Nov 17 2010
If there is a common theme among traders in all asset types, it is the anticipatory nature of their trading. From IBM stocks to organic cotton futures, investors universally buy ahead of whatever they believe is going to play out, not what has previously occurred and is printed on the tape today, last week or las month. With possibly the lone exception of purely
elliott wave technical traders, who buy and sell based mostly on signals produced by a dizzying range of price- and momentum-based theories, this type of tendency results in the development in question – what ever it may be – being at the bare minimum partially priced just before it truly comes to pass. There may be few constants in the stock market, but “buy on the rumor, sell on the fact” is one of them – being a bit predictive and contrarian in your decisionbar belief is one of the foundations of a prosperous fundamental trading strategy.
So with this in mind, we’ve been eyeing the U.S. greenback with renewed interest. It has been shunned for the bulk of this year, particularly throughout September and October, and has lost ground against practically all main developed-nation currencies. It has given up ground even much more against commodity-rich under-developed ones. Yet with the Republican victory in the midterm elections and the Fed’s notorious QE2 session of quantitative easing (in the form of $600 billion newly-printed dollars), the greenback has stayed up reasonably well. This suggests two details; QE2 has previously been priced, and in simple fact was becoming priced throughout the October timeframe as the trading markets speculated precisely how big it would be. Second, the markets are probably to start searching previous QE2 in short order see a chorus of international criticism in opposition to QE2, but we question any considerable downward movement in the dollar.
Be aware that our long-term worries regarding the greenback continue to be – the Fed’s
decisionbar willingness to develop “a small” inflation runs the danger of permanently debasing the globe’s reserve currency against nearly every single important resource-rich, exporting nation in the world, except China, who refuses to let its Yuan readjust to where it is supposed to be. But we see a great trade shaping up here in which we capture a greenback rebound that coincides with continued economic advancement heading into 2011. The big 64 thousand dollar question: against which currency will the dollar increase the most?
From our viewpoint, the easy answer is the euro. Assuming the market place has indeed accounted for all the bad news relative to the greenback and it will react properly to improving economic information, Europe’s complications are possible to return to center stage. The problems highlighted by Greece last summer have not corrected, they were simply overshadowed; it has been fundamental Euro-zone strength that pushed the euro from $1.26 in late August to $1.39 this week, but instead the greenback's weakness. In the mean time, Germany has categorically refused to even discuss more bailouts though the budgetary complications in Portugal, Spain, Ireland and Italy stay very severe. It looks unlikely that the ECB can move on interest rates until finally at minimum the 2nd half of 2011, and if the downward pressure on the dollar subsides, the euro should be vulnerable to a multi-cent decline with respect to the greenback.
From an ETF standpoint there are two approaches to take advantage of this idea. The first would be to basically short the shares of a basic long-euro ETF. However, shorting stock is not for everyone, so one more possibility would be to use a leveraged futures ETF to achieve a similar outcome to a larger degree.
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Jul 30 2010
Foreign exchange ("Forex") trading is a complicated business. The foreign exchange trader should take into consideration what may be called the basic factors of a country's economy (i.e. the qualitative factors that may have a bearing on its currency's exchange rate). So, what are these "fundamental" aspects? They contain political developments (like alterations to a country's government's economic policy) and appropriate resolutions performed by a country's central bank. They also include any relevant pieces of economic news affecting the country in question. The
Forex trader needs to not just be aware of this information at an early stage, but to effectively "second guess" how the money markets will react to it. It would probably be unwise for traders to ignore such fundamental elements and to just ground their market decisions on technical analyses.
Approximately three trillion dollars is traded each day on the foreign exchange market, creating it the world's most efficient market. FX trading is vastly different to stock trading. For example, in the Forex market, currencies are "paired" in that when one is bought, the other is sold, and vice versa. As such, investors may find FX trading to be a beneficial means of diversifying their investment portfolios.
A number of factors make the Forex market unique (in addition to its liquidity, mentioned above). These include the thing that the market operates 24 hours a day, 6 days per week, and that traders in the market usually make low profit margins (in collation to other markets).
The Forex market has altered quite dramatically since participation was started in the 1970's; now, it is not only the banks, but a row of investors that routinely take part in the market. If you do select to operate in this market, you would be well advised to enter in a reputable course to get to know the nitty gritty of the complexed world of currency
trading, find out about the various ways that this could be done and to consistently apply Forex trading strategies that function.
The essential aspects that a Forex trader should consider when performing a fundamental analysis of a country's economy include that country's GDP, employment rate, trade balance and most recent budget. Much of this information is publicly accessible online.
The results of a fundamental analysis could affect a trader's course of action in a plenty of ways. For example, a trader may employ fundamental analysis to determine or foresee the direction and extent to which a given country's official interest rate can change. Based on this analysis, the trader may trade the country's currency if he/she predicts interest rates will cease, or purchase the country's
currency if he/she foresees interest rates will rise. Indeed, big investors may take this matter a step further by searching for efficiently influence the value of a country's currency. For instance, these investors could fund industrial growth in a country and subsequently sell back that country's currency at a higher rate.
Jul 29 2010
The trading means we are going to pay attention to in this article is all about Forex trading made simple - the way is simple to realize, simple to use and can make triple digit gains in around 30 minutes a day. In spite of its easiness, the pro traders employ it, novices though ignore this marvelous trading method but don't make that bother you, the majority of novice traders lose cash.
The greatest error you may make in
Forex trading is to suppose you can foresee Forex prices beforehand. Prediction is just translated in Forex trading as, believing nor guessing and if you attempt to do it, be ready to lose your money. The old statement goes - " A trend in motion is more likely to continue than reverse" and its true!
The method to earn money in Forex is to sell the reality of cost change and trade trends as they get in motion - You don't foresee anything, you simply let the market tell you when to trade.
Most traders have no idea but they all begin the same way by ceasing resistance and making a new chart furthermore, as the trend progresses, breakouts continue. So if you wish to get in on these big trends, simply purchase breakouts to new chart highs on a
Forex chart.
You do miss the real turn as this happens and that's why novice traders don't use this method but at the end of the day, no one is able to predict the trend change beforehand so why bother? Simply, focus on what could be ahead of you in terms of profit, more than focus on the little bit of the move you have missed.
When you utilize a breakout trading means, be selective in the breakouts you select to trade. In general terms the more tests of a range before the break the better the odds.
When the break occurs - accomplish your trading sign and place your stop below the resistance level that has broken which will not function as maintenance. You can use simple charts and see and trade breaks but a great idea is to add a few verifying momentum oscillators to verify cost change is accelerating as the break occurs, because this enlarges the odds of success even more.
Many of the world's major traders use breakout
trading way and you have to, because it is easy to learn, easy to do and the greatest, it may make you huge benefits in about 30 minutes each day. Breakout trading is Forex trading done simple and every person can do it so try it for yourself and see.
Jul 13 2009
Forex trading - feel the market.
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When most people think of Forex Market, what comes to mind is usually basic information that's not particularly interesting or beneficial. But there's a lot more to Forex Market than just the basics.
Now that we've covered those aspects of Forex Market, let's turn to some of the other factors that need to be considered.
Trading the Forex market has become very popular in the last years. Why is it that traders around the world see the Forex market as an investment opportunity? We will try to answer this question in this article. Also we will discuss come differences between the Forex market, the stocks market and the futures market.
Some of the benefits of trading the Forex market are:
Superior liquidity.
Liquidity is what really makes the Forex market different from other markets. The Forex market is by far the most liquid financial market in the world with nearly 2 trillion dollars traded everyday. This ensures price stability and better trade execution. Allowing traders to open and close transactions with ease. Also such a tremendous volume makes it hard to manipulate the market in an extended manner.
24hr Market.
This one is also one of the greatest advantages of trading Forex. It is an around the click market, the market opens on Sunday at 3:00 pm EST when New Zealand begins operations, and closes on Friday at 5:00 pm EST when San Francisco terminates operations. There are transactions in practically every time zone, allowing active traders to choose at what time to trade.
Leverage trading.
Trading the Forex Market offers a greater buying power than many other markets. Some Forex brokers offer leverage up to 400:1, allowing traders to have only 0.25% in margin of the total investment. For instance, a trader using 100:1 means that to have a US$100,000 position, only US$1,000 are needed on margin to be able to open that position.
Low Transaction costs.
Almost all brokers offer commission free trading. The only cost traders incur in any transaction is the spread (difference between the buy and sell price of each currency pair). This spread could be as low as 1 pip (the minimum increment in any currency pair) in some pairs.
Low minimum investment.
The Forex market requires less capital to start trading than any other markets. The initial investment could go as low as $300 USD, depending on leverage offered by the broker. This is a great advantage since Forex traders are able to keep their risk investment to the lowest level.
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Specialized trading.
The liquidity of the market allows us to focus on just a few instruments (or currency pairs) as our main investments (85% of all trading transactions are made on the seven major currencies). Allowing us to monitor, and at the end get to know each instrument better.
Trading from anywhere.
If you do a lot of traveling, you can trade from anywhere in the world just having an internet connection.
Some of the most important differences between the Forex market and other markets are explained below.
Forex market vs. Equity markets
Liquidity
FX market: Near two trillion dollars of daily volume.
Equity market: Around 200 billion on a daily basis.
Trading hours
FX market: 24hr market, 5.5 days a week.
Equity market: Monday through Friday from 8:30 EST to 5:00 EST.
Profit potential
FX market: In both, rising and falling markets.
Equity market: Most traders/investor profit only from rising markets.
Transaction costs
FX market: Commission free and tight spreads.
Equity market: High Commissions and transaction fees.
Buying power
FX market: Leverage up to 400:1.
Equity market: Leverage from 2:1 to 4:1.
Specialization
FX market: most volume (85%) is made on major currencies (USD, EUR, JPY, GBP, CHF, CAD and AUD.)
Equity market: More than 40,000 stocks to choose from.
Forex market vs. Futures market
Liquidity
FX Market: Near two trillion dollars of daily volume.
Futures market: Around 400 billion dollars on a daily basis.
Transaction costs
FX market: Commission free and tight spreads.
Futures market: High commissions fees.
Margin
FX market: Fixed rate of margin on every position.
Futures market: Different levels of margin on overnight positions than day time positions.
Trade execution
FX market: Instantaneous execution.
Futures market: Inconsistent execution.
All this makes the Forex market very attractive to investors and traders. But I need to make something clear, although the benefits of trading the Forex market are notorious; it is still difficult to make a successful career trading the Forex market. It requires a lot of education, discipline, commitment and patience, as any other market.
When word gets around about your command of Forex Market facts, others who need to know about Forex Market will start to actively seek you out.
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Jul 2 2009
Money management and risk management in
forex trading.
The risk management and money management skill is an essential part of forex traders whom want to be successful in money making. When we talk about money making, we don’t mean a quick rich method, we are referring to a consistence monthly income.
One of the most important thing a successful trader do is systematically plans his Money and Risk Management to avoid margin call ( The process of The broker cancelled your trade when the trade is against you and your money value drop to the preset number ). Money management is all about how the traders systematically decide their accepted risk level and how many lots ( volumes ) to trade in a single trade.
The risk level should be measured based on how many % percent of the account you will lose if the open trade is closed. In general, it should be set not more than 3% of the account size regardless of your used margin and available margin value.
How to plan the trading lot size?
For example, your trading account is $20,000. The stop loss should be triggered to 3%. Therefore $20,000 X 3% = $600. Let say the stop loss is decided at 30 pips, the pips value is $10. The number of lots to place should be calculated as follow:-
$600 / 30 pips / $10 = 2 lots
You trade 2 lots with the stop loss set at 30 pips.
If traders trade without money management, they are in fact gambling. They are not looking at long term return, instead only hoping for hitting the “jackpot”. Money management rules will make us very profitable in the long run. If we know how to control your losses, we will have a chance at being profitable.
Ready to make some pips from the Forex market? Wait ! Before you go too far, remember It is very important that you define how much you are willing to lose on each trade. A good trader always thinks about what they could potentially lose BEFORE thinking about how much they can win.
Do not forget the Trading rules that we had discussed before in our
forex education site.
1. Make sure you use only the money that you can afford to. Be sure that you can afford to lose all of them without having affect your daily life. - Forex trading rule 1. If you can not afford to lose this sum of money, you should not trade forex. This is the 1st and most important trading rule.
2. Never put emotional feeling in the game. Do not take revenge on the market in the event that you have make a lost. If your emotions rule you, you will never able to be a successful trader.
3. Keep discipline in mind. If you have a bad trade that day, you cut your loses and keep moving forward by following your trading plan. Lack of discipline is the biggest reason that trader don't find success.
4. Make full use of all your charts. You should read all your yearly, monthly and weekly charts to help identify the support and resistance line. We will cover it the later chapter, move on..
5. Keep your trading system simple. The more complicated a trading system is, the harder it is to trade with. Simple trading rule will helps you make better trading decision.
6. Test out the demo version. Go live only when you acquire enough skill.
7. Good trading is all about knowledge, do not rely too much on news. Technical chart indicator gives you simple way to process data into useful information.
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