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Jun 29 2009
Develop your own
forex trading system.After the results of the fundamental economic announcement hits the news wires, the currency markets often jump. When it does, it smashes through the nearest and weakest levels of support and resistance.
Learn
forex news trading.However, at some point the price has jumped too far and too fast and pulls back. This price level is very important. It often takes three to five minutes to reach that level. When the price level reaches this level and begins to pull back, this is the end of the news spike in most of the cases.
Get good
forex training. Just before the news came out, the markets began to wake up. Don’t forget that traders can’t know the results of the news before it is released. Some traders are placing orders on hunches, rumors and guesses. Mark the price level when it begins to pullback with a horizontal line on the chart.
Sometimes, this last minute volatility is created by traders exiting a trade before the news came out. So the chances are the market may move in the wrong direction as the initial reaction.
Don’t trade just because you see the market moving in a particular direction 20 seconds before the news was announced. Don’t pull the trigger at this point. Preserve the capital. The news is then released suddenly and the market moves dramatically. Thousands of orders are placed.
There are unique risks like slippage, gapping, spreads and such. Don’t pull the trigger yet. However, we now have two pieces of vital information with us now. We know the results of the economic announcement. We now know whether it was good, bad or surprising for the markets.
We also now the direction in which the market is moving. Let the market move. Stay out. Discipline is important. Don’t pull the trigger. It may feel like you are missing a great trading opportunity. You are only missing the risk.
The price begins to pull back. You have a better market to trade now. Volatility is still high but not wild, crazy or out of control. Slippage risk drops to zero. The danger of spreads widening is now drastically reduced.
The price retracements are often where the novices lose money. You have avoided it by waiting for the price to pull back. You now know the direction, support and resistance of the market. Now trade in the direction of the market.
You can also let the news come out, let the volatility identify the support and resistance, let the price pull back, let the price bounce again and cross the horizontal line that you had drawn. That’s too much waiting and requires good patience on your part.
The main focus should be preservation of your capital and only trade if the chances of winning are high. It will keep you out of bad trades. If the market reacts powerfully to the news, only then trade. Otherwise stay out of the trade.
Jun 28 2009
Last week’s
Forex Trading Review
The Dollar managed to stall the recent losses against the Euro but lost more ground against riskier currencies as stock markets tested highs around the world. The break above 10000 on the Nikkei helped most Yen crosses to test fresh year highs. US retail sales were at expectations of 0.5% in May. Also June Consumer Sentiment increased to 69 vs. 68.7 previously. Oil broke above $70 a barrel for the first time this year. The Euro couldn’t muster fresh gains this week as the USD received broad support from its status as reserve currency around the world. Multiple Finance minister have offered there support both for the USD and US bonds in the past week. Industrial Production (April) dropped 1.9% vs. -1.4% previously. The EUR/USD gained 0.33% closing at 1.4016, after opening the week at 1.3970.
The Japanese Yen couldn’t break past 99 Yen but did mange new highs on the AUD/JPY and GBP/JPY as the carry trade roared back on commodity gains. Final Q1 GDP was upgraded to -3.8%. The GBP rebounded well after Political concerns faded. EUR/GBP traded at fresh year lows. Manufacturing Production gained 0.2% vs. -0.1% forecast.GBP/USD gained 2.82% closing at 1.6442 after opening at 1.5978. The AUD surged ahead as Unemployment numbers of -1.7K beat forecasts of -30k and commodities rallied. Consumer Confidence surged the most in 22 years up 12.7%. The AUD/USD closed up 2.36% at 0.8122 after opening at 0.7930.
The Forex Currency Trading week preview
In the States; on Monday, TIC Flows (April) previously at 23.2BN. On Tuesday, PPI (May) forecast at 0.6% m/m. Also released, May Housing starts are forecast at 485K whilst building permits (May) is forecast at 500K. May Industrial Production is forecast at -0.9% vs. -0.5% previously. On Wednesday CPI (May) are forecast at -0.9% vs. -0.7%. On Thursday, weekly Jobless Claims are forecast at 610K vs. 601K previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; On Tuesday, German Zew Survey forecast at 35 vs. 31 previously. On Wednesday, Trade Balance is forecast at -1.5Bn in April. On Friday, German PPI (May) is forecast flat vs. -1.4% previously m/m. In the UK; On Tuesday, CPI (May) is forecast at 2.0% y/y vs. 2.3% previously. On Wednesday, BOE minutes released along with ILO Unemployment Rate (April) forecast at 7.35 vs. 7.1% previously. On Thursday, Retail Sales (May) forecast at 0.3% vs. 0.95 previously. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Tuesday, BOJ meet and are forecast to hold at 0.1%.On Friday, BOJ minutes form the meeting released. We will provide our previews and reviews of these data releases in the daily summary.
In Australia; RBA minutes on Tuesday the highlight. We will provide our previews and reviews of these data releases in the daily summary.
Euro – 1.3970
Initial support at 1.3793 (May 28 low) followed by 1.3728 (May 21 low). Initial resistance is now located at 1.4178 (Jun 11 high) followed by 1.4267 (Jun 5 high)
Yen – 98.15
Initial support is located at 97.09 (Jun 5 low) followed by 96.52 (Jun 2 low). Initial resistance is now at 98.89 (May 7 high) followed by 99.74 (April 13 high).
Pound – 1.6380
Initial support at 1.6242 (Jun 10 low) followed by 1.6041 (Nov 6 low). Initial resistance is now at 1.6662 (Jun 3 high) followed by 1.6739 (61.8% retrace).
Australian Dollar – 0.8075
Initial support at 0.7968 (Jun 8 low) followed by the 0.7828 (Jun 10 low). Initial resistance is now at 0.8263 (Jun 3 high) followed by 0.8378 (Sept 26 high).
Gold – 937
Initial support at 936 (May 21 low) followed by 925 (May 20 low). Initial resistance is now at 965 (Jun 5 high) followed by 983 (June 3 high).
Forex Currency Trading involves substantial risk of loss, and may not be suitable for everyone.
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Jun 28 2009
Get free
forex signals. There are a lot of news events in the forex world. These news releases often disrupt the short term forex markets. Quarterly reports carry more weight than the monthly and weekly news. There are many strategies for news trading.
Forex news can be highly profitable but at the same time risky. Sometimes the results of fundamental economic announcements are surprising. The news may shock the markets for a while. For example, the release of the NFP figures has been moving the EUR/USD pair on average 100 pips for the last two years. About half of these pips occur just within two minutes of the release of the NFP figures on 8:30 AM EST Friday.
Get good
forex training. Consider this worst case scenario. You are a news trader and immediately sell the EUR/USD pair within 2-5 seconds after the release of the NFP figures. However, the EUR/USD has already dropped 30 pips because of the pre news guessers who are anticipating a bad news.
Your forex broker gets thousands of sell orders just like yours almost at the same moment. It will take your broker a few seconds to execute these orders. Meantime, the EUR/USD pair falls another 15 pips while you wait for your order to be executed.
Because the volatility is so extreme to the downside as no traders are placing the buy orders, the broker widens the pips from 3 to 12. The moment your order hits the market, you are already -12 pips but you are also 45 pips away from where you thought the market would be.
Suddenly the EUR/USD pair starts to pull back. But you have already pulled your trigger and now you are at a loss of 55 pips. You exit your trade to cut your losses. You are angry. You want to blame the broker. But you can’t blame the broker.
You should read the agreement with the broker that you had to sign when you opened your trading account. There will be a clause in it that says that the broker does not guarantee order execution at times of high volatility.
Do news traders always end up like this? Not always. But most can and do end up behaving this way quite often. This usually depends on the importance or surprise results of the economic announcement.
So you need to develop a survival strategy. Do all that not to lose money. This survival strategy calls for the preservation of your capital at all cost while at the same time giving you maximum pips if you really want to trade the news.
Your priority is not to make as much money as possible. It is to reduce your risk by patiently waiting for conservative repeatable setups. News trading puts a trader’s patience to test and your objective should be to use the undue volatility to identify the important levels of support and resistance.
Jun 28 2009
Learn
forex scalping.Currency markets react violently to the release of fundamental economic news like the release of the NFP figures, the housing sales figures, the GDP figures or other socioeconomic and political news. Volatility is what makes currency markets so attractive to so many traders.
Develop your own
forex trading system.One of the popular methods of trading currencies is to trade news releases. This type of trading strategy is intriguing to many traders as it provides the possibility of instant gratification. You lay on the trade minutes before the news release. Your heart pumps when the clock ticks within 60 seconds of the number coming out.
Get good
forex training.When the news does come out, either you feel an instant sense of elation, a trading high that you had the right instincts or an instant sense of frustration when the market behaves in a totally unpredictable fashion. News trading is great for those traders who like a lot of action within a short period of time.
When an economic number deviates significantly from the consensus forecast, there is usually a knee jerk reaction in the markets accompanied by a decent follow through. This is the basis of news trading. News trading if done incorrectly can lead to more losers than winners. So you have to be careful. There are many ways to trade the news.
Attempting to capture the volatility in the currency markets created by a news release is what trading the news means. This volatility in the currency prices creates the breakout trade as the price action smashes through the support or resistance. You must note that a news trade is not a trade that is placed just before the news is released or is placed just after the news is released.
Many traders follow the adage, “Buy the rumor and sell on the news”. Many traders trade the news. You must know news trading is a risky business. There are several forms of risks unique to news trading. You should understand the risks involved in news trading. [spin]
[spin]Many brokers charge more for a trade just after news is released. The spread charged by the brokers may jump to 15 pips from 3-4 pips right after the release of the NFP Figures.
Most brokers find it difficult to enter your order just right after a news release as they are flooded by thousands of orders in just a few seconds. This means that your order may take longer to process and your trade could be entered many pips away from where you had wanted.
The stop order placed by you needs to be touched by the price before it’s triggered. However, sometimes after the release of fundamental news, the markets can become highly volatile and jump several pips all of a sudden.
For example on the EUR/USD currency pair, all of a sudden on the release of the news the price may suddenly jump from 1.3249 to 1.3255. Suppose you had the stop loss order placed at 1.3250. The price jumped from 1.3249 to 1.325 without ever touching 1.3250 price levels.
Your stop loss order was not triggered. The price never touched 1.3250. You did not get stopped out. You are still in the market. You are exposed to potentially unlimited losses.
Jun 27 2009
Forex traders base their trading decisions on either technical indicators on their charts or on the trends in economy. Therefore there are two major way to analyze the currency movement: technical analysis and fundamental analysis.Below are my thoughts and my
currency trading tips.
You may wonder which approach of market analysis to take. It is really up to your personality. There are many traders who trade only using technical indicators and think that making decisions based on fundamental factors is not profitable. However there are other traders who may think the opposite way.
Forex traders who use the technical analysis will argue that only chart patterns and indicators will give you the reliable signals by showing you the charts. However those traders who use fundamental analysis can show you how the economic news releases move the price. By knowing the certain fundamental parameters you can predict which way the price will go.
It may seem that fundamental analysis is more reliable. But the technical indicators and chart patterns also give you reliable signals if you learn how to recognize them. Technical analysis is especially valuable when there is no fundamental factors currently influencing the market.
If you use only technical analysis by identifying the technical patterns and not paying attention to the fundamental factors, then any major economic event can move a currency pair against your position. There are indeed some regular economic news releases that can move a currency pair up to 100 pips in a matter of few seconds.That's the reason why you need to
learn Forex trading.
Fundamental news releases not only move the currency pair for very short period of time, very often that strong movement will set the price movement direction for much longer time. Therefore following the local and worldwide economic and political news is the way to predict the currency price movement. However the technical analysis give you the exact points to take profitable trades.
Price movement is never a straight line. Price will go up and down. It's true that economic factors are behind those movements. But technical analysis can also predict how long the movement of the price due to a fundamental news can last and pinpoint the exact entry and exit points.
That's the reason why most successful traders pay attention to technical analysis as well as to fundamental one. It is always best to have a balanced approach. Nowadays a lot more traders use only technical analysis. If you one of them at least know the schedule of the major news releases to adjust your trades properly.
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