this a coincidence?

Elliott attributes this mass psychological move to the human trait of herding. Even though Elliott¡¯s theories were based on stock market price movements, it has been applied to evaluating Presidential approval ratings and fashion trends changes as well.

The conclusion, the market price actions are not the cause of economic growth or slow down, but the reflection of the mass psychology of investors. If the mood of the investing public is upbeat then a bull market ensues. This is counter to what most individual perceive, that because there is a bull market the mood of the investing public is upbeat.

Elliott Wave patterns follow a sequence that the markets move up in a series of 3 waves and down in a series of 2 waves. This 3 wave impulse and 2 wave corrective sequence form the foundation of the 5 Wave impulse pattern (the opposite is true in a downtrend).

The Elliott Wave Counts are as follows;

Wave 1 - Short Covering
Wave 2 - Pullback from Short Covering
Wave 3 - Major Rally Phase
Wave 4 - Institution Pause in the Rally
Wave 5 - Retail Buying

Wave 1 is usually the weakest of the impulse waves. It is a brief rally based on short covering of the bears from a previous move down. When Wave 1 is complete, the currency pair sells off, creating Wave 2.

Wave 2 ends when the market fails to make new lows. You often see dominant reversals patterns form at the end of this wave signaling the being of the rally phase or Wave 3.

Wave 3 is the longest and strongest of the impulse waves. This signals strong currency buying or selling in the direction of the trend. This trend usually starts of slowly, but tends to accelerate as it breaks to new highs above the top of Wave 1.

Like any trend, especially a strong trend a correction will occur. Traders will begin to take profits and the currency pair will retrace. This signals the beginning of Wave 4.

Again the currency pair will rally ushering in the Wave 5 rally. Wave 5 is typically supported by the retail traders and not institutional buyers (the herd) and tends to lack the momentum generated in the Wave 3 rally. This creates divergence that can be easily measured on any technical oscillator. After the currency pair breaks to new highs above the previous Wave 3 high, the rally loses steam and changes trend.

This trend change can result in either a new 5 Wave impulse pattern or a corrective in nature.

Now that we know what the Elliott Wave analysis is, how would a currency trade using this analysis look like, just as an example?

Look to Wave 5 as the most reliably tradable impulse wave. The trade sets up as follows. Look for the Elliott Oscillator to pull back between 90% and 140% of the Wave 3 high on a daily chart. This pullback should correspond to a 38%-62% Fibonacci retracement from the Wave 2 extension. This signal is the strongest when the Fibonacci retracement is between 38% - 50%.

Like any technical analysis tool you never want to employ an indicator as a stand alone analysis tool. A trigger and a confirming indicator are required as well.

Look for a trigger in candle patterns, such as Harami, Tweezers or Harami cross. There are a variety of software packages on the market that perform Elliott Wave counts and have other entry signal indicators as well.

Draw a regression channel on the Wave 4 retracement and look for a break above or below the channel as confirmation to enter the trade.

Place stops at the high of the Wave 1 advance, just below the 38% Fibonacci retracement level or where your individual trading plan dictates. Trail your stops once the currency pair has advanced past the Wave 3 high. Look for reversal candle patterns like doji, hammers, shooting stars or hanging mans for signals that the wave is about to end or stall. A typical price target is 127% retracement of the Wave 4 low.

This is just a glimpse of how Elliott Wave analysis can be deployed to enhance your forex swing trade evaluations. Look more into the Elliott Wave theory and other strategies as tools for increasing your forex swing trade opportunities.

Risks of Trading in Forex Market

2009-03-11T18:26:00.000-07:00

Although every investment involves some risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore, if you are considering participating in this market, you should understand some of the risks associated with this product so you can make an informed decision before investing.

As stated in the introduction to this booklet, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital i.e., funds you can afford to lose without affecting your financial situation. There are other reasons why forex trading may or may not be an appropriate investment for you, and they are highlighted below.

The market could move against you

No one can predict with certainty which way exchange rates will go, and the forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you close it out will affect the price of your forex contract and the potential profit and losses relating to it.

You could lose your entire investment

You will be required to deposit an amount of money (often referred to as a security deposit or margin) with your forex dealer in order to buy or sell an off-exchange forex contract. As discussed earlier, a relatively small amount of money can enable you to hold a forex position worth many times the account value. This is referred to as leverage or gearing. The smaller the deposits in relation to the underlying value of the contract, the greater the leverage. If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire deposit. Depending on your agreement with your dealer, you may also be required to pay additional losses.

Overtrading is another ordinary money management mistake in the forex market. This trading does not have clearly defined trading objectives; the sole reason is to make more money. To avoid this mistake, make sure that every trade is broken into ultimate goals, and that these goals are achieved before other positions are added. Very few traders can successfully manage multiple positions in a variety of currency trading markets.

Overconfidence is a big mistake when it comes to money management and the forex market. This is caused when a trader has or thinks they have particular or inside information. These hot tips are sometimes wrong, and when this happens large amounts of money may be lost because of this. The way to avoid this is to avoid being confident in any rumors or special information you may have. Managing your money means taking measures to preserve it as well.

Preferential bias can exist among forex market traders. This happens when they only see or hear what they want in relative to the favored trade. This can cause a trader to ignore the real activity of the forex market in favorite of what they want to happen. It is important to look at each trade impartially and do not become set in cement with your opinion. Do not ask friends or family for their opinions; just go with what you know.

Forex Trading - Should you Be Trading in Forex Now!

2009-03-11T18:24:00.000-07:00

Forex dealing or Forex Trading as it is better known is all about investing your money into other currencies, so you can gain the interest for the right time period of time or the difference in dealing currency all around. Forex trading does involve other assets along with money, but because you are placing in other countries and in other businesses that are dealing in other currencies the cornerstone for the money you make or lose will be dependent on the trading of money.

Constant Tradin is done in the Forex Market as time zones will vary and the markets will open in one country while another is near closing. What occurs in one market will have an effect on the other countries forex markets, but it is not always bad or good, sometimes the margins of dealing are near each other.

A forex market will be present when two countries are involved in dealing, and when money is traded for goods, services or a combination of these things. Currency is the money that trades hands, from one to another. Often times, a bank is going to be the source of forex trading in, as millions of dollars are traded daily. There is nearly two trillion dollars traded daily on the forex market. Should you get involved in forex dealing? If you are already involved in the stock market, you have some idea of what forex trading really is all about.

The stock market takes buying shares of a company, and you watch how that company does, waiting for a bigger return. In the forex markets, you are purchasing items or products, or goods, and you are paying money for them. As you do this, you are gaining or losing as the currency exchange differs daily from country to country.

To better condition you for the forex markets you can learn nearly trading and purchasing online using free 'game' like software. You will log on and create an account. Entering data about what you are interested in and what you want to do. The 'game' will allow you to make purchases and trades, involving different currencies, so you can then see first hand what a make or loss will be like. As you continue on with this fake account you will see first hand how to make decisions dependent on what you know, which means you will have to read about the market changes or you will have to take a brokers data at value and play from there.

If you, as an individual want to be involved in forex dealing, you must get involved through broker, or a financial institution. Individuals are also known as spectators, even if you are investing money because the amount of money you are placing is minimal compared to the millions of dollars that are invested by governments and by banks at any given time. This does not mean you can't get involved.

If you are ready to start investing in Forex and you are looking for a Great Forex Broker, the CFD FX REPORT have recently researched all of the Best Forex Broker so feel free to visit us or email support@cfdfxreport.com We also offer Forex Trading Report, Forex Education, it is why the CFD FX REPORT is the site that Traders use.

Forex Trading - Create a Plan to Trade Forex Market

2009-03-11T18:21:00.000-07:00

Despite what you have read, all of the promises there is no system that will make you an instant millionaire in forex trading. You can increase your chances of success by implementing a forex trading plan and to protect you from going broke.

When you start to dig deep into the Forex Market
there are three simple time frames in which you can trade Forex.

- Short Term
- Medium Term
- Long Term

All of these strategies have their own advantages and disadvantages when it comes to Forex Trading. No one strategy is better than the other.

1. Short Term
Or as the Forex trader is known as the scalper and they are going to be trading very quick trades often buying and selling currencies back and forth many times throughout the day. Leveraging is required here to both make a profit and also protect your investment.

2. Medium Term
The medium term forex trader will hold the currency from one day to one week. The big advantage of the medium term trader is that profit can be made on the least amount of capital invested. This is looking at more established trend lines and trading with wider stops.

3. Long Term Trader
The Long Term forex trader or investor can hold the currencies from weeks to months and even years if they can see a direction for that currency. Leveraging is also required here as well as short term trading to both make a profit and also protect your investment

Where traders make the biggest mistake is start out as a short term trader, the trade will go against them and they then decide to hold on to this currency trade until it turns around so they are forced to become a medium term trader. What will normally happen is they will end up with a lot of bad trades and ultimately end up broke. So whatever your strategy is trade it and stick to it.

Tools of the Trade:

When trading on the Forex Markets most traders use Technical Analysis for find trades. There are a number of technical analysis strategies that you can to help you become a profitable trader.

Technical analysis can be used to monitor many indicators as well as the all important price activity. When you get to know more about your personal needs in Forex market, you can get programs that will bring together large amounts of the data that you want included in your analysis. You will be able to customise and organise your plans for your personal investment strategy.

The other advantage of being a long term trader is you isolate yourself from the huge swings as the markets are open for so long.

Every single Forex Trader should use the golden rule of using stop losses, as they will help you to protect your capital.

The take profit order is the same as stop/loss but will stop the order when it has reached the level that you have set to reap the benefits. It is a dilemma because you do not want to curb your profits by putting a take profit on your order but unless you watch your account all day, the currency may drop like a stone and you may lose it all. It's better to take little and often.

Time to Trade, the advantage of the modern age is the internet, mobile phones where you can trade from anywhere in world. You can set up accounts with a broker, even use a demo account until you feel comfortable. When selecting a Forex Broker remember finding a great Forex Broker is an important as selecting a winning trade. If you are uncertain who is a great Forex Broker, visit the CFD FX REPORT
as they have recently researched all the brokers to find who they believe to be the best Forex Broker in the market. They are some excellent education lessons to be learnt from them as well.

So if you wish to learn more on Forex Trading feel free to visit us to gain more knowledge on the Forex Trading.

Forex Report - How to Be A Millionaire Trader

2009-03-11T18:19:00.000-07:00

We all want to make money from trading, and we all want to make millions from the stock market of the forex market. However it is a well know fact that over 90% of traders will in fact go broke and not become successful. So if we are to look at who does become successful there is a group of people that tend to become more successful than others.

There is a group of individuals who tend to make the better traders and their non mathematicians or College educated, they have a skill that anyone can actually learn and their very successful. The group of individuals I am referring to are...

Professional card players who are great at playing cards and poker and the exact same skills you need in these games are the ones you need in Forex before we explain why lets dispel one of the greatest myths about Forex Trading:

One reason for this is if you watch all great card players, they will all have one common trait, which is patience. They also realize that they cannot win every hand, and as traders we cannot win every trade. If we understand this we are increasing our chances of success as a trader.

We also must realize there is more trading days to come, as there is more cards to be dealt. So if we miss a trade, don't trade for trades sake.

Remember DO NOT Trade for TRADES SAKE

Forex Trading is Complicated

To enjoy Forex trading achiever does not take you have a college education or have a complex Forex trading strategy or knowledge of maths and the reason is simple - Forex trading is simple and if you get a system to Complicated it will break in the ever changing brutal world of Forex Trading. Also as humans we like to complicate things and we believe that if they are complicated, then we are smarter therefore it makes us feel better. Quiet often though simple things will make us a lot of money. This can be also looked at with trading strategies, keep them simple.

Mathematics doesn't aid, because markets don't move to certainties, you are only trading with odds and probabilities and that's why card players are so great at Forex trading.

Here are the reasons card players make such great Forex traders.

1. They are Patient

They wait for the right hand and only play when the odds are in their favour. Contrast this with the bulk of Forex traders who are always in the market or trying losing strategies like scalping. In Forex Trading you don't get rewarded for trading often, you get rewarded for being right.

2. The Ability to Fold

A fabulous card player will pass hands by when the betting odds are non in his favour and he is also happy to fold when in a hand, if he doesn't think he will win. He keeps his losses tight and he doesn't mind dealing them, as he knows his time will follow.

Most Forex traders on the opposite hand simply can't do this and run losses or get disappointed, as their emotions get involved.

3. Courage at the right Time

The fabulous card player knows when a great hand comes up, he needs to maximize his potential and will milk as much money from it as he can. They are prepared to bet huge amounts and hold on with discipline and win.

Contrast this with the average Forex trader who banks his profit early or bets 2% and thinks he is going to make a lot of money. In Forex trading, you need to hold and profit from long term trends and have enough riding on them to make a great profit.

4. discipline discipline discipline!

You have heard about how serious it is in Forex Trading and it is to take loss after loss as the market hurts your ego and makes you look stupid is hard. Most traders cant do - Professional card players know it's the key to success and are mentally prepared to do this and know they will hit a home run.

Keep it Simple.

Forex Trading is simple and always has been and the huge difference between winners and losers is the correct to keep losses small and bet big amounts when the time is right.

That's why card players often become multimillionaire traders - there not interested in ego, being clever or Complex - but being able to make money and that's why this group enjoy Forex trading success.

Forex Market - Make Money in Choppy Markets

2009-03-11T18:18:00.000-07:00

The Forex Markets do not create clear trend lines all the time. Quiet often we will experience very volatile markets and the prices can move dramatically up and down. Sometimes they can start to trend then also of sudden make a strange upward or downward movement which will trigger your stop loss and stop you out of the trade.

So How can we trade this sort of Forex Market and make money?

1. Don't expect a long swing plan or any sustained price movements if you are already in an open position, get some profits out when you have made some from the forex market or shift it to the breakeven price as soon as possible. This will reduce the risk of losing that position.

2. When you need to trade in these conditions trade the currencies pairs that are highly correlated. So we are talking about the top 6 currencies pairs.

3. It can be also useful to use some level of Fundamental analysis such as referring to the calendar of economic announcements every now and then in forex trading. Sometimes a choppy market occurs when there is two or more economic data releasing at the same time or within a few hours. A particular news may trigger an up movement while the other one may trigger a down. Therefore it is a bad time to trade forex as you do not know exactly where the forex market is moving.

4. Sometimes when the forex trading market is choppy, it forms range-trading channels, which sets one up for a breakout. If there's is no indication on which direction the market is moving, forex trader may go long when it's at the bottom range, and short when it is at the top range. This may earn you some pips, but again, it is better to wait for price to break out from the range-trading channels so that ideally you will be able to catch the breakout trend. This is why is why it is important to have a great forex broker too as they can help you with trading ideas. If you are looking for a Best Forex Brokerfeel free to visit the CFD FX REPORT as they have recently researched all the broker on the markets and can point you in the right direction.

The above should help you when trading choppy currency markets, but they are no guarantees of success. If you don't feel comfortable with the trade don't do it. Remember the markets are open nearly 6 days per week and 24 hours per day so there is also going to be more trading opportunities. Sometimes the market can go through fazes of not trending at all so don't try and predict a trend otherwise you are gambling.

Forex Trading - The 3 Biggest Lies

2009-03-11T18:16:00.000-07:00

Everyone that is involved in Forex Trading for awhile would have all heard these 3 misconceptions about Forex Trading, but beginner traders continue to fall for them. These are also some of the reasons why many Forex Traders end up going broke.

So how can we avoid these common traps and make money from Forex Trading?

Firstly lets look at the 3 areas to avoid when you are starting out Forex Trading.

Making Regular income and Profit:

This is misconception number 1.

Think about this for a moment how can you make regular income from something that changes as frequently as the Forex Market. No matter how great the system is the market simple changes all of the time, how often have you been in a well trending trade only to see something strange occur and a nice profit turns to a break even or worse a loss? So the next time you see or hear of someone saying make x% profit every month's run!

Ability to Predict Forex Prices in Advance

This is misconception number 2.

This is the biggest crowd puller, think about it can you see into the future? No. No matter how great the theory, how well it has been back tested you still cannot have a theory that works 100% of the time. Think about it if there was a theory that worked 100% of time we could predict future results. So the theory would need to take into account, all interest rates cuts and rises, speeches from the banks and monetary authorities as you can see highly unlikely. No Impossible.

Make Massive Profits minimal Exposure:

This is misconception number 3.

Many of us would have seen systems advertising the make 100% gains and have less than 1% drawdown. This is not reality and you can see the real results to support this outrageous growth rate to drawdown that has been audited.

So consider this and Improve your chances!

The common fact to trading is that over 95% of all traders will lose their money and the ones that do believe at least one of the above

So how you can become successful as a forex trader is understand that you can make profits in the long term, that making money is going to be up and down and that Forex trading is a game of odds not certainties. They also understand that to make money you need to take risks, the old saying of risk versus reward.

If you want to get involved in Forex trading and win you can, by getting a good solid Forex education and good Forex mentoring. In some cases you can find a Best Forex Brokerthat can assist you. If you are looking for a great Forex Broker, look at the CFD FX Report they have recently researched all the Forex Brokers and have come back with who they believe to be the best.

You can win and enjoy huge rewards for your effort, if you understand the challenge of Forex trading and what the reality really is. If you understand this, you're on your way to long term currency trading success.
Also make sure that you have a good trading plan and stick to that trading plan.

FOREX Trading without Indicators

2009-03-11T18:15:00.000-07:00

When it comes to trading most professional traders will be trading with indicators, so when most people hear that someone is trading with out them there is an instant look of bewilderment. To them it sounds like driving in the dark with no lights. But in fact it is the opposite.

So to people that trade without indicators they have to same reaction to people that trade with 10 indicators on their charts in order to place a trade. They will view all of these indicators as causing a blind spot to what is actually going on in the market.

FOREX Traders have been trading without indicators for as longs as the market have been around. This is what is simply known as price action. This particular trader is looking at the chart, looking at the current prices movements, comparing it to past price action movements to predict future price movements. So in simple terms everything we need know is sitting there right before our eyes, without the block of needless indicators.

Here is an example, within the FOREX Market there are certain patters that will be repeated on a constant basis. They are predictive in nature, as opposed to indicators like and RSI or MACD which are always lagging. They are only telling us what has already happened. Anybody can be a millionaire if they only tell you what has happened already. The real skill is using past information to make an informed decision about what the future holds. Trading without indicators is as close as we'll ever get to being a FOREX Trading psychic.

For more education lessons please feel free to visit the CFD FX REPORT they are helping traders become more educated. They can also help you in your search for the best FOREX Broker has they have recently reviewed most of them and come up with who they believe to be the Best FOREX Broker in the Market.

8 Traits Of the Great Forex Trader

2009-03-11T18:13:00.000-07:00

To be a successful Forex Trader takes time, education and knowledge, but the great news is anyone can do it. You do not have to be a genius to be a Professional Forex Trader.

There will be many people that disagree with the above and end up broker, because they people have been successful in other areas and they see Forex Trading simply as a financial game. They do not put in the require effort to make themselves successful. So what are the traits to make you a Great Forex Trader?

Lets Examine these factors:

1. Do not take forex trading for granted. They see forex trading as the same if not harder than most specialized profession. They put in a lot of efforts and time to trade well.

2. They acknowledge the financial risks in forex trading. They know that they can win and as well lose money in forex trading. They use smart money management skills

3. They will educate themselves first and build up the knowledge the same as any profession, remember it all takes work. They respect and obey all the previous rules set by the previous successful traders. They understand about trend trading and why it is risky to trade against the trend.

4. They will have patience and understand that it takes time to be successful. They don't see it as a get rich quick scheme. They invest a small amount first and build up.

5. They know the importance of having a mentor like any profession. They understand their deficiencies as a beginner and are always seeking knowledge from the experienced traders.

6. They stay with one proven trading strategy and trading only one currency. They do not jump from one strategy to another. They do not try trading many currencies at one time.

They are devoted to understanding the nature of them and maximizing their profits while minimizing their risks.

7. They set aside sufficient capital that they can afford to lose. With money they can lose, they do not feel pressure while trading. They simply follow their trading plan on executing their trades.

8. They keep records of their trades. They review their winning and losing trades to understand their mistakes and how they can improve their trading results.

The figures are that 95% of traders will end up broke, because they simply fail to plan and will not use the above traits. Make sure that you get the right level of education and knowledge and if you need more information feel free to visit the CFD FX REPORT , they have a host of free education lessons, they can help you find a Forex Broker.

Forex Trading Errors- How To Fix

2009-03-11T18:12:00.000-07:00

When we are trading we will all from time to time make a mistake when forex trading and it is normal and sometimes can be looked upon as healthy, so as to know that the decisions will either make or break you. However, if this becomes severe to a point wherein you lose more than you can afford to, then you would have to take measures in order to avoid further damage. This is why when you are trading you must make sure that you only trade within your limits. If you can't afford to lose it, don't trade.

When trading you must make sure that you keep your emotions in tact, do not let them take over. If you let your emotions take over the result is more than likely to cause even more rash decisions and can cloud your strategies, producing even more disastrous results. You should aim for more positive months with good turnovers but face it; there are some periods wherein gain is not achievable.

Before trading you should make sure that you have a plan and part of that plan is to employ a money management technique; in case is where you went wrong the first time. You should always consider what your losses are going to be. Since most traders would tend to gamble as opposed to trade, instead of making a calculated risk, their bank accounts would be drained each time there is a loss. They don’t have a great capital management system which causes damaging effects. By managing the amount that you can afford to lose in thinking of all possibilities, you can be assured that you do not get bankrupt with forex.

You must make sure that you educate yourself as much as possible about the Forex Market, a great place for education lessons is the CFD FX REPORT They specialize in offering free Forex Education as well as helping you find the Best Forex Broker.

Each trader has their own attitude towards forex trading and what risks they are personally prepared to take, but learning about the inherent principles can go a long way in helping you develop your own style and making you more successful in the long run. You can also develop a trading system and make sure to be disciplined enough to follow what you have created. Remember create the plan, plan the trade and trade the plan. You should have this next to your trading screen at all times and never forget it. Remember that since your money is involved and that you are not participating in the market just to lose it, you have to think objectively and learn to foresee the consequences of your decisions.

Do not associate loss with the feeling of being a loser, in order to be a successful trader you will take losses and the best traders can handle them. When trading you should know that you can't pick the market 100% of the time, so there is going to be losses it is how you handle those losses to how successful you are. The forex market is an objective industry wherein sound decision-making and strategies are employed and not about judging your emotional capabilities and dealing with them. If you can't handles losses, or losing money, do yourself a favor and don't trade.

How to Start Forex with a Great Training Course

2009-03-11T18:08:00.000-07:00

Are you constantly surfing the internet looking for a forex trading strategy? Are you confused as to what course to start with? When you want to get involved with Forex trading, you have to figure out approximately how much money you would like to commit to trading, and then find a low cost course which will educate you to get started.

If you want to get started in trading really soon, one way is to buy a course online that teaches effective methods of trading, courses that gives you a high probability of placing a successful trade. Then, you need to study and test the method on a demo trading account until you are profitable.

If you can find a home trading course that has customer support, the better. They can guide you in starting your demo account and even in a live account. Such as the Forex Profit Accelerator of Bill Poulos, here, there is support up to 1 year

http://best-investment-options.com/Recommends/FPA2.html

Here are two things you might want to remember:

Learn. Learn Learn. There are many methods out there, and some are easy to understand, others take time to get hold of. Acquiring as much information as possible and finding your "sweet spot" will save you time in your starting demo account, and saving you money.

"Practice makes perfect" .Please don't start into the market with real money until you are confident and totally comfortable using the trading method. It is suicide kind of way of losing all of your money is to jump into the market too soon, before really testing a trading method. That is what the demo account is for.

As traders, the only way to test a trading method is to stick to it religiously. Therefore, it is a must to write down your plan or method for finding a trade, and stick to it. Just like anything we do in life, from cooking to weight loss programs, proper practice will make you able to enter the markets with confidence and will ensure you don't lose your trading account.

These preparation makes investing work your favor.

Things to look for in a Forex Training Course:

Make sure it is from a reliable trading education source. One of the best there is nowadays is getting an education from a veteran who has done great in trading. Bill Poulos is one of them. He has made millionaires in trading in his courses due to his experience since 1974. He is known for making trading easy to understand, easy to apply and for all experience levels.

Take your time. Practice the concepts over and over again in a demo account before jumping into the real trading.

Forex Broker- Tools to Find Best Forex Broker

2009-03-11T18:06:00.000-07:00

Time to Select a winning Forex Broker. This will help you find the best online brokers in the market. Finding the right Forex Broker is an important as selecting a winning trade. When you start trading you make sure you do your due dilligence on that stock or currency before you trade, well you should do exactly the same with selecting a Forex Broker. So what are the key requirements that you need?

Determining a Forex broker is a tough process to navigate through and for most people, the necessity of outside help is needed. Trying to trade in the Forex market without a broker could lead to damaging results for the normal trader. Similarly, hiring the wrong Forex broker can lead to the same result as trying to muddle through it alone. It is highly important that you be diligent in researching any future brokerage firms to handle your financial portfolio.

A serious Forex Broker will provide you with clients that were successful and can attest to the specific broker's qualifications and achiever account. Put yourself in that position, would you testify to someone's strengths if they did a poor job for you? Client story Testimony should be present in any potential Forex broker and plentiful to indicate a solid background with trading. You can tentatively assess a lot from a Forex broker with a list of clients that will speak up for the brokerage firm or individual broker. It should be noted that all word of mouth Testimony should be taken with a grain of salt and dissected to collect the pertinent information. Testimony should be used in your research to find a Forex broker but should not be the determining factor.

Another good morsel to test the dependability of any possible Forex broker is the amount of information, literature and lessons that they are willing to give to you. Most Forex brokers are of a high reputation and a solid background however, there are many out there that don't have a great account or no history and it is wise to steer clear of these brokers. You are trying to find a trusted financial advisor and settling for second best, just won't do. The more a prospective Forex broker is willing to do for you in the area of helping you understand the Forex trading system, the better quality trader they will be for you.

A great avenue to travel down when seeking a good Forex broker is to ask your acquaintances about Forex brokers and how they met. This can not only give you potential referrals to fantastic Forex brokers but will also equip you with ideas and resources that you may not have located. If you get a referral from friends, be sure to still research that specific broker and his qualifications before giving to any official agreement.

The other factor in Determining a serious Forex broker is the margin of return that is offered. A Forex trading margin used to influence your money and many Forex brokers offer different margins. Determining a Forex broker, who gives a margin of ten to one isn't a very fantastic find so it's worth the time to reinvest in research. Remember that this industry is all about customer service and catering to the clients so if your future Forex broker doesn't return your calls within a fair time frame it would be advisable to keep exploring.

Forex Broker - The 6 Steps to Finding the Best Forex Broker

2009-03-11T18:04:00.000-07:00

If you are just starting to test the bodies of water of foreign exchange trading or what we advert to as Forex, you will finally have to build a relationship with a Forex broker.

Getting a good Best Forex Broker is quite critical to successfully trade in the foreign currencies markets. Not every Forex brokers are made the same. Each one will have tools and functions different from the other.

You might find a broker that offers great resources and information to analyze and spot trends in currency trading but can come up short on the software platform side. So it is important to do Some research at the starting so that the relationship you nurture with your broker can be a lasting and paying one. To serve you along here are Many tips on getting a great broker:

1. Account types - The total of capital you are willing to invest will dictate what type of account you will open with a brokerage. Typically, virtually brokerage firms will offer a "mini" and a "standard" account. As the term involves, a mini account can be opened for as little as $200. This is suitable for the beginner looking to gain experience in trading. However there are cases when trading options such as leveraging can be limited in a mini account. A standard account, on the other hand, offers more options over the mini account but the minimum deposit is also much greater (around $1,000.00).

2. Platform - The platform is basically the program that you will use to get such information like live quotes, graphs and charts, your exposure, your profit and loss, the margin required, every your open positions with their current profit and loss status and further useful data. A good brokerage will very likely be using sophisticated technology in their platforms so be sure to find out if it is user-friendly at Every. every the buying and selling should be easily done in as little as one click. Many platforms also gives you access to daily analyses in Forex, news reports and Forex signals including support and resistance levels.

3. Leverage - Leveraged financing is a feature common in Forex trading. It basically means you can use credit in order to maximize your returns. In simpler terms, what you do is you "borrow" your broker's funds temporarily to make larger trades and if all goes well, will produce larger profits. An opportunity So is created to control a $400,000 transaction for as little as a $1,000 actual investment. In this example, the leverage level is x400. An investor should be aware though that if the market turns sour, there is a risk of losing a substantial sum of money, depending on the amount of leverage taken. So it is a serious idea to learn more about leveraging before exposing your investment in the open market.

4. Spread - Stock brokers make their money in commissioning, Forex brokers make theirs done the spread. A spread is the difference between buy and sell--the price at which a currency can be bought and the price at which they can be sold at any given time. To the investor, a smaller spread logically means that there is a higher profit potential. There are 2 types of spread--fixed and various. Fixed spreads remain the same throughout the day. various spreads change according to market conditions. A active market must react considerably in your favor before you can turn a profit. Spread also alters from account types. A mini account typically charges a higher spread than a standard account. A potential trader should So know the spread of Every broker before settling at a decision to sign up.

5. Technical support - Obviously, support should be considered such as when the software becomes faulty or when questions arise regarding certain transactions. Quick acting support reflects positively on a broker and you can even try this by contacting them with pre-sale questions.
6. Demo account - Before putting any weight on any of the items mentioned above, a beginner should always look for a broker that offers a demo or trial account. Not Every brokers offer demo accounts. A demo account will allow you to trade in "play" money so that any losses you incur do not count against your investment. Needless to say, you do not make any money either if you turn a profit in your demo account.

It is there only to get a beginner acclimated to the different Forex conditions. While this may be Many of the almost important points to consider when looking for a Forex broker, there are Many "little things" that may crop up while doing your search such as unique promotions or great offers. However there is enough data in the foregoing to provide you with a basis for judging whether Many offers are above board or not.

There is nothing to stop you from signing up with different brokers and to take advantage of whatever great offers they may have on the table. Exercising Many due diligence at the start will prevent a lot of heartache later on. A good Forex broker should be able to serve you become more successful in your trading. Make sure you use a Great Forex Broker and make your Forex trading a profitable one.

Finding A Forex Broker For Dummies

2009-03-11T18:01:00.000-07:00

Online brokers give an important role to play when you open an online trading account. Every Last broker can offer different services and features. You must research all the online brokers to find the foremost broker to meet your needs. I experience listed a huge number of online brokers and placed their information for you to read in one easy-to-read webpage. This is a free, "no-cost to you" service for our valued readers and can be seen on this link Best Forex Broker

What to search for in an online broker.

Brokerage House rates - this is the range at which you are charged for buying or selling through your online account. These rates are usually charged based on a sliding scale. The more units you purchase in a single transaction, the less the "cost per unit" you will pay. The correct sliding scale can vary and may sometimes be negotiable for larger buys. Compare for each one broker and read the fine print within contracts. Selection the one that best meets your buying and selling style.

History fees - Look for hidden fees in account contracts within the terms and conditions. I acknowledge of one broker who requires an extra $10 to transfer money out of an account "quickly" as against withdrawing money normally. Hardly a reasonable fee, I'd say. All fees should be listed in the terms and conditions listed in opening an account.

Phone access - Online services can go down during hours of service. Gaps to broadband services, power outages and computer problems can stop you from accessing information you need at critical points. This is why you must experience phone access to your online broker. Do not even consider using an online broker if they do not provide phone access.

Access to your money - I prefer giving instant access to my money regular though it is held in a cash account by the broker. Most brokers will experience a cash account facility that is linked to your trading account. My account is linked to a MasterCard account, which means I can access that money anytime through any ATM or make purchases as I would normally using a MasterCard. Don't be misled into thinking you must only have a separate cash holding account with the online broker. There are lots of options open to you as a client and good online brokers will provide several options for your cash holding account.

Extra benefits - essay out those brokers that give you extra inducements to open an account with them. Some offer a limited free brokerage period. Others will offer free reports on the markets you are interested in. These bonus offers can help you getting you account given and setup a profitable trading account. For more information on finding the best online stock broker feel free to visit our website.

The CFD FX REPORTis the real time traders tool, that gives you daily trading ideas, stock market and forex education.

Best CFD Broker - Australia

2009-03-11T18:00:00.000-07:00

The Contracts For Difference (CFD) Market is the largest financial market and everyday new investors plan to jump in when they learn of the benefits, that is, high returns on investment which is as high as 20% per month a month.

So if you are brand new to the CFD Market you do have a few options when starting to trade, try and trade yourself, get some education first or Find a Best CFD Broker to help you.

A great CFD broker with experience with ideally a lot of happy clients and experience is the CFD Broker that you should be trading with and trading through. Once you've found the ideal CFD broker, all that's to be done is, keep a regular check on your investments and it is advised to do it independently to avoid scams, because one can never know. So, how to find the right CFD broker, is that the question?

Well, the great news for you is, this article was written just for you. Every single person will trade with different levels of risk and depending on that factor you might like to check how different CFD broker work and then select the one from them.

Before undertaking the task of searching for a CFD Broker, remember to strike out brokers promising massive returns, they are scams without doubt and same for brokers who are promising you that you will make millions of dollars with or no risk. If this takes place then the alarm bells should ring. If you go with this particular broker you will end up broker!

Trading as any other investment always involves some level of risk because of the nature of the market which you must be prepared to incur and also understand that losses can and will occur. You must understand no one can pick the market correctly 100% of time. So if you are prepared that in order to trade you will have losses you will be a better trader. A trader that can take losses, and in particular cut losses quickly will be a much more successful trader. Remember cut your losses quickly and let your profits run.

Here are some important things to consider when you are choosing a CFD Broker. Make sure to check the spread of the CFD broker as that's where they earn their money, read their terms of service carefully and check the services offered. So the bigger the spread the more money they are making, therefore the less you are making.

There might be a lot of services being offered upfront at no cost but you might be billed for them later on, so make sure to sign up only for the services that are required.

A CFD broker is a long term partner for your financial success so, make sure to research their background well. If you are not sure about that broker continue to look around or start off very small. All that's to be done is put in a little effort by checking the credibility of the CFD broker or company upfront for peace of mind in long term.

So if you don't have the time to research CFD Brokers yourself the CFD FX REPORThas recently researched all of these brokers and come up with what they believe to be the Best CFD Brokers in the Market.

CFD Broker - Make the Choice - Not A Mistake

2009-03-11T17:58:00.000-07:00

With the modern times of mobile communication, it is not unusual to find hidden in a home a trader or a broker who is doing their CFD Trading from the comfort of their own home. Today to be a CFD trader all that you require is a computer setup to multi screen investing servers, the number of the casual or evens serious home based CFD traders has grown a great deal of late and this is because of the internet and the popularity of certain commodity trades.

Today, this article will discuss about the CFD market, and how you can find a great online CFD broker when you do decide to jump on the wagon and become a CFD Trader. Most of the CFD Brokers today offer the ability to be able to trade online, CFD trade over the phone, or CFD trade from you mobile phone.

With the growth of the virtual CFD Trader, we have seen an explosion of online CFD brokerages on the internet in the almost predictable economic elastic demand and supply. Today we are seeing more individuals turning to commodity trading as a viable source of second or even third income, brokerages and financial firms all over the world have responded by extending their services to the modern technology world. Before you choose which firm and which broker to choose, there are few things you need to do.

First step is to find the black list of online CFD brokers and those that have a bad reputation. There are a few collectives that collect a list of names of individuals and companies (including all their aliases and permutations) and place them upon a compiled list for everyone to refer to. If that is not enough, you must also check your local finance and governing body and run a list of potential brokerages and companies you want to join with them - you never know what you might find. Deal with well established companies that have strong regulation. Recently the CFD FX REPORT has researched all the online CFD Brokers and have come up with who they believe to the Best CFD Broker.

Do not be swept off your feet by a long list of credentials if you do not know what they mean or where they even came from in the first place. Be wary of customer testimonials that are written on the website itself, as these can doctored or fabricated.

Use a company that has great references, and has good client testimonials. Check also for longevity, the more years a broker and his company have been around, the more chances that it is a legitimate and viable source of investing advice. Always be careful where you place your money and it is very, very important that you choose a good online broker that is both legitimate and has the needs of your finances at heart. You must feel comfortable with this broker, remember a bad broker can make you BROKER.

Forex Glossary

2009-03-11T17:56:00.000-07:00

Here are some of the most common terms used in FOREX trading.

Ask Price ¨C Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote ¨C e.g. EUR/USD 1.1965 / 68 ¨C means that one euro can be bought for 1.1968 UD dollars.

Bar Chart ¨C A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information ¨C the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.

Base Currency ¨C is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 ¨C US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.

Bid Price ¨C is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 ¨C means that one euro can be sold for 1.1965 UD dollars.

Bid/Ask Spread ¨C is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.

Broker ¨C the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.

Candlestick Chart - A type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick ¨C a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.

Cross Currency ¨C A currency pair that does not include US dollars ¨C e.g. EUR/GBP.

Currency Pair ¨C Two currencies involved in a FOREX transaction ¨C e.g. EUR/USD.

Economic Indicator ¨C A statistical report issued by governments or academic institutions indicating economic conditions within a country.

First In First Out (FIFO) ¨C refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.

Foreign Exchange (FOREX, FX) ¨C Simultaneously buying one currency and selling another.

Fundamental Analysis ¨C Analysis of political and economic conditions that can affect currency prices.

Leverage or Margin ¨C The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 ¨C you can trade currency worth 100 times the amount of your deposit.

Limit Order ¨C An order to buy or sell when the price reaches a specified level.

Lot ¨C The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.

Major Currency ¨C The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.

Minor Currency ¨C The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.

One Cancels the Other (OCO) ¨C Two orders placed simultaneously with instructions to cancel the second order on execution of the first.

Open Position ¨C An active trade that has not been closed.

Pips or Points ¨C The smallest unit a currency can be traded in.

Quote Currency ¨C The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.

Rollover ¨C Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.

Technical Analysis ¨C Analysis of historical market data to predict future movements in the market.

Tick ¨C The minimum change in price.

Transaction Cost ¨C The cost of a FOREX transaction ¨C typically the spread between bid and ask prices.

Volatility ¨C A statistical measure indicating the tendency of sharp price movements within a period of time.

Charts for the technical analysis

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Kinds of prices and time units. Charts for the technical analysis are being constructed in coordinates price (the vertical axis) time (the horizontal axis). The following kinds of currency prices represented on charts are being distinguished on Forex:
* open - a price at the beginning of a trade period (year, month, day, week, hour, minute or a certain amount of one from these units);
* close - a price at the end of a trade period;
* high - the highest from prices observed during a trade period;
* low - the lowest from prices observed during a trade period.

Providing the technical analysis one uses charts for different time units from 1 year or more till 1 minute. The bigger is a time unit applied for the chart plotting the bigger is a time span to analyze price movements and to determine the major trend by means of the chart. For the short trading charts for less time units are more suitable.

Line chart. The line chart is plotted connecting single prices for a selected time period. The most popular line chart is the daily chart. Although any point in the day can be plotted, most traders focus on the closing price, which they perceive as the most important. But an immediate problem with the daily line chart is the fact that it is impossible to see the price activity for the balance of the period as well as gaps breakups in prices at joints of trade periods. Nevertheless, line charts are easier to visualize. Also, technical analysis goes well beyond chart formation; in order to execute certain models and techniques, line charts are better suited than any of the other charts.

Bar chart. The bar chart consists from separate histograms. To plot a histogram in coordinates price time the points responding to high, low, open and close prices for a time period analyzed should be marked on the one vertical bar. The opening price usually is marked with a little horizontal line to the left of the bar; and the closing price is marked with a little horizontal line to the right of the bar. Bar charts have the obvious advantage of displaying the currency range for the period selected. An advantage of this chart is that, unlike line charts, the bar chart is able to plot price gaps. Hence, it is impossible to see on a bar chart absolutely all price movements during the period.

Candlestick chart. The candlestick chart is closely related to the bar chart. It also consists of four major prices: high, low, open, and close. In addition to the common readings, the candlestick chart has a set of particular interpretations. The latter is possible thanks to the convenient visual observation of that chart.

The opening and closing prices form the body (jittai) of the candlestick. To indicate that the opening was lower than the closing, the body of the bar is left blank. Current standard electronic displays allow you to keep it blank or select a color of your choice. If the currency closes below its opening, the body is filled. In its original form, the body was colored black, but the electronic displays allow you to keep it filled or to select a color of your choice. The intraday (or weekly) direction on a candlestick chart can be traced by means of two "shadows": the upper shadow (uwakage) and the lower shadow (shitakage). Just as with a bar chart, the candlestick chart is unable to trace every price movement during a period's activity.

Risks by the foreign exchange on Forex

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The Forex is essentially risk-bearing. By the evaluation of the grade of a possible risk accounted should be the following kinds of it: exchange rate risk, interest rate risk, and credit risk, country risk.

Exchange rate risk. Exchange rate risk is the effect of the continuous shift in the worldwide market supply and demand balance on an outstanding foreign exchange position. For the period it is outstanding, the position will be subject to all the price changes. The most popular measures to cut losses short and ride profitable positions that losses should be kept within manageable limits are the position limit and the loss limit. By the position limitation a maximum amount of a certain currency a trader is allowed to carry at any single time during the regular trading hours is to be established. The loss limit is a measure designed to avoid unsustainable losses made by traders by means of stop-loss levels setting.

Interest rate risk. Interest rate risk refers to the profit and loss generated by fluctuations in the forward spreads, along with forward amount mismatches and maturity gaps among transactions in the foreign exchange book. This risk is pertinent to currency swaps, forward outright, futures, and options (See below). To minimize interest rate risk, one sets limits on the total size of mismatches. A common approach is to separate the mismatches, based on their maturity dates, into up to six months and past six months. All the transactions are entered in computerized systems in order to calculate the positions for all the dates of the delivery, gains and losses. Continuous analysis of the interest rate environment is necessary to forecast any changes that may impact on the outstanding gaps.

Credit risk. Credit risk refers to the possibility that an outstanding currency position may not be repaid as agreed, due to a voluntary or involuntary action by a counter party. In these cases, trading occurs on regulated exchanges, such as the clearinghouse of Chicago. The following forms of credit risk are known:

1. Replacement risk occurs when counterparties of the failed bank find their books are subjected to the danger not to get refunds from the bank, where appropriate accounts became unbalanced.

2. Settlement risk occurs because of the time zones on different continents. Consequently, currencies may be traded at the different price at different times during the trading day. Australian and New Zealand dollars are credited first, then Japanese yen, followed by the European currencies and ending with the U.S. dollar. Therefore, payment may be made to a party that will declare insolvency (or be declared insolvent) immediately after, but prior to executing its own payments.

Therefore in assessing the credit risk, end users must consider not only the market value of their currency portfolios, but also the potential exposure of these portfolios. The potential exposure may be determined through probability analysis over the time to maturity of the outstanding position. The computerized systems currently available are very useful in implementing credit risk policies. Credit lines are easily monitored. In addition, the matching systems introduced in foreign exchange since April 1993 are used by traders for credit policy implementation as well. Traders input the total line of credit for a specific counterparty. During the trading session, the line of credit is automatically adjusted. If the line is fully used, the system will prevent the trader from further dealing with that counterparty. After maturity, the credit line reverts to its original level.

Dictatorship risk. Dictatorship (sovereign) risk refers to the government's interference in the Forex activity. Although theoretically present in all foreign exchange instruments, currency futures are, for all practical purposes, excepted from country risk, because the major currency futures markets are located in the USA. Hence, traders have to realize that kind of the risk and be in state to account possible administrative restrictions.

Short data about the origin and development of the currency exchange market

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Currency trading has a long history and can be traced back to the ancient Middle East and Middle Ages when foreign exchange started to take shape after the international merchant bankers devised bills of exchange, which were transferable third-party payments that allowed flexibility and growth in foreign exchange dealings.

The modern foreign exchange market characterized by periods of high volatility (that is a frequency and an amplitude of a price alteration) and relative stability formed itself in the twentieth century. By the mid-1930s the British capital London became to be the leading center for foreign exchange and the British pound served as the currency to trade and to keep as a reserve currency. Because in the old times foreign exchange was traded on the telex machines, or cable, the pound has generally the nickname “cable”.

After the World War II, where the British economy was destroyed and the United States was the only country unscarred by war, U.S. dollar, in accordance with the Breton Woods Accord between the USA, Great Britain and France (1944) became the reserve currency for all the capitalist countries and all currencies were pegged to the American dollar (through the constitution of currencies ranges maintained by central banks of relevant countries by means of the interventions or currency purchases). In turn, the U.S. dollar was pegged to gold at $35 per ounce. Thus, the U.S. dollar became the world's reserve currency. In accordance with the same agreement was organized the International Monetary Fund (IMF) rendering now a significant financial support to the developing and former socialist countries effecting economical transformation.

To execute these goals the IMF uses such instruments as Reserve trenches, which allows a member to draw on its own reserve asset quota at the time of payment, Credit trenches drawings and stand-by arrangements. The letters are the standard form of IMF loans unlike of those as the compensatory financing facility extends financial help to countries with temporary problems generated by reductions in export revenues, the buffer stock financing facility which is geared toward assisting the stocking up on primary commodities in order to ensure price stability in a specific commodity and the extended facility designed to assist members with financial problems in amounts or for periods exceeding the scope of the other facilities.

At the end of the 70-s the free-floating of currencies was officially mandated that became the most important landmark in the history of financial markets in the XX century lead to the formation of Forex in the contemporary understanding. That is the currency may be traded by anybody and its value is a function of the current supply and demand forces in the market, and there are no specific intervention points that have to be observed. Foreign exchange has experienced spectacular growth in volume ever since currencies were allowed to float freely against each other. While the daily turnover in 1977 was U.S. $5 billion, it increased to U.S. $600 billion in 1987, reached the U.S. $1 trillion mark in September 1992, and stabilized at around $1.5 trillion by the year 2000.

Main factors influences on this spectacular growth in volume are mentioned below. A significant role belonged to the increased volatility of currencies rates, growing mutual influence of different economies on bank-rates established by central banks, which affect essentially currencies exchange rates, more intense competition on goods markets and, at the same time, amalgamation of the corporations of different countries, technological revolution in the sphere of the currencies trading. The latter exposed in the development of automated dealing systems and the transition to the currency trading by means of the Internet. In addition to the dealing systems, matching systems simultaneously connect all traders around the world, electronically duplicating the brokers' market.

Advances in technology, computer software, and telecommunications and increased experience have increased the level of traders' sophistication, their ability to both generate profits and properly handle the exchange risks. Therefore, trading sophistication led toward volume increase.

Forex Miracle Review - Does the Forex Miracle System Work?

2009-03-10T16:30:00.000-07:00

If you have decided that you are tired of your money just sitting and not growing, the Forex Miracle can be yours. You can take a minimum investment and turn it into big money! This is accomplished with little or no effort on your part. The work has already been done for you. You just have to gain the knowledge to make the Forex Miracle come true for you.

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Over all this is a great system for the person that requires a plan that will generate income with little or no input. You will be pleasantly surprised when you learn about the Forex Miracle system.

Forex Robot - Simply BUY More Money!

2009-03-10T16:27:00.000-07:00

Maybe you haven't heard of a forex robot yet, but those who have are living it up as you read this. Not too many people realize that there is an easy way to make money at home without any technical knowledge or skill. Pat yourself on the back; you are one of the lucky people who will discover this secret on how to literally buy more money.

How is it possible to buy money, you ask, and why haven't you heard of it before? Trading money is very lucrative. Ask around. Few people will tell you that there is an easy way to make a lot of money, with any investment amount & in your sleep. And if they do, then they're probably pointing you to the website I have listed at the bottom of the article. I am going to introduce you to an automated forex trading robot that will make you rich. You'll be able to sit back and enjoy a simple, pleasurable life while your forex robot will buy money for you.

The first thing you will need is a home computer with an internet connection. It needs to be able to stay connected to the internet the entire day. Don't worry about the cost of leaving your computer running, because that is a small price to pay compared to the money you'll be making. How? Keep on reading if you wanna buy money.

You'll need to buy a copy of our forex trading robot. After you do that, install it onto your computer by following the simple instructions on the CD. Once everything has been set, what you need to do next is select a currency pair. You have to make a choice of two different to trade against each other. For instance, you could put the United States Dollar, or USD, against the Euro for trade. Once you select two currencies, the robot will do everything else for you. The way everything works is that these currencies go up and down on a regular basis. Basically, the forex robot tries to buy money at low prices and sell them at much higher prices.

As long as it your computer is plugged in, the robot will keep working and you'll keep making money. Even when you're sleeping, or even when you're on vacation, it will keep keep churning out money.

New Forex Day Trading Robot

2009-03-10T16:22:00.000-07:00

When I first heard the term Day Trading Robot, I thought that I might have stepped into a science fiction story. I had a picture go through my mind of a little metal man zooming through cyberspace, dealing and trading with other little metal men in hats. I know I have quite the imagination huh?

But then reality kicked in and I knew I had to look into this revolutionary software. I did some research and learned just what the day trading robot was and what it did. What I found was surprising and refreshing! It seems that the day trading robot was really designed for big investment firms who did a large amount of day trading and who needed to optimize their time spent looking for short-term investment opportunities. Just recently it has become available to the home traders and we are lucky that it has!

The day trading robot acts like an account management service. It was designed by highly skilled traders and investors and is programmed to know and understand the trading market system. To use the robot, you need a minimum amount of trading funds, normally $1000, but the robot can easily make you triple that in profits.

The robot works 24 hours a day, gathering information and trading (during market hours) for you. Whether you are a small time investor or a big time investor, the day trading robot is something you want to look into to maximum your return and investment and to diversify your portfolio.

The Use of Currency Trading Pairs

2009-03-10T16:15:00.000-07:00

If you plan to go into forex, one of the most important points you need to understand is how currency trading pairs work. Although you are free to experiment and sift through other currencies where you can possibly make a profit, pairs in currency trading are the basics where you will base your trading plans from. If you are new in the field of currency trading, you should definitely consider being an expert with the currency pairs before you explore other fields.

In forex, currency pairs work by relating their values against each other. Each pair is composed of a base currency and a quote currency. The base currency is the first among the pair which is the target currency that you wanted to buy. Meanwhile, the quote currency is the second among the pair which tells you how much of it do you need to buy the base currency or the first one. Using the USD to Euro conversion, a quote presented as USD/Euro=.067 simply means that you will need 0.067 Euros to be able to purchase one US dollar.

Working with Currency Trading Pairs

To be able to plot out your plan in the forex business, you will constantly need to consult your own currency pairs. Among the most popular trading pairs are the combinations of US dollars and Euros, US dollars and Japanese Yen, US Dollars and Swiss Franc. Most of the forex traders use US dollars as their quote currency since it is the most widely used currency in the world. The Euro, Swiss Franc, and the Japanese Yen are among the highest yielding and also most volatile base currencies in the trading game.

As a forex trader, it is your responsibility to keep track of currencies individually. In reality there really are no hard and fast rules about currency pairs. You are the one who gets to ultimately decide which of these pairs you plan to keep an eye on and develop. But it helps to have a separate track of these currencies individually so that if a raise occurs in each of them, you can easily form your pairs and make a sell or buy them at the soonest possible time. The thing about currency pairs is that they may not last as long as you would like them to. Sometimes, you need to make quick pair ups to keep ahead of the game.

Choosing the Best Currency Trading Pairs

As mentioned, there are actually no limits to which currencies must be paired against each other. What it takes is a watchful eye and keen observation to make sure that you have the right combination to trade in the currency market. But if you are a newbie and you are still trying to gain your momentum in the currency market, it will be good to stick with major currencies, such as dollars and euros, as your quote currency.

Although these currencies fluctuate as much as the others, they are also the more frequently used. These currencies will help you develop your own style when it comes to scouting the currency trading game since they are widely used. It is also a good idea to keep only two pairs at a time and gradually increase as you gain more confidence in buying and selling your existing currencies.

Empower Your Use of Currency Trading Rates

2009-03-10T16:10:00.000-07:00

When it comes to scanning the forex market for opportunities, you will need to be more familiar with currency trading rates. However, these rates may not exclusively be kept as is. As currencies rise and drop according to their specific values, it affects how the rates in the forex market will be presented. It's pretty easy to understand how the rates work since they are usually duly presented right on the forex dashboard if you are using any particular platform.

However, tracking rates can be a hard thing to keep up with. They always rise and fall and they have a huge tendency to fluctuate before you even know they will. So to help you monitor their activities as closely as you can, here are a couple of forex tools you can utilize to your advantage:

1. Forex Chart - Generally, forex charts contain all of the possible currencies you may play within the forex market. But if you want to keep track of your game much more efficiently, you can choose to retain only those currencies which you have a good grasp on. Another thing about forex charts is that they are also characterized by their spreads which helps you understand how your values will eventually play up once you start using them. Forex charts are useful in understanding currency trading rates because it gives you the opportunity to identify currencies that you can buy for a low price but sell at a more profitable cost.

2. Trading Software - Let's face it, keeping up with the forex market needs 24/7 focus with almost no break in between. But the question here is can you do it? Actually, there's no need for you to shoulder such a heavy task all by yourself. With the help of a forex trading software, you can now automate your forex business and conveniently keep track of currency trading rates while you attend to other things.

Aside from these forex tools, it is also necessary that you learn more about the forex market so you can better analyze occurring trends within the business. Admittedly though, it is not enough that you are now proficient enough to keep your currency business going. You also need to educate yourself with the most up to date information about the forex market. These days, you can choose to self study or apply to online courses which you can flexibly take when you have the time to. Here are some practical ways that can help boost your knowledge about currency trading rates:

1. Read online tutorials - There are lots of websites that offer video tutorials to make learning more efficient for you. Most of them can be accessed for free while some may require a one time or monthly fee for you to access their site and browse through videos more effectively.

2. Join in forum discussions - Forex business people converge online through forums. This is a great place for you to know the latest in the world of forex from different locations worldwide. You can also get here, knowledge on some first hand experiences in forex trading that you might not be able to learn theoretically.

3 Things That Make Foreign Exchange Trading Such a Great Cash Cow

2009-03-10T16:06:00.000-07:00

Foreign exchange trading, or Forex for short has been around for a very long time and it has seen some popular growth in the past few months. This has been due to the downturn of the economy, slow growths by different corporations and eroding consumer trust on traditional commodities like stocks and equities.

While this was enough to make more and more people join the paper trade, the recent successful linkage of the Forex market and all its variables onto the information super highway has made it an extremely easy investment platform to enter, even for part timers. Now, the number of retail and casual investors number in the tens of thousands, and that number is increasing on a daily basis. If you are considering to join to the Forex market, that is a good idea, but one that needs to be approached with some caution. Why is the Forex market such a great one? Well this article will discuss the great points that make foreign exchange trading such the cash cow it is today.

One of the reasons is because the market, when compared to other commodities in the economic marketplace, is one of the most liquid markets you can trade in. investment decisions are quickly changed into market movements and trading is done in real time. There is less red tape and taxation and processes to follow when trading in the Forex market, and this is great for one that is as responsive and dynamic as this one. You do not need to worry about convoluted processes before you get your money, or if you need to pull our, all you have to do is let your broker know. Another thing about this market is that it is a zero sum game, which means that there are losers and there are winners, period. If you do your hard work, look at all the data and do the appropriate analysis, most of the time, you will find yourself on the right side of the market.

This is a market that really separates those who are prepared and those who only came on board on some flight of fancy that the Forex market will reward anyone who just bothers to show up. Do you work and you will be assured a piece of the 5 trillion dollar a day pie that the market is churning out. Last, but not least, the Forex market is a true 24 hour market, and it only closes on the weekends. This means there is a direct correlation to the money made and your stamina. If you have been gifted with boundless energy then you will be able to make more money. Spend 6 hours on the market or spent 16 hours on it, it really depends on you. You are your own boss and how much money you make is dependent solely on your efforts. This is why the foreign exchange trading arena is such a great cash cow to serious and part time traders alike.

3 Ways to Conquer Forex Capital Markets

2009-03-10T16:03:00.000-07:00

One of the interesting things about 2008 and the beginning of 2009 is the introspective look at market activity all over the world. By charting the movements in the global economy and investment activity, one would realise that the popularity of the traditional commodity markets have spiraled down of late and the numbers have been executing a sort of financial exodus, to other more, dynamic markets. The numbers do not lie and if you watch the financial reports in the past few weeks, you would have realised that most of the well known names in stocks, equities and futures have been suffering of late because of reduced confidence by consumers and investors alike.

So where have they been going? Well, on of the places that they have flocked to is the Forex market and the reasons for this are quite elementary. The market has actually grown of late, it is the most liquid market of all and it is a 24 hour investment platform with no physical trading floor which can be bound in higher taxation and red tape. So you have a investment platform that is quite attractive to those who wish to turn the tide and make some money. And if you are one such person considering a move, then you are making the right choice. But do not go in unprepared; while this article will not allude to everything you need to know about the Forex capital markets, these are some useful pointers to help you on the way to your fortune and avoid the pitfalls that more than 80% of new investors are making today.

One of them is to have good money management from the start and assess how much you can risk. This will be your margin. On top of that, you need to set aside some risk capital either to bail you out or to top up the account once you start to run low, but never set aside more than you can comfortably lose at any one time. Remember, the margins given by brokerages are quite high and can go to your head, so be careful about where you spend and keep track of your profits and losses.

One more thing is to have a strategy down and one way to do this is to get your hands on a good Forex systems programme and there are plenty available online. To be honest, you are new, and if you have no prior experience in Forex markets and how they operate, a good system will dissect and lead the way for you. Read review sites and get the ones that are newbie friendly. Last but not least, make sure you have a good relationship with your broker and you need to be able to trust him or her. Do background checks and make sure they are 100% legit before putting your money in their financial accounts. These are 3 things you need to consider before you can fully conquer the Forex capital markets and with these things in mind, you will be well on your way to financial independence.

Need Help? - Try Currency Demo Trading

2009-03-10T15:53:00.000-07:00

Trading in the Forex market has to be one of the most interesting experiences out there, and if you don't know what you are doing, you have probably joined a fraternity of more than several tens of thousands of new traders who are entering the market every year. It is not a traditional market, and in fact, it can be said that the Forex market is one of the most dynamic and most volatile markets that are out there. The solution is currency demo trading and this article will tell you why. All you have to do is look at the nature of the Forex market. The amount of data available is infinitely staggering and you never know what you need to use and when. The trading options are also plenty. Should you day trade? What is a pivot point? How do I measure price feeds and integers? What indices should I be looking at?

And these are just some of the market factors. While falling under the technical analysis umbrella is a league of pretty hefty information, we have not even begun to touch on fundamental analysis, which looks at the external factors that could affect market psychology. You have economic factors like global finance policies, behaviours of central banks (the market makers of the paper trade), governments, fiscal policies, inflation, budgets, GDPs!. Then you need to look at things like political factors like wars, unions, bilateral agreements, world trade, policies between transnational companies.

And this just scratches the surface of the Forex dilemma. Think we are done? No chance. You have to understand market movements and market psychology and the patters that Forex market might fall into when thrust into different situations. You have to know where investors will flock to when things are going bad and how to maneuver around the price points and look for the swing trade. You need to know what kind of system you will be employing to balance the amount of data that you will be getting and you must have a strategy on the table. You also need to understand that money management is a good thing, and how much to risk on your initial margin. You have to be familiar with the software given to you to manipulate the market and you need to be able to do things like read exchange rates and use a currency calculator effectively.

You have to understand when the market starts and where it shifts to, and that different regions of trading often has with it different sets of rules to trade with. The only way you are going to balance all of this and even understand that the Forex market is the one for you is to sign up for a currency demo trading which will put you into a simulated environment that mirrors the Forex market, its real world situations and all the foibles and difficulties you will be facing along the way. If you come out unscathed and ready for more, then you know that you are ready for the currency market.

What Are Sold Or Bought in the Currency Market?

2009-03-10T15:51:00.000-07:00

The foreign exchange market is characterized as merely a speculative marketplace. No currency trading takes place because there is actually no currency that is physically traded or exchanged; thus, nothing is being sold nor bout in a forex market. All transactions are just recorded and typed in as a computer entry, where the net is calculated depending on current market price. If transactions are in dollars, everything - both profits and losses - will be recorded as dollars on the account of the trader.

What currencies can be traded? The most common traded currencies are: Euro and U.S. dollar, U.S. dollar and Japanese yen, Great Britain Pound and U.S. dollar, and U.S. dollar and Swiss franc. How about commodity pairs? Commodity pairs are usually in Australian dollar and U.S. dollar, U.S. dollar and Canadian dollar, and New Zealand dollar and U.S. dollar. All of the mentioned paired currencies, together with its different combinations like the Euro/Japanese yen and Great Britain Pound/Japanese yen and Euro/Great Britain Pound account for a 95% more of all speculative dealings in the foreign exchange market.

Due to the fact that currency trading is always transacted by paired currencies, the trader constantly long in one currency and comes short on the pair of such currency everytime he trades. For instance, a trader's average lot is equals to 100,000 units of Euro/U.S. dollar ad if he sells it, he would trade the Euro for U.S. dollars, which would mean that he would now become "short" in Euro and "long" in U.S. dollars.

What is the Role of an forex Option Writer?

2009-03-10T15:41:00.000-07:00

Trading forex options can be a wise move for a trader since it has many attractive features. Firstly, it is flexible to use since the options buyer dictate the precise time and price of the underlying currency pair indicated in an options contract. He may exercise his option to go through with the purchase come expiration date of just let the option expire without value. Only the premium will be the option buyer's loss. Another good thing about currency options is that it exposes the trader to a more limited risk and requires only a small amount at the onset of the transaction. This amount is what is called the premium and serves as payment for the buyers right to the option.

Generally, to write, sell or grant an option is riskier than to buy or sell forex options. This is because the writer/seller of option may experience a loss of unlimited amount since it is his responsibility to provide for extra margin in his account to retain the position on the same level in case the market movement proves unsuccessful on his part. Another risk comes when the buyer decides to exercise his option after a break in currency movement and the seller has no choice but to settle in cash the option or give the interest. If the option is "covered" by another position, there may be lesser risk. If the option is on leverage, the seller gets an open forex position. If however the option is not at all covered, the loss on the part of the seller may be unlimited

How to Use Charts in Forex Trading

2009-03-08T19:46:00.000-07:00

When you are getting started with forex then a tool that can aid your success is the forex chart. You will start looking at various forex systems as well as using demo accounts to test your knowledge. You will need to sign up to a trading system in order to do so, and an added benefit of doing this is that you will gain access to a wealth of information of the forex market. This includes charts to help you succeed.

The best Forex system I can personally recommend is Forex Phantom a highly anticipated release of 2009. Forex Phantom takes all of the great features from previous systems combining them together with some new unique features and develops the worlds most talked about Forex system.

Depending on how you go into forex trading, certain forex charts will be more or less useful to you. You will find charts that show values of certain currencies when compared to each other, and these are constantly updated as the market changes each and every day. You will start learning signals in trading which can help you to make important decisions and improve your chances of making a profit.

Even if you feel you have learned important information through forex charts it is always a good idea to practice first using demo accounts. Different brokers will have different systems, so it will inevitably take a while to learn them all. It is also for these reasons that forex charts can differ from broker to broker. Whilst you may be keen to get stuck in with currency trading, it is always best to start your career on solid and safe foundations.

Picking the system and the forex charts that you are going to use may take a bit of time when you enter into the market without much background knowledge.

However, you will soon find many sources of recommendations online, as well as through friends who may have more knowledge than you. Take as many recommendations as you can, as well as learning slowly and making your own decisions based on what feels right for you.

Forex Trading - When You Don't Have a Lot of Cash

2009-03-08T19:38:00.000-07:00

If you have looked at forex trading but decided it isn't for you, have you ever thought about mini forex trading? Even if you do not have a lot of money, mini forex trading is a way for you to get started with trading. It is a great way to practice, or even just to trade without the large sums that some traders invest.

Many people are advised to get started with mini forex trading as a way to understand the market and get to know the signs. It basically means that the forex trading contract is a lot smaller than it normally could be. You therefore reduce any risk of losing large sums of money, at the same time as learning the best trading techniques that work for you. When you learn better techniques and make more money from your mini forex contract you may even be able to move onto a larger contract.

Opening a mini forex trading account is not too difficult and only requires a few hundred dollars. Regular forex accounts can require multiple thousands, so it is understandable why mini forex has become so popular. Once you start out your money will still be at risk, just with regular forex, but you will have less to lose since you had a smaller investment in the first place. However, this also means that you will need to use forex trading strategies just as you would with larger forex accounts.

Mini forex trading accounts are great for beginners, but you should always do your research before undertaking any kind of risk.

One Forex System I can recommend to anyone getting started in the Forex market is Forex Phantom released only this year. Forex Phantom is the most astonishing, professional and accurate Forex system to be developed.

You should be familiar with the currencies you wish to trade, as well as doing your research on different forex strategies that could work to make you money. Once you have the right strategy you can soon begin profiting from mini forex accounts.

Be Patient With the Forex Market - Learn How to Forecast the Future

2009-03-08T19:35:00.000-07:00

Like any kind of investment, the forex trading market carries a degree of risk. It can be hard for beginners to get started in trading if their initial moves do not make them any money. However, with time to learn from your mistakes you could just find your hard work paying off in the end.

Once you get going in the forex market you will start to realise that much success comes to people through the 'feeling' they get about certain signals. Whilst this feeling will vary from person to person, it is always based on as much reliable information as possible - including forex alerts, charts and so on. However, even if you have set yourself up with all of these at your fingertips you will still find the forex signals hard to read in the beginning.

The truth is that two people can read the same signal completely differently, which is why there are always wins and losses in the forex market. When you are just starting out you might be lucky and get onto a winning streak right away. However, you may also experience a loss. This is all part of life, and the way in which the forex trading market works.

Something you may not of known is that many of the Forex professionals use Forex systems such as Forex Boomerang or Forex Phantom. Personally, I feel if you want to have the largest hand in the Forex market then a Forex system is essential the one I recommend is Forex Phantom. Only being released this year Forex Phantom has brought the biggest talks and anticipation over its release, with a simple interface and unique features it is the number one system.

So, if you have just started out in forex trading and are finding it hard remember - forex trading requires patience. And a lot of it! Whilst forex is relatively easy to get into, this doesn't mean that you can avoid all the research and all the learning tools that are there for you.

Perhaps you should even start with a demo account, moving up to a mini forex account as a way to minimize the risk in these early stages. Have patience with all of these learning tools and you should soon be able to find success in the forex market.

How to Use Scalping Strategy in Currency Trading

2009-03-08T19:33:00.000-07:00

There are many currency trading strategies you can use to make solid profits at the Forex market. However, one of the easiest strategies you can use is scalping or range trading.

The concept of scalping revolves around taking numerous small profits on very short transactions. Essentially, you will take advantage of short market runs and cash-in every profit you can take from your open positions.

In fact, expert traders can trade for as short as 1 minute and take considerable profit when they close their positions. So here are some basic tips you can follow in order to take advantage of scalping as a Forex strategy.

First, you have to ensure that your Forex broker allows scalping. Some brokers prohibit this practice and can suspend your account if you engage in such practice. So better read the terms and conditions of your broker especially the fine print of your electronic contract.

Second, you need to find short term predictable price movements so you can take advantage of range trading or scalping. You can use a 5-minute chart or if you have customizable chart, you can further reduce your chart analysis to 3 or 2 minute runs.

Third, you need iron clad discipline when you engage in scalping. When you set a profit taking position and you hit it, you should close your position immediately. Delaying your profit taking can be very disastrous for your scalping strategy.

Scalping is a viable currency trading strategy if you are adept at identifying favorable short term market movements. Be very carefully when using this strategy because it entails lots of risks on your part.

4 Ways to Trade Options, American Style

2009-03-08T19:28:00.000-07:00

Forex options trading is one type of transaction done in the world of foreign currency trading. In line with this, several option styles are employed in forex trading. The four option styles are the European option (an option which is exercised only during the expiry date), the American style (an option exercised on any trading day as long as it is before the expiry date), the Barrier option (wherein price of the option must reach trigger level before it can be exercised) and the Bermudan option (option which can only be exercised on a specific date on or before the expiry date).

The American style option makes use of four basic trades described from a spectator's point-of-view. The four ways to trade options are referred to as long call, long put, short call and short put. In a long call, the investor foresees the forex price to increase and so he buys the right to purchase the option. The operative word here is increase. In the long put, what the trader foresees is that the price of the foreign exchange will decrease thus making him buy the right to sell the option. In both instances, the trader only buys the right to either sell or buy. He may do so at an agreed upon price and expiration date but is not under any obligation to do it. If his forecasts are true, he stands to gain profit. If on the other hand he is mistaken with his predictions, he only loses the premium paid for the right to buy or sell.

On the other hand, a short call is made if it is the trader's belief that the forex price will decrease and thus may sell the option short or sell or write a call. The investor selling the call is obliged to sell the forex to the buyer at his option. The short put happens when the trader predicts that the price of options will increase and thus will buy it or sell a put. He becomes obliged to purchase the currency from the put buyer at the latter's option. Again, if the traders in the last two mentioned trades are correct with their forecasts, they will gain profits. Loses in these cases is unlimited, such as the full value of the currency, should the predictions hold false.

How Can You Lower Risk Through Forex Options?

2009-03-08T19:25:00.000-07:00

Many people want to engage in forex business but are apprehensive because of the risk involved. Fear is always a factor when deciding to start forex business. This is understandable because risk plays a major role in any forex transaction. While it is impossible to eliminate risk in the forex trade, there is a way to minimize it. This is possible through forex options.

Forex options gives the trader more control over his forex trade while minimizing the risk of losing more money than what he could afford. This is possible because the trader's loss is limited to the premium paid for the option bought. The trader doesn't have the obligation to pay for the loss even if the currency losses considerably against its pair. On the other hand, if the currency gains anytime within the duration of the option, the trader will have the option to exercise his right to gain profit.

Limiting the trader's liability to the price of the premium paid is far lower risk than having to pay the loss in case the scenario becomes unfavorable. The trader however have the right to gain more from the option if the scenario becomes more favorable. The earning potential of the option trading is limitless but the risk is limited.

Forex options is good for people who can't afford to lose too much money in forex business but would like to earn more. The system may be a little difficult to master but the benefit it brings to the trader is enough motivation to get started.

How to Pull it Off With Currency Trading

2009-03-08T19:18:00.000-07:00

Many traders fall short in achieving success in currency trading. One cause for this is the lack of discipline on the part of the traders. Still, that's not the main cause as to why traders get defeated. The primary reason is that these traders don't take things more seriously as they should and exert more effort.

In addition, to be able to achieve your most sought after success in the currency trading, you have to stay focused and understand the how's and why's of market operations. After you have fully recognized about how this kind of strategy works, then it will not be that hard for you to discover what it takes to succeed in currency trading.

So, what does it really take to succeed?

1. Be a clever worker instead of a hard worker. When it comes to success in currency trading you really have to work smart. Plan a system that would only use up little time to earn profits. In this fashion, you have every chance to achieve success in trading in less than an hour per day and that's three times as much in annual profit. Going along with the basics is an important factor to succeed in trading.

2. Carry out a probability trading. In recent times, there are big industries that provide automatic solutions which they claim can actually let the trader know the right time to deal and they are also capable of picking up information about market floors and ceilings with perfect scientific accuracy. However, there's really no such thing so never even consider it. One more unrealistic method is day trading. Regardless of how hard you may try, the chances will in no way be on your side in day trading because you will not have sufficient revenues to cover your inescapable losses.

What Is A Forex Option and Its Types?

2009-03-08T19:13:00.000-07:00

Forex options are defined as securities that allow option investors to realize profits without the need to buy the underlying currency pair. With the use of leverage, forex options may spell huge profits for the trader. It however comes alongside some risks. On the other hand, the currency options may be held with the underlying currency pair which will result to earnings but minimize the risk.

Sometimes, the potential for earning may have to be limited to be able to also limit the downside in the transaction. In forex option trading, the risk of the option writer is greater. Due to this, most option brokers require higher capital on the part of the traders if they intend to sell the options contract. Likewise, not all forex traders offer option contracts to traders for the same reason. It would be best to try to find a good broker that would allow traders to do options trading along with other traditional positions.

Forex option trading has two types, traditional and STOP options. The first one is what is commonly called the "put/call option". In forex trading, "put" is synonymous to "sell" and "call" is synonymous to "buy". The traditional option allows for the trader to either buy/call or sell/put options which would give him the right to exercise said option at a certain date and price previously agreed upon by the option buyer and the option seller. The trader is in no obligation to exercise the said option when the time comes if he refused to do so but will have to pay for the right to the option. The said payment is called premium. If the movement of the currency pair goes to the advantage of the trader, he may exercise his right and buy/sell the pair. He may then sell or buy the pair at a price that will earn him profit. If he decides not to use his option, it expires worthless. The only loss on the part of the trader is the minimal amount of the premium.

SPOT (Single Payment Options Trading) requires a higher premium on the trader though it is simpler to set and carry out. What happens in a SPOT is that a trader predicts a currency pair scenario and quotes a premium. The scenario would include an agreed upon price and expiry date. If the trader buys the SPOT option and his forecasted scenario happens, his option becomes spot cash.

4 Tips on Why Forex Options Appeal to Traders

2009-03-08T19:09:00.000-07:00

More and more traders are choosing to get forex options. It is a currency contract that allows them the flexibility to do more with their investment at a predetermined and minimized risk price. It is also a contract that has very little obligation placed on it. After the premium is paid, no further obligation is asked from the buyer. Here are some of the things you may want to look into to understand why currency options are so alluring:

• Low and predetermined risk - since you are paying a premium which allows you to buy foreign currency if you choose to do so buy not obligate you if it is unfavorable to you, then you know all the risk involved. You are not risking a high capital and you already know what you will be losing if tides turn against you.

• Unlimited profit potential - the only obligation you have is the premium you pay at the beginning of the contract. After that no matter how high the value of your currency goes, you will be keeping all the profit.

• Works as a hedge - you get the right to buy the currency without buying it at present. This would avoid market fluctuations reducing your risk to just the premium cost.

• Getting ahead of the pack - now that you are not risking a lot of capital, you can get ahead of everybody. You do not need to wait for deep-seated events to happen, you can maximize your profit with just a set risk.

These are only the major reasons why traders opt to go with options. There are endless possibilities if you know how to work them.

Hedging Forex Strategy

2009-03-08T19:01:00.000-07:00

In order to understand the hedging Forex system, you need to first understand what hedging even is. Hedging is basically the act of buying and selling pairs of currency as a way of protecting yourself from unwanted currency fluctuations. Traditionally, this method was used by large companies so that they could protect profits from currency fluctuations that would cause them to lose money. Although hedging Forex strategies work well for these large multinational companies, it is not recommend that inexperienced Forex traders use it. Using it can leave you open to a lot more risks than you are already and should be avoided entirely.

Trading Forex has become increasingly popular among individuals who want to make money working from home. Many people who try it lose all of their money when they start out because they do not have a strategy, or are completely unprepared. If you fail to become completely educated in Forex, you will lose. You will be disappointed and lose all of the money you invest.

The best way to trade in this market is to use a robot to do your trading for you. FAP Turbo is one of these robots, and it will automate the process of trading for you so that you can avoid letting your emotions get in the way of your trading. Allowing emotions to influence trading can only end in a loss of money. Robots help you stick with your strategy and leave emotions out of the equation entirely. This is by far, the best way to trade.

How To Handle A String Of Losses

2009-03-04T14:22:00.000-08:00

Everybody hates to lose and unfortunately no one is blessed with the ability of foresight, therefore losses are an unavoidable part of trading. When we enter a trade we will either be right, or wrong, and even if we broke-even we'd still be classed as being wrong - as nobody enters into a
trade just to break-even! When unsuccessful traders encounter a string of losses they begin to engage in self-destructive patterns that help them escape the pain they are experiencing.

In this article we bring to light these self-destructive actions that can help you realize what you are doing before it takes hold of your physical health. If you find yourself already engaged in these patterns hopefully this article can help you to get you back on track as quickly as possible.

The Destructive Patterns

If you find yourself caught in a string of losses or a bad performing week/month be sure to monitor your behavior. It is during this time that you will be at your most vulnerable. You will begin to indulge in activities that at first seem harmless, but upon excessive use (or in time), begin to cause physical damage to your health.

Ask yourself the following question: during during drawdown periods do I find myself over-indulging in these activities:

> Food (especially junk food - eg. chocolate, ice-cream, chips)?

> Sex (includes viewing pornography)?

> Alcohol?

> Drugs (includes excessive smoking)?

> Laziness (find it difficult to wake up in the morning)?

> Entertainment?

All of the above taken in excessive doses can be detrimental to your own physical health (some even in small doses!).

These activities above during your losing period are only covering up the pain of confronting the true issue, and your body tries to rid the emotional pain by trying to "fix" it with physical pleasures. Unfortunately it is going about it in the wrong way, so what should you do?

Firstly... REALIZE WHAT YOU ARE DOING AND STOP IT!

You need to realize what you're doing and you need to STOP doing it immediately! You can either decide to stop, or you'll be forced to stop when your body eventually
breaks down and prevents you from any form of movement. It will be much more beneficial to you in the long-term if you can decide to stop *NOW*.

Once you have stopped you now need to figure out a way to solve the pain - not by cutting out or neglecting it, but by staring it in the face. Bring your problems out into the light, be honest with yourself. There can be no growth without pain, you are experiencing the emotional pain, now it is time to find the error and therefore your growth.

Begin Your Review

The review process begins in two separate areas: You & Your System. Here are some checklists for you to go through to find out where the problem could lie:

"YOUR SYSTEM" CHECKLIST

> Was your system thoroughly tested prior to trading it (or paper traded if you do not have the capacity to programme your system into backtesting software)?

> Did you test with out-of-sample data?

> Do you even have a system???? If you do not, how do you even know if the method that you are trading is even profitable??

> Is your system's code correct?

> Did you over-optimize your system? (what have we discussed about over-indulging?)

> Did you paper trade your system prior to placing capital on it?

> Did you trade with a small amount of capital prior to placing the rest of your funds on it?

> Do you know the system's limitations?

> Did you properly drill your system? (see our blog article on why I am the system designer from hell)

"YOU" CHECKLIST

> Is the current drawdown you are exhibiting with your system normal?

> Are you comfortable with your system's historical drawdown performance?

> Are you fully aware of the risks involved with your system and the instrument(s) you are trading?

> Are you trading with funds that you are comfortable risking?

> Are you relying too heavily on your performance?

> Have you set realistic goals?

As you can see there are generally two areas that you need to explore: the mechanical aspect - your system - and the emotional aspect - you. Both can be responsible for making the way you feel the way you do. It will either be an error on the system's side with how the system was tested and/or programmed, or it can be your own psychological profile not being comfortable with the system's performance.

Your Answers = Change = Your Growth

What steps should we now take? Now that we have begun a corrective process where we have stopped the evil nature of our over-indulging ways to take control we should continue our "corrective nature" by invoking our findings and taking ACTION in correcting our errors.

If the problem was mechanical - fix it, if the problem was emotional either go about setting up new thought patterns, or change your current system. The answers lie in whether you need to expand your knowledge in system development, or whether you need to grow emotionally as a person.

Unfortunately there is no easy road, and even if there was everybody would be doing it. Hopefully this article has made you ponder over some of your behaviors during drawdown periods, be sure to keep an eye on yourself and as always take care of your body, because there's no use in making all the money in the world when you don't have the physical capacity to enjoy it.

Tips For Beginners For Earning Guaranteed Forex Money Online

2009-03-04T14:00:00.000-08:00

The foreign exchange or forex market is a great place to dabble in trading if you're interested in making a little extra money or even turn it into a full fledged career. With over a trillion dollars exchanging hands daily, no other trading market is as high in volume, offers a more liquid commodity to trade, nor is as inviting as the forex market. There are a few things to verse yourself with to get you set up to quickly earn some forex money online.

Like any other market, the forex market can be very unpredictable particularly in recent months and years with the global economy in recession and negatively feeding off one another. While there is a great deal of money to be made from trading ahead of curves, it can be extremely risky and, unless you're a seasoned trading veteran or market analyst, pointless to try to tackle.

The only true and guaranteed path to making forex money online is by tirelessly and painstakingly watching and following trends, being aware of changes great and small in the markets which you are invested in. This puts you in the position to also be able to act on these changes and trade in your best interest accordingly. You can get in a good habit of riding profitable stretches in trends large and small, trading away when the trend reverses, and repeating this practice elsewhere.

As you probably gathered, the only guaranteed path to making forex money online of tirelessly closely following trends can be a full time job and a half in itself. One invaluable resource available to everyone which is designed to watch the market around the clock and trade automatically on your behalf and in your best interest is a forex trading system, or a program which you run on your computer and is tied into your trading campaign.

The reason that I establish that these trading systems are for everyone is because, as these systems are entirely automated, they require virtually no knowledge of the forex market or even how to initiate a trade. The best and newest of these systems, as the technology continues to improve, respond to changes in trends or substantial reversals quickly, effectively making the split second decisions which human rationalization and reaction time impedes and ultimately keep you on the winning side of your trades near 100% of the time. These systems also trade without emotion, so your trading is never compromised, instead only always effected by up to the minute hard market data.

A Currency Trading Education - Why People Fail at This

2009-03-04T13:58:00.000-08:00

When it comes to a getting a currency trading education, a lot of newbie traders just don't get it right. I mean, after all, I'm sure just about everybody has heard this statistic: 95% of all currency traders WILL lose money trading the market. So what makes them coming back for more? I mean if most people are going to end up losing money why are there so many people trading in the first place?

The answer should be really obvious. They want to be part of that legendary 5%. Those traders who don't have to get up and fight through traffic to work for a boss that they can't stand. This is the kind of dream that everybody has. So it's really surprising how many people don't take trading more seriously. They are risking lots of money, yet they are basically using toys to trade the market. They obviously did not get the right kind of currency trading education.

How else would you explain the concept of forex expert advisors?

For those that are unaware of what these are, they basically trade the market for you. You input the script onto a Metatrader chart, and it begins to start trading for you. Let me go over this again for you, to make sure you understand what I am saying here. These expert advisors TRADE FOR YOU!

If this doesn't fall in the heading of "toy", I don't know what does??

What if bankers, doctors, lawyers, etc...decided that they would just let a machine do the work for them? It sounds pretty stupid, when you look at it like that, doesn't it?

If it was as simple as that to trade currency, then why wouldn't EVERYBODY do that. Everybody would just grab the same expert advisor, and become millionaires, right? I hope you are catching some of the sarcasm, because I am laying it on pretty thick.

Look, if you want to succeed in currency trading, then it really is no different than anything else. You are going to have to get your hands dirty and really understand how the markets really move and stop relying on "toys" to do the dirty work for you.

Learn Forex Online - Where to Start and What to Be Weary Of

2009-03-04T13:54:00.000-08:00

If you are looking to learn forex online, there are certainly a ton of different venues to choose from. You've got literally dozens of different kinds of forex forums, where you will find thousands of different forex traders that you can communicate with. It's a great way to learn about forex trading, but I do want to wish you a word of warning, however. Don't fall into the trap.

I know that sounds rather ominous, but that really wasn't my intention. It's just that I have seen many traders get really complacent when they are starting out with trading due to spending most of their time on forex forums, instead of learning about what it actually takes to trade for a living.

As fun as the forex forums are, they are filled with people who have been trading on demos for years who have never actually risked a single dollar, trading. This is like going to a cycling forum, and taking instructions from somebody who still rides on training wheels. I know this sounds ludicrous, but that is what happens to a lot of people.

There is a reason for it. Many people are busy looking for this incredible holy grail, that is talked about so much in the trading community. Certain traders feel like there is something out there, that if you just input it into your trading software, you will NEVER have a losing trade and you'll be a millionaire by the end of the year.

Until that day comes, they will not trade a single penny on the market. Well. let me be the bearer of bad news. There is no such thing as the holy grail. It's a myth or urban legend. It's the kind of thing that many people claim to have seen, but you'll be hard pressed to find any visual proof that it exists.

If you want to learn forex online, then do it! The important word, however, is learn. This means that I don't want you to think that there is some magical piece of software will tell you exactly when to buy or sell by placing arrows on your charts.

If you really want to learn forex (at least from the technical analysis side), I strongly suggest that you understand the concept of price action. This is where you can look at a simple price chart, like a bar chart, and be able to understand what the market is actually doing.

Forex Trading System Course - What to Choose

2009-03-04T13:51:00.000-08:00

When it comes to choosing a forex trading system course, it feels like there is an infinite amount to choose from. There are courses for every kind of trader, whether you are a scalper and like to go in and out of the market 10 times a day, all the way to position traders, for those traders that like hold their trades for weeks, months, and years at a time.

But the important thing you should be asking yourself is what am I truly going to learn? Is the course just going to cover the same rhetoric that you read about all the time inn forex forums or is it really going to help me with what I am trying to accomplish, which is to truly get a deep understanding of the market, so I can predict its future price movement.

The problem, nowadays is that most forex trading system courses don't really explain to their students the underlying reasons why the price moves the way that it does. Unfortunately, what most of the courses do, is teach traders how to put layers of indicators on their charts and only buy or sell when the indicators tell you to.

There are so many things wrong with this, I don't even know where to begin.

Let's start with the obvious fact that these indicators are lagging. This means you are making your trading decisions based off of indicators telling you what has already happened!

Also, who understands what these indicators are telling you? I'm sure we all know that Stochastics, for example, are supposed to let us know when the market is overbought or oversold. But do you honestly think most traders even understand what it means for markets to be overbought or oversold? I really doubt it. To most traders, Stochastics are just a couple of lines that go up and down, and you are supposed to buy when the lines are down, and sell when the lines are up.

This goes back to my original question. What are you actually learning?

Forex Online Trading - What Not to Buy Into Or Believe

2009-03-04T13:49:00.000-08:00

There are a number of misnomers when it comes to forex online trading which, if you are considering or curious about trading currency, you should know. Here are some common misconceptions about trading in the forex online trading.

It's More Difficult Than Stock Trading - In many ways, forex online trading is identical to the traditional stock exchange online. The forex market keeps longer hours so there is slightly more responsibility required on your end. Beyond that the main difference is that you're buying and selling something with each trade, but it's simultaneous so there isn't anything else to keep track of. The aim is still the same, buy low and sell high as effectively as you can.

It's a Guaranteed Money Maker - That being said, forex online trading isn't the end all be all secret to financial success. While it's not necessarily more difficult than stock trading, many people seem to get this impression, possibly because the currency exchange is less known than the traditional stock market.

You Need a Full Service Broker - And by full service broker, I mean the traditional form which most people associate with the term. It's not necessary to have a full service broker in forex online trading. These days it's not even entirely recommended anymore. Many traders have begun building a new trend of using a forex trading program in place of a broker. This is essentially an automated program which performs the same tasks but at a fraction of the cost, analyzing up to the minute market data around the clock and trading in your best interest automatically.

Does Forex Maestro Really Work?

2009-03-04T13:43:00.000-08:00

Every week or two it seems like there is a brand spanking new automatic forex trader released. Some show promising results while others aren't even worth the space they take up on your computer hard drive. More recently though there has been a particular automatic trader that has generated a lot of positive feedback. Its name is Forex Maestro and it has been getting positive reviews from many people in the industry. The only question that remains though, is does Forex Maestro work? Can it deliver on everything it promises to?

I was fortunate enough to grab a review copy just after it launched last month and gave it a bit of a spin to see how it performed. If you do buy the software I recommend you also run it on a demo account first to see how it works for you. First up, what does Forex Maestro actually do?

What Is Forex Maestro?

It is a completely brand new trading package built to work with MetaTrader4. It works by simply running the software with the platform and it places all of your trades for you. That's right! Its completely automatic, if everything works as it should you don't even need to touch it, the robot places all trades on your behalf.

Does Forex Maestro Work?

This is the question on everyone's lips. will it deliver on all the promises the sales page suggests? After lots of testing I have to decree that it does work. The results achieved on a demo account were promising and there is certainly potential for this software to be a real juggernaut.

Is it worth Buying Forex Maestro?

Well that all depends really. If you like to relax a little and enjoy time away from the computer then Forex Maestro might just be the product for you.

If, however, you like to be a more hands on trader and spend time analyzing the signals and trends then you may be able to pass on the system. This isn't to say the software is no good (I think I've proven to the contrary on that) I am merely stating that it might not be for you depending on what sort of trader you are. You will need to make your own judgment on this.

Forex Programs If Well Thought Out and Properly Initiated Can Lead to a Life of Financial Prosperity

2009-03-04T13:40:00.000-08:00

None of us "Plan to fail, but many of us fail to plan," which can lead to a life of disappointments. Fortunately, there are well thought out Forex programs that have proven to provide the participates who follow and work hard at them a true path to economic freedom. If your dedicated, determined and refuse to fail, then it is certainly possible to create great wealth in the FX markets by adhering to the established methods mention below.

As with everything else in life, education is the key to success and the currency markets are no different. The first step in this journey you are about to undertake is to learn Forex trading from its basic fundamentals to its most advanced and sophisticated investing and trading strategies. You can accomplish this by enrolling in one of the many excellent currency classes offered online today.

The second thing you will need to do is to get the best tools possible to help you with your decision making process. These are Forex trading systems, which is software specifically developed for this purpose. You are going to be inundated with critical data daily that's needs to be processed and evaluated for its relevance pertaining to a particular currency of interest to you. It is simply not humanly possible to do this in a timely and efficient manor with out software designed for this purpose.

You're almost there, don't give up yet. We are just getting to the fun stuff, making some good money. Now you have your knowledge and tools, let's start practicing everything we learned and start understanding our software. The third and final step is to open a demo account with a Forex brokerage firm. Now you are going to practice, practice and practice, when you get done with that, practice some more. When you are one hundred percent sure you are going to make good money with a real money account because you are doing it consistently with the demo account, it is time to go for it.

There you have it, a tried and true Forex program if followed to the letter will virtually guarantee you a long and successful career as a professional currency investor. Yes, I know it is not easy, but if it was easy everybody would be doing it and the opportunity for the huge wealth creation you have would not be there, would it? You can research everything you need on the internet and hopefully it will work out great for you.

Forex Trading - A Look at Forex Market Makers

2009-03-04T13:38:00.000-08:00

The Forex market, also known as the Foreign Exchange Market, is a currency exchange market that functions over the counter. What this means is that unlike markets like the NYSE and the London Stock Exchange, there is no physical address and all trading is done from buyer to seller online or via telephone. While, the selling and buying of forex trading is more direct there are still traders and brokers working side by side. Traders are known as those individuals that trade on their own behalf and brokers are individuals or firms who handle trading for other individuals. Whichever method you choose to go with there are people known as market makers who influence the market with the trades and predictions they are making.

Market makers are mostly retail traders who are not able to trade through the exclusive trading club known as the Interbank Market. These retailers are generally found in two categories of brokers: the market makers and the electronic communications network (ECN). Market makers set both the bid and asking prices within their systems and then have them displayed on public trading sites. By helping to control the overall feeling and climate of the market they are able to provide liquidity in the market. They offer the counterbalance to your transactions.

While, this seems like a great way to feel more confident in your trading and built better profits for yourself, you have to be careful of the cut they are getting. It may look in your favor on paper, but they are always designed to be in favor of the market maker. The spread is reasonable and stands up to competition, but they won't hesitate to pass it on to someone else who will make them more. They can also decide to hold your order and trade against you. You need to be completely aware of each situation before deciding to deal with market makers to keep your best interest in mind. But, with a little help and a lot of observation, you can figure out how to use a market maker to your benefit and avoid when they are working to their own benefit.

Best Forex Indicators - 2 Popular Indicators and Fatal Mistakes Most Traders Make

2009-03-04T13:28:00.000-08:00

Forex indicators can be used to help you learn how to navigate the forex currency market to the best of your advantage. There are many of them to choose from and ideally they should be used in tandem for the best results. When you are looking to offer a range of choices and cover two of the biggest areas of question, when to trade and what to trade, there are two specific indicators that can be used together for the best results.

The RSI (Relative Strength Index) can be used to help determine what markets have been over bought or oversold. This is a great way to figure out what to trade as you will be able to avoid the markets that are over sold or over bought depending on the trades you want to make on that particular day or during a specific time frame. The first real step in using forex indicators is to set some goals and take a look at the best way to meet those goals. Though short term gains are the most exciting and can often get your fired up and ready to trade more, they are more risky and can just as easily disappear in a volatile market or by over trading.

Instead, shoot for medium to long term goals so you have a chance to read the market for a couple of days and put together a sensible and successful plan of action. Another one of the top indicators to use is the MACD (Moving Average Convergence Divergence), which can help determine when to trade by narrowing down the best times to make the most trades and when others are doing the same. With this information and that which you gain from the RSI indicator you are able to best determine when and what to trade, two of the largest proponents of success on a trade market.

These two forex indicators should be used together and with an overall solid plan of action to get the best out of trading on the forex currency market. One of the biggest mistakes you can make is to go into trading without a plan or set goals. If you allow rash decisions or trends to rule you're trading, you will lose money and end up broke. Another mistake to avoid is relying entirely on indicators as this will leave you no room for instinct, tips or other tactics. Nothing can predict the future of the current market and you must realize that in order to be successful.

Greatest Forex Day Trading Strategy

2009-03-03T17:57:00.000-08:00

Are you searching for the greatest Forex day trading strategy? There is usually no set and forget method for day trading success since profitability depends on the market environment for the day. Therefore, making money successfully with day trading requires the trader to be very good at accessing the market and choosing the right strategy to "attack" it at the right time. As a result, many traders have developed their own system for trading different currency pairs, time frames and volatility levels.

What are the Different Types of Market Conditions That Can Affect How You Day Trade?

From my own experience with Forex day trading, the following are several common scenarios that will affect the way you approach the market.

1. Fast Trending Day

This environment would indicate that the currency pair's price is trending up or down and breaking out of its current trading range. This usually happens when there are changes affecting the currency's country. A fast trending day can be seen when the price of the currency pair rises below or above the 21 Exponential Moving Average and then going back to it. A trader should study the fundamentals of the country before deciding how to trade next.

2. Slow Trending Day

This happens when the currency is very stable. The price usually starts near the 200 Moving Average and does not move more than 25 pips out of it. Once the price moves up or down, it will usually move back to the 200 MA again in the day.

3. Normal Trending Day

This is also the environment of a stable currency, with the price staying near the 75 Moving Average constantly throughout the day.

4. Volatile Big Range Day

This usually happens to a more unstable currency, whereby price can trade many pips apart. There is a lot of potential to make money, but you also need to cut losses quick to avoid huge losses. This type of day can also happens on a news day and needs to be approached carefully.

Online Forex Training

2009-03-03T17:55:00.000-08:00

Are you searching for the best tools of online Forex training? The Forex market is becoming more easily accessible to the general community of investors. It involves the buying and selling of currencies worldwide and can be traded through the phone or the Internet.

1. Is It Really Easy to Make Money From the Forex Markets?

Despite many stories of how some traders have managed to make millions in the currency market, Forex trading is very risky when handled by the wrong hands. All traders who wish to make money from this highly volatile market needs to equip themselves with some basic skills and money management rules before they start.

2. What Are the Best Ways to Learn Forex Trading?

There are many ways to learn currency trading. You can choose to attend an on-location training course near your area if it is available. It is more common for people to learn Forex through the internet though. This can be done using online courses, lessons as well as through mechanical systems that experts have created.

I personally prefer going to on-site courses as it is easier to clarify doubts there, but their major drawback is that they are very inconvenient and usually cost more compared to learning online.

Trading Online in Currency is a Sure Way to Make You Smile

2009-03-03T17:53:00.000-08:00

Frowning is what the world has been doing of late, and the economic crisis and recession, pay cuts, unemployability rates increasing, government cut backs, and the stock market crashing hard to the floor has been causing a wave of pessimisms in the world population. However, there is something that can change all this. Trading online in currency is a sure way to make you smile and I will give you the reasons for this pretty soon. But let us look at the figures of the Forex market for the past year.

Number of investors, retail investors like you and me have increased to a staggering 50% of the original number. While a large chunk of that fail in their attempts, a sizeable number retains their presence in the market and go on to make some real, serious money from their gains. What needs to happen here is some knowledge, a fundamental grasp of the information and technicalities of the market and a little bit of hard work - all will get you the aptitudes necessary to make some good money on the market.

Unlike commodity markets of the more traditional nature, the Forex market is not bound by a physical space where trading happens, and this means that the amount of red tape around this is quite small and the taxations of this is also relatively small in the same sense. Unlike the amount of rules and regulations that you have to encounter around markets like stocks and bonds and maybe even futures, the Forex market is one of the most liquid markets in the world and this means you can pull in and pull out whenever you want to and there is nothing to stop you from doing so.

Last but not least, the third and final reason why Fx markets are so great for anyone out there is because of the fact that it is an over the counter trade, unlike stocks and bonds, which are ruled by a plethora of taxes, rules and regulations. The level of liquidity of the FX market is pretty high considering the fact that the daily turnover for the market is around 4 to 6 trillion. Commanded by central banks and governments, the Forex market has seen the recruitment of more than thousands of new investors almost every day and this is because it is a market with one of the lowest barriers to entry.

These are 3 reasons why Forex trading is great for beginner traders and you should stop considering the options and trying your hand at the paper trade right now. Millions of dollars are exchanging hands as we speak and when the market is played right, you will be able to give yourself a piece of the pie and lead yourself to financial independence. Thus, trading currency is a sure way to make you smile.

Bad Forex Brokers Spoiling Your Day? Avoid Them Like the Plague

2009-03-03T17:51:00.000-08:00

The internet is rife with bad Forex brokers, some independent and some attached to financial institutions, but all with the same agenda to make a quick buck out of you and they all use the same M.O, promising you the world, assuring that you will be a millionaire within a week and all the while asking you to put in an initial margin as wide as a continent. Soon as you know it, you barely get in touch with them, they give you a Forex platform that looked like it was designed by a blind horse and your profits are rising as fast as a deflated zeppelin.

The thing is, spotting a bad Forex broker is really very easy, and they often prey on the new investor who has no idea about the realities of the Forex market. They rope them in with wild visions of the market simply turning into gold at their very touch, and while a tiny little thought might creep into your head about 'If it is so easy, why isn't he doing it?', you just brush it off as the zeros pile up in front of you, sipping your imagined pina colada in the Bahamas as the sky begins to rain gold on you. Wake up. Forex brokers and websites who just promise you an invitation to the million dollar round table are just trumped up vaporous marketing lingo to get you to deposit your money in their bank accounts.

In fact, all you are doing are making them rich. Some of the things you need to know about good brokers is that the first thing they do not ask for is a handout. They ask you how much information you actually know about the Forex market and if you know zilch, they will sit down with you and give you some brief oversights. Then they will sign you up to a virtual simulated environment and a dummy account where you can invest fake money in a real investment environment and learn from there. The fee you have to pay for this is pretty low so learn all you can. Then, if you have decided to go on, they will put you through a crash training course and guide you along the way. They will communicate with you from the start.

Fantastic Tips on How to Trade Currency

2009-03-03T17:46:00.000-08:00

In these bearish of times and the economic crisis become more and more of a global endemic, the old and trusted traditional markets have begun to show their flaws and crumble before the very eyes of the millions of investors that have sustained its survival for the past one hundred years. Because of this, more and more people are turning towards the practice of trading currency, the very basic element of the market because of several reasons.

The market is extremely liquid, is over the counter and anyone can make money on any position as long as you can read market momentum. What you need in your arsenal as you attack the paper trade is some tips and tricks that seasoned investors have been using for as long as the market has been around, tips that have been making them plenty of money. One of the things and formulas that make reading the market is having as much information as you can. If you know anything about the market at all, you would know that you need to have both technical and fundamental analysis on your side when making decisions on market movements.

What this means is information that can cover entire libraries, and here comes another tip. Be smart about the information that you are going to mine and use when trading with your currency pair. Usually it is determined by the currency and the currency pair that you are trading with and of course, the region that you are trading with. The Forex market is a true 24 hour market and depending on the time that you are trading, you could be in Sydney, London or even New York. These regions have their own set of rules and environments that you need to be familiar with when you are investing with the market. A look at technical analysis will reveal a ton of information and ways to read the market. Through the whole host of processes, charts, diagrams and mathematical formulas, you need to be able to pick and choose the ones that you will be comfortable with.

Using this and fundamental analysis, you will be well armed to attack the market, but there are so many other things you need to consider. You need to be familiar with market psychology, you need to understand price movements, how to use spreads and pivot points to manipulate the market and you need to know who your biggest competitors are and the market makers that have the power to change the entire shape of the market within a few hours. With these things in mind, you will have better focus and better strategies formulated to read the market and implement some good investment decisions while trading currency. This is the secret weapons of the 10% of investors that come into the market and stay there - making their presence known. Do not be the majority that fall out and make a difference in your life with some good old financial independence.

Online Forex Trading is the Key to Financial Independence

2009-03-03T14:23:00.000-08:00

There has to be a reason why online Forex trading has become the popular phenomenon that it is today. The numbers of people that have started to trade in the market have more than quadrupled of late, with more and more people joining on a daily basis. Unlike more traditional commodities, there is no fixed place for Forex trading, which means that there are less rules and restrictions that can bog down the individual trader.

Stocks and bonds, futures and the equity market all have centres for trade where traders have to connect with in order to make their investment work. Forex and online trading associated with it has no such restrictions, and the relative ease of access means that more people can trade in it. From students to moms at home, the possibilities are endless for anyone interested enough to pick up a Forex guide and start reading. Forex trading is very dissimilar from buying and selling in stocks and by means of Forex trading tactics will give you supplementary compensation and help you attain even better profits in the short-term.

There are wide ranges of Forex trading strategies accessible to shareholders and of the for the most part useful these Forex trading strategy is a approach identified as leverage. But that aside, there are many reasons why online trading in Forex is going to make it easier for people to invest their money and see some good returns. This is because of the support structure that has been placed in and around the online Forex environment that allows for the easing of people into the trading environment. For one, many of the brokerages and banks have streamlined their operations into the internet and have extended their services to cyberspace, so the online investor is getting just as much support as a person who approaches bank or a brokerage. Another thing that there is to further help the average investor out there is the training programmes and the dummy accounts that you can leverage on to get to know about the market.

By enrolling in a training and dummy account, where the money is not real but the situations are, you will be able to learn the ins and outs of the market and realise for yourself whether or not the Forex market is there for you. An additional advantage is that it is easier to acquire admission to the newest information and breakdown from internet Forex trading sites. Naturally, they will convey up to date stocks and prices in real time. In addition, the majority of these sites contain a round-table or contain a live online gossip method where you can check with with Forex agent and erstwhile financier as well. It is a speedy and straightforward technique to make contact with your Forex agent should you necessitate aid. These are some of the reasons why online Forex trading can be easy for anyone to make money, so log on and start making money now.

The Holy Grail of Technical Indicators

2009-03-03T14:21:00.000-08:00

The relative strength indicator is one of the most commonly used technical analysis tools available. Unfortunately it is also one of the most misused.

The RSI was a tool developed by famed market technician Welles Wilder during the 1970's as a way to determine whether a market was overbought or oversold. The formula is rather simple with the average number of up closing days divided by the average number of down closing days. So this indicator essentially measures the size of a stock's closing gains and compares it with the size of a stock's closing losses.

According to Larry Connors over at TradingMarkets.com who back tested this indicator from 1995-2006 in over seven millions trades there is no statistically significant edge using a 14 period RSI, which is generally the default setting for this indicator. However when used on a 2 period setting he found that it becomes a very effective tool in one's technical analysis arsenal.

Using the 2 period RSI we define overbought as a reading over 90 and oversold as any reading below 10. What Connors found was that a stock with a reading of 90 underperformed the benchmark index one week later, and a stock with a reading of 10 outperformed the index by an average of .50%. Furthermore he found that as readings became more overbought or oversold the amount that a stock moved was more substantial. For example if a stock had an RSI reading of 1 or below then within a week the stock averaged a 1% gain over the benchmark index, and if a stock had a reading of 99 or more the stock averaged a loss of -.31% compared to the index.

Best Forex Software For Consistent Profits

2009-03-03T14:19:00.000-08:00

There are many different forex trading software platforms available, all designed to work with your current level of knowledge to find the best trading possibilities for your goals. Many wonder whether forex software can actually help, the answer to that is yes, but you need to know what you are doing and how to best use the software to your advantage.

When it comes to finding the best forex trading software for your needs, there are a few things to consider. First, there are essentially two types of forex trading software, one is designed to provide you with entry and exit points, while some that show you not only entry and exit points, but also the logic that goes behind it and how to prepare for your next trade.

The first type of software is generally really good at what they do, but you still have to be aware of what's happening with the forex market in order to take advantage of a good entry or exit point, as provided by the software. To achieve consistency with this type of software can be difficult, but you need to be dedicated to the process and put your own two sense in, so to speak.

The second type of software, on the other hand, provides not only good entry and exit points, but also can place the trade orders for you.

This enables you to step away from the situation and live your daily life while still being able to take advantage of positive market trends and have reliable software working hard to do that for you. After you've had a chance to play around with demos of each style of software, you must decide which the best is for you.

In most cases the fully automated software is the best choice because it will make the trades and decisions for you, so you can take full advantage of positive markets and trends. Forex trading software is designed to help you and optimize your trading to better meet your goal, if you are using the first type of software you are only getting halfway there and still have to do most of the work yourself.

Finding the Best Forex Traders

2009-03-03T14:08:00.000-08:00

When you are entering the forex market you are likely feeling overwhelming and under-confident. This may be the best time to find one of the best forex traders out there for assistance with trading and getting to know the climate of the forex market. The forex (Foreign Exchange Market) is a non-physical currency trading market that operates between buyer and seller online or via telephone with the addition of brokers, traders and market makers.

In order to find the best forex trader for you, you need to first set goals about what you want to accomplish in the forex market and what time frame you are looking at to accomplish this and set some trading guidelines to keep you and your trader from making rash, miscalculated risks which could make you lose money and your confidence in the market.

Check around on forex forums to find out who other traders are using and what they look for in a solid forex trader. You should be considering someone with the same goals as you, who has experience in the forex market and knows how to use technical indicators swiftly and easily to find the best times and trades to make on your behalf. On the personal side, you also want someone who is easy to work with and makes you feel confident in yourself, your trading goals and using them to trade your money for you. This is a big responsibility and shouldn't be taken lightly by either them or you. You need to trust them and they should make a solid effort to ensure you, in a genuine way, that you are safe and secure in their hands.

Forex trading can be a scary thing unless you have the right support and the best forex traders on your side. Take the time to find someone who is in alignment with your trading goals, comfort zone and trading knowledge in order to help you learn more, trade successfully and confidently reach your forex market trading goals. This will result in the outcome you are looking for while helping you to build the skills required to understand and utilize the many facets of the forex world.

Using Leverage and Rollover to Maximize Returns in the Forex Market

2009-03-03T14:03:00.000-08:00

Leverage is very common in the FX market, and this is why it is so popular among traders; large returns can be made from a small investment. FX brokers will commonly give 100:1 and up to 400:1 leverage. This means that for every dollar you receive a minimum of $100 in capital you can trade with. Lets assume that you choose to have 100:1 leverage in your account, and you deposit $1000. You will have $100,000 in total buying power you can make money off of. To open a position worth $10,000 will mean that you put $100 in margin. This is your good faith assurance of the trade, and as long as you maintain a total of $100 in your account that trade can stay open.

A $10,000 dollar trade is called a mini lot and each pip movement will result in a profit or loss of $1.00 approximately (will be based on what currency pair you are trading). A $1,000 dollar trade is called a super-min lot and each pip movement will reflect a gain or loss of $0.10. A standard lot is $100,000 worth of currency and thus each pip movement is worth $10.00. Currency pairs differ in how much they move on average each day. Some currency pairs frequently see moves of 400+ pips a day where others will almost always be under 100 pip movements.

Brokers will commonly "roll over" positions in your account. This means that each day you will be credited or debited the difference in the interest rates of the currency pairs you are holding. This is not interest on your margin or the leverage your broker has given you. If one country has an interest rate of 4% and another has a 2.5% interest rate, this difference will be credited or debited from your account depending on if you are long or short the higher interest currency, respectively. In this way you can earn an additional income stream by having bought a higher interest rate bearing currency and holding it till just after 5:00 PM ET.