Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it? This report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in forex trading. (PRWEB) December 18, 2005 -- Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it? This report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in forex trading.
Trade pairs, not currencies – Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.
Knowledge is Power – When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
Unambitious trading – Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
Over-cautious trading – Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don’t place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
Independence – If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:
Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period); Seek advice from too many sources – multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome – by yourself, for yourself.
Tiny margins – Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.
No strategy – The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
Trading Off-Peak Hours – Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple – don’t.
The only way is up/down – When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That’s it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.
Trade on the news – Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.
Exiting Trades – If you place a trade and it’s not working out for you, get out. Don’t compound your mistake by staying in and hoping for a reversal. If you’re in a winning trade, don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get used to it.
Don’t trade too short-term – If you are aiming to make less than 20 points profit, don’t undertake the trade. The spread you are trading on will make the odds against you far too high.
Don’t be smart – The most successful traders I know keep their trading simple. They don’t analyse all day or research historical trends and track web logs and their results are excellent.
Tops and Bottoms – There are no real “bargains” in trading foreign exchange. Trade in the direction the price is going in and you’re results will be almost guaranteed to improve.
Ignoring the technicals– Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.
Emotional Trading – Without that all-important strategy, you’re trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don’t tend to make the wisest decisions. Don’t let your emotions sway you.
Foreign exchange transactions that are settled immediately are said to occur in the spot market, while transactions to be settled at a future date occur in either the forward or the futures market.
These markets are summarized below:
1. Spot Market:
This is the market for currencies for immediate delivery. The price of foreign exchange in the spot market is referred to as the spot exchange rate or simply the spot rate.
The spot FX market is unique to any other market in the world, as trading is available 24 hours a day.
Somewhere around the world, a financial center is open for business, where banks and other institutions exchange currencies, every hour of the day and night with generally only minor gaps on the weekend.
Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their very own trading time.
This market is for the exchange of foreign currencies at a future date. A forward contract usually represents a contract between a large money center bank and a well-known (to the bank) customer having a well-defined need to hedge exposure to fluctuations in exchange rates.
Although forward contracts usually call for the exchange to occur in either 30, 90 or 180 days, the contract can be customized to call for the exchange of any desired quantity of currency at any future date acceptable to both parties to the contract.
The price of foreign currency for future delivery is typically referred to as a forward exchange rate or simply a forward rate.
3. Futures Market:
Although the futures market trading is similar to forward market trading in that all transactions are to be settled at a future date, futures markets are actual physical locations where anonymous participants trade standard quantities of foreign currency (e.g., 200,000 EURO per contract) for delivery at standard future dates (e.g., March, June, September, and December).
Up until recently, only banks, hedge funds, and other large institutions have had access to currency trading in the spot market.
With an approximate volume of $2 trillion traded on a daily basis internationally, the individual trader looks for an opportunity to take advantage of the most liquid market in the world.
Day-traders are no longer confined to trading stocks and commodities, and now have the ability to trade all of the major currencies, including US Dollar, Yen, Euro, British Pound, Australian and Canadian Dollars, Swiss Frank and etc, 24 hours a day.
There is considerable exposure to risk in any Forex (FX) transaction.
Before deciding to participate in FX trading, you should carefully consider your objectives, level of experience and risk appetite ...
Forex or Fx means Foreign Exchange. Forex trading is an excellent opportunity for investors to make money. Forex trading means buying or exchanging one currency with one another. Most important players here are Banks, Governments, Currency speculators, and other institutions.
Forex Trading, Why Forex.
Forex is the most important factor for any country. Forex reserve determines the status of the country. Forex or FX is the most important asset today. It is one of the greatest opportunity to make money. Forex Trading means trading in the currencies. In the FX market one currency is traded or exchanged with another currency. One of the Unique factors of the forex market is the volume of the trade that happens in the forex market. According to the latest estimates morethan 4 trillion US dollar per day.
Unique factors of Forex (FX) Trading
Volume of the trading that happens in the market.
The liquidity factor. Currency determines the liquidity.
Trading hours. The market is open for 24 hours a day.
High Leverage Margin
Low margin of profit compared to other investments and trading. But the return on investment increases on the volume of the trading.
There are many advantages of Forex trading. FX Trading gives you the greatest return on your investment.One of the greatest advantage of Forex trading is its high leverage margin. It allows you to trade hundred times more the amount you invest. It allows you to make an investment decision any time because the market is open 24 hours a day.
Forex market gets affected by various factors. Political, Economical and market factors. Learn forex trading because it gives you a great opportunity to make money. Learn the factors control this factor. Learn how to make money. Learn advantages and disadvantages of the FX trading.
Most aspiring traders may have heard about forex trading. For those that are unfamiliar with this market, here is a simple definition of what Forex is. Forex basically refers to the Foreign Exchange market. Veterans in this market have givin’ the market several names over time, some include “FX”, “Spot FX” or “Retail Forex”. Whatever you want to call it, you should know that it is the biggest financial market in the entire world. With volume trades nearing $5 trillion dollars a day. Compared to other popular American markets such as the NYSE (New York Stock Exchange) this equates to nearly 40x larger. Its no surprise that Forex trading has huge a following of aspiring traders!
Forex (Foreign Exchange) trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders. However, recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.
The currencies of the world are on a floating exchange rate, and they are always traded in pairs Euro/Dollar, Dollar/Yen, etc. About 85 percent of all daily transactions involve trading of the major currencies.
Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. This is how they look in the trading market: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. As a note you should know that no dividends are paid on currencies.
If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to stay in it. In case everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it.
Transactions on the forex market are performed by dealers at major banks or forex brokerage companies. forex is a necessary part of the world wide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts.
Therefore, it is reasonable for you to believe that the forex market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.
Price movements on the forex market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the forex market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.
The fact is that the forex market never stops; even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market, FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.
When you compare them, you will see that the currency futures marketis only one per cent as big. Unlike the futures and stock markets, trading currencies is not centred on an exchange. Trading moves from major banking centres of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game.
In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements.
Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market’s fantastic liquidity and strong trending nature of many of the world’s primary currency exchange rates.
Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.
“The forex trading market will be doubled in just three years. This is all due to active participation of the fund managers and pension funds, says research by David Kurtz, published in Financial Times on October 9, 2006.”
“According to studies, 95% of the learned burn their money in the market as against the 5% cream of the crop, who enjoy magnificent currency trading success”
Do you want a consistent source of income? Do you want to work from home and still earn enormous amounts? Have you tried forex trading but have seen your investments plummet always? Despite your innumerous effort, you are not able to make substantial profits. What if you get the key to earn profit month after month? How about making your neighbors jealous of your new luxury car? How would it feel working by poolside in a big house, and a vacation every month? What would be life like if you could spend ample number of hours with your sweet little kid? Sounds like a dream, isn’t it?
There is no place in the world like Forex trading market to accomplish success in spawning oodles of money. The Foreign Exchange trading, popularly known as Forex, deals with purchase and sell of foreign currencies and thus, holds unleashed potential equivalent to share trading.
How does it Work
Forex trading is driven by the fluctuating forces existing in the currency market. These forces are capable of playing with the prices of currencies from different countries. Thus, there is a constant revision of the worth possessed by each currency.
Investment in Forex trading is made by converting one currency into another during its deceased value phase on the run.
When the prices of new currency climb new heights, the investor has the options to convert it back to the original form or alter it into other another currency.
Thus, keeping in mind the fact that nothing remains constant in this universe, one can expect to earn high yields on Forex trading investments. The prospective investors in this market must learn existing trends in Forex trading before making serious investments.
The importance of Forex signals could not be overlooked, as these signals escort the most apposite entry and exit points to the market. If you, as an investor in forex trading market, are able to find best trading signal provider, you automatically become eligible to earn huge profits. Forex trading is most enchanting investment options, only if you are able to access right set of tools like trading signals. These signals mark the probability of success as well as failure for every investment in forex trading.
What Is Importance Of Forex Signals
Forex signals are the basic entities, which are capable of letting your investments to flourish in right direction. Here are few ways, by which forex signals provide help to the investors:
With every passing day, hundreds and thousands of Internet users are born. So, what are their intentions? Amongst others, one of the most tempting motives is to participate in online trading. The latest trends of online trading have made life easier for traders by providing them with the latest updates, precise information, and above all, the advantage to trade from their comfy seats.
Investments- The Synonyms For Risks
If you are impressed by the idea of online trading, from the beginning of this article, here is something more important than what you have heard till now. While switching from offline trading to online trading, an important aspect has firmly held its position. We are talking about risk factor involved in any type of investment and here are some expert advices to tackle it:
Forex trading or foreign exchange currency trading involves selling one currency to buy another. Some of the most commonly traded currency pairs are USD-CHF (US Dollar / Swiss Franc), EUR-USD (Euro / US Dollar), USD-JPY (US Dollar / Japan Yen), and GBP-USD (British Pound / US Dollar).
The main Trading centers of the forex currency trade are New York, London, Frankfurt, Tokyo, and Sydney. They are located in different time zones due to which the forex trade functions 24 hours a day.
There is no central exchange or location where the trading is conducted, and most trades are executed between two interested parties who use the phone or other electronic means to communicate.
The main market for forex currency trading is the inter-bank market, in which banks, insurance companies, corporations and other large institutions trade to manage the risks associated with fluctuations in foreign exchange
The forex market is by far the safest trading market in the world. There are no corporate board rooms, CEO's, company directors or any one else that can take sensitive corporate information and pass it on to someone who could take part in Insider Trading. There is no way for that to happen in the Forex Markets. Individual forex traders can trade in the over-the-counter (OTC) market, which does not have any exchange or clearing house, and has limited regulation. Individuals can also trade in forex futures and options at a regulated exchange like the Chicago Mercantile Exchange.
,b>Currency traders are no longer the preserve of large institutions. Anyone can learn how to trade forex, and do it from anywhere. Individuals can trade in the forex market from their homes by means of a high speed Internet connection.
To be successful, it is essential to have access to up to date information about the latest changes and trends in the forex market. You can sign up to get a forex trade signal via e-mail, SMS, or through software installed on your desktop.
These Forex signals will suggest buying and selling points, along with price targets, and stop-loss levels. You can plan your trades accordingly, and can even arrange to have trades automatically executed in your account by means of trading software.
Currency trading can be a highly lucrative business but it also involves a lot of risk. It is best to seek the advice of an independent financial advisor before you get into it. Don’t trade forex with money that you cannot afford to lose. It is best to practice trading by opening a free demo account before you start investing your own money.
Do you trade forex? Do you consider trading forex? Do you consider learning how to trade forex? Don’t do it. I like the profit opportunities that currency trading carries. I like also the risks involved, it wouldn’t be fun otherwise. But I don’t like the idea to trade myself. Where is why:
1. Trading forex is work
If you want to make your money work for you, trading forex is not an option. You will have to work for your money. Day trading may look exciting for someone who never tried it, but once the initial excitement is gone you’ll realize it’s just a computer based work like any other.
2. Trading forex is too risky
This sounds paradoxical from the keyboard of a high risk investor but I really think forex is too risky. There are thousands of websites offering forex trading strategies. Have you heard for any super-successful one? Sure, some make it for a while, but no strategy guarantees long term success. This is because forex is unpredictable. There is too much probability and too much volatility in it. That’s why you are unlikely to see serious hedge fund to invest in forex ever.
3. Trading forex does not add wealth to the world
If you want to make money, you need to create wealth. What exactly is the wealth that a forex trader creates? What is the value he adds to the world? I can’t think of any.
Forex trading is a zero-sum game. If you make money, this is because someone else is losing it. If the intellectual energy put into currency speculation was put into something else, this could make the world a better place.
4. You don’t grow
I am sure many professional forex traders will be mad to hear this, but seriously, how exactly does day trading helps your personal or professional development? Sure, you’ll learn some strategies, maybe build some self-discipline and… what else?
5. You need money to make money
Let’s imagine after few years of investing your time, money and hard work you finally become a highly successful forex trader who achieves consistent 5% monthly ROI. This is quite unlikely considering that probably 95% of the new forex traders fail miserably, but I know you are smart, so let’s hope it will happen.
Since forex trading is work, like explained in point 1, you will probably do it all the day and will rely entirely on it for your income. So if you want to earn $5,000 monthly you’ll need $100,000 startup capital. Uh.
6. Trading forex is addictive
Just like gambling, day trading is highly addictive activity. Each small success leads you to believe that you can do better and better trades. Each bad trade forces you to trade more so you can make up for the loss.
Gamblers and forex traders often sell or bet their homes to feed their passion and hopes. If you lack self discipline, forex trading is one of the worst professions you could ever take.
7. Day trading is stressful
Do you really want to watch the computer screen all the day, to worry about your open positions when you go out for lunch and to wake up in the night because an important even happens on the other side of the globe and you can not miss the currency fluctuations produced by it? Think seriously about this because this is what the life of a professional forex trader is.
If you dream about lifestyle of freedom and leisure and are picturing yourself with a laptop on the beach, trading forex is most probably not for you. It’s an activity for people who like to live in stress and risk.
8. The forex trading knowledge is useless in other professions
Seriously, do you think the years you spend in studying forex can be useful if one day you decide to do something else? It won’t help you even for similar activity like stock trading because the systems and strategies are completely different.
In most professions whatever you learn during your experience can be extremely useful if you switch to a related (and sometimes totally unrelated) field. This is not the case with forex trading knowledge and experience.
9. There is too much fraud
Not all Forex brokers are as honest as we would like. Every professional trader has heard about big Forex brokers scamming away. See for example how several brokers were shut down in 2007.
When trading Forex you don’t have full control over your money. A dishonest broker can close down and run away or just deny you to withdraw your money.
10. You can have others trade for you at almost no costs
Why trade forex yourself, when you can get professionals trade your money? The managed forex accounts give you access to expert’s knowledge for a share of the profits. You don’t have to pay anything upfront. Isn’t that cool?
Yes, most managed forex account suck in performance and that is because of the reasons given in points 2, 6 and 7. Chances are if you trade yourself you’ll also achieve the same pathetic results but will lose not only money, but time and intellectual power too. Besides that, some managed trading accounts do well and actually make money.
Regardless of anything, I think forex investing is something to be considered. But if you plan to trade yourself, you must be very sure that you want it. The life of the forex trader is not romantic or carefree. At least this is not the life of most forex traders.
Forex Trading Robot Software That Works
Anyone who has ever dabbled in forex trading knows just how risky it can be. Looking over stats, weighing the market, and trying to predict the winning foreign exchanges is a serious time consuming challenge. The money is there and the forex trading market can be very lucrative for those with experience and the right evaluation system. Developing a successful system for evaluating trades can take a lot of time and cost you a lot of money in the beginning. Simply put, the learning curve is a steep one for most investors starting out in this type of financial venture. The good news is, with the advent of the computer and software development, the gap between evaluations of forex trades and choosing a winner has been dramatically reduced.
Forex Trading Just Got Easier And Way More Profitable
Because of the previously mentioned gap between evaluating and choosing, someone got a brilliant idea to develop software that could keep track of the market trends and evaluate the potential profitability of available forex trades. Thus the forex trading robot software was born, or created. This was revolutionary! What a great tool! Everyone that uses this fantastic software application will become rich over night! No, I’m afraid not. Why is that? Mainly because like most new software programs they still needed a lot of work. They were good at a few things, and those things were good things to know, but they failed to give the bigger picture of the forex trading market place. As time has gone by, forex trading robot software has gotten better and better. Forex trading robot software has become smarter and more reliable at evaluating the forex market place. Thus, this is one of the best times to give forex trading a whirl.
Getting Started In Forex Trading
Forex trading is fast becoming a big Internet past time. This is mainly due to the convenience of using the Internet to access forex market information, and the ease of using a home personal computer. A good tool to use for evaluating the forex marketplace and doing the actual trades is a forex trading robot. The one you should look at and consider is FAP Turbo; it is fairly new to the market place, but has steadily been gaining a favorable reputation.
“How to turn $1,000 into $1,000,000 in 24 months”
Some traders using this system have reported amazing streaks of up to 30 winning trades in a row (I’ve included the testimonials below). From a trading system standpoint, that’s pretty amazing.
And depending upon the exit strategy selected, the system generates monthly returns of between 30% and 55%.
Trading Advisor Included
Included (for free) with the 5EMAs Forex Trading System is an Expert Advisor for the MT4 forex trading platform. It doesn’t auto-trade for you, but what it does is to generate audible alerts when trade entry criteria have been (or are about to be) met. You have to do next is to confirm the trade with the rules and principles taught in the course, and then place your trade.
Fig. 2: USDCHF Trade using the 5EMAs Forex Trading System
Once you get an alert, simply confirm the set-up is valid and place your trade.
While auto-trading is great, most of the time manually confirmed trading systems have the advantage of having the human eye gauge the current market sentiment for the final “Go Ahead” on a trade. This is something that a computer program can’t replace, especially if you have trading experience.
How to do Forex Trading (Currency Exchange) Successfully Online
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There are many aspects of forex trading (currency exchange) that make it difficult to achieve success. This article will spell out some of the factors that you'll need to be aware of, and outline specific tools and strategies that have worked well for me, and others.
Online Forex Trading - Do's and Don'ts Any experienced trader in the currency exchange market will tell you that there is one major thing that will limit your success - emotion. If you are trading foreign currencies, you have probably done your homework on statistical analysis and fundamental analysis, but are your emotions in check? I'm sure we've all experienced the sick feeling in our stomachs that occurs when we've sold too early, or held too long. Our emotional tie to our funds can make us do stupid things.
To avoid the heavy losses caused by emotion-induced trading, I suggest using an automated trading system with your foreign exchange portfolio.
Step2
What is an automated forex system? Quite simply, an automated currency trading system for foreign exchange allows you to make decisions before you actually enter the market. Sometimes, you may hear these systems called "expert advisors." With an automated trading system, you decide when to cut your losses, and how long to let your winners run, before you ever invest a dime. This way, you can make logical decisions before you are on the emotional trading roller-coaster.
Putting a system like this in place also makes your forex trading automatic. You no longer have to sit and watch charts and wonder when to pull the trigger.
Forex trading systems consist of software packages that allow you to enter your decision making triggers, then let them go to work for you. Currency exchange trading systems automatically place all of your trades at precisely the right times. You don't have to monitor anything once you've set them up.
Step3
How do I know which Automated Forex Trading System is right for me? There are thousands of currency exchange trading systems out there, each with its pros and cons. The goal of each system is to make money for its users. Of the thousands out there, I've found one that I believe to be very consistent, risk-averse, and brilliantly configured - which I'll recommend in step 5.
In the next step, I'll go over how to set up all of your accounts to get started with forex trading.
Step4
Setting up an Online Forex Account - The first thing you'll need to do is open an online forex trading account. There are hundreds of brokers to choose from. Do a search online, and when you find a few that you like, sign up for a free practice account. This will allow you to test their systems before investing any of you hard earned cash.
A few things to look for when choosing a system:
- Make sure that the brokerage offers the MetaTrader 4 trading platform. This is required by many "expert advisor" systems, including the one I recommend in the next step.
- If you are trading less than $20,000.00, look for a broker that will allow you to trade a small .01 lot size.
Step5
Setting up an automated trading system - Of the thousands of automated forex trading systems out there, I would recommend using Forex Cheetah (Website link available under resources at bottom of page). This system is very well thought out, thorough, and as you can see from their performance charts, quite stable and profitable.
At the time of writing, Forex Cheetah's forex trading system was making it's users about 2.5%-3.5% weekly on average. That's a possibility of over 130% each year! Not too shabby.
Step6
Sit back and watch your account grow. The beauty of the automated forex trading systems is that once it's set up, you literally don't have to do anything! It is 100% automated. You can just sit back, relax, and watch your trading profits soar.
Thursday, January 22, 2009
Day trading the foreign currency (forex, FX or interbank) market is definitely one of the more challenging endeavors an aspiring trader can pursue. The higher degree of leverage (as high as 50:1 or 100:1) available in this market can increase profits, but it equally accelerates losses.
This makes the issue of trade timing and selection that much more critical to success. Because of the lack of volume data in the spot currency market (i.e., there are no Level I or II quotes, or time and sales data), newer traders will find they will need to develop much more disciplined strategies that rely less on broader market dynamics and more on raw price action and individual market “micro structure”.
The Big Ben strategy exemplifies this approach. It is a day-trading technique that takes advantage of the shift from trading from one market center to another in the 24-hour forex trading environment.
The Big Ben strategy Big Ben is a currency-specific trading strategy designed to capture the first directional intraday move that often occurs within the first few hours after the Frankfurt/London market openings, which begin at approximately 1 a.m. ET. The strategy works best with the British pound/U.S. dollar (GBP/USD) rate.
Because this currency rate trades lightly outside of London trading hours, the surge in trading every morning in the U.K. gives it a “œreal” market opening, which the strategy looks to exploit. Figure 1 shows pound/dollar trading is virtually nonexistent during Asian trading hours. When London opens, however, the pound/dollar accounts for nearly one-quarter of all forex trading. Currency rates with more continuous, 24-hour trading will have less of a distinct open/close as they pass through the different money centers.
For example, the dollar/yen rate (USD/JPY), which dominates forex activity during Asian trading hours (78percent of volume), still accounts for 17 percent of trading during Euro pean hours.
The rules The following rules are for short trades, but the strategy can be reversed to trade on the long side. Setup:
The pair makes a new range low at least 25 pips (a pip is the forex equivalent of a tick, or minimum price fluctuation) below the opening price after the early Frankfurt/London trading in the GBP/USD rate begins around 1 a.m. ET.
The pair then reverses and trades 25 pips or more above the opening price.
The pair then reverses once again to trade back below the intraday low established in step 1.
Sell a breakout (at least seven pips) below the London low.
Once filled, place an initial protective stop no more than 40 pips above the entry price.
After the market moves lower by the distance between the entry price and the stop, cover half the position and trail a stop on the remainder.
These simple rules position you to profit from common behavior that can occur in the pound/dollar when the London/European market opens. (Kristian Kerr)
You can do it too! You can use the Internet to start forex trading and build a new source of income for yourself. I have created this website/weblog to help you to achieve that.
I have been working as an internet marketer for so many years. There are different kinds of home businesses that I can recommend but because of so many scam programs and the raising competition, I prefer to recommend you to learn and work on forex or online foreign currency exchange or currency trading.
There are two good reasons for that: 1- You will not be scammed and 2- Competition will have no effect in this business. In fact, foreign currency exchange is the only business that becomes more profitable for everybody if more people work on it. It is amazing, isn't it?
There are a lot of similarities between currency trading and stock trading but currency trading is easier to learn and work.
There is a risk in this business like others but if you learn it properly, you will be profitable. It is like driving. You will hurt yourself and others if you start driving before you learn it properly. And you will enjoy driving if you do it after passing the training stages and enough practice and experience.
Today we are able to sit at our personal computers and trade so many different currencies in the forex market through the internet and without having to go to any bank or money exchange agency or making even a small phone call. Everything can be done through the internet and from home.
Why Is Forex Trading a Suitable Business?
It is easy to learn: There are a lot of good home businesses but they can be hard for most people. For example, blogging is a good home business but it is impossible for 99% of people because they are not writers and they can not write. You can learn forex trading easily. You just need to be serious and organized.
It is a different home business: In other online home jobs, you have to make websites, advertise, sell, refer, recruit, support and ... but in this business you don't have to do any of these things.
It makes a considerable decent income for you: You can make thousands of dollars through forex trading if you learn it properly. Once you learn it, making money will be as easy as 1, 2, 3. Of course let me tell you again that there is a risk. Those who start currency trading without having enough knowledge and experience will lose and give up. It is like any other business. You have to learn it first.
It is safe: Yes, it is safe because you will not be scammed. Once you learn it and choose a well-known and reliable broker company (you need to join a brokerage company to become able to trade currencies), you will have nothing to be worried about.
It is stable: Forex is an international business not just a business opportunity created by a small local company. So it is a stable business. It is not like other businesses that make money for a limited time only and then become slowed down, bankrupt or closed. Currency market is always ready for the traders to trade and make money.
If you are a beginner, you can use the training articles and learn how to trade and make money. If you are already a forex trader, you can take the advantage of my daily reports to trade.
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The US Dollar looks likely to challenge key resistance levels against the Euro, British Pound, Canadian Dollar, and Australian Dollar through upcoming currency trade. Yesterday’s false break lower against the Euro and British Pound proved short-lived, and we maintain our bearish bias on the EUR/USD and GBP/USD.
Despite a false break through yesterday’s trade, the Euro remains in a tight wedge formation against the US Dollar. The falling trendline dating back to early October has thus far held, and the Euro/US dollar pair subsequently sees support at recent monthly lows of 1.2400. Given overall bearish momentum, it seems increasingly likely that the Euro will go on to challenge said support through upcoming trade, and a failure eyes April, 2006 lows of 1.2065. Our short-term bearish bias remains intact absent a Euro/US Dollar breach above resistance at 1.2835.
The US Dollar/Japanese Yen has seemingly broken its wedge formation, and a dip below support at approximately 95.70 suggests that further short-term losses are likely. Next price floors come in at the important 61.8 percent Fibonacci retracement of the 90.90-100.50 move at 94.60, which likewise coincides with an intraday double-bottom from November 12. Previous trendline support has now become resistance, and the USD/JPY has shown difficulty climbing above 96.00. Our very short-term bearish bias remains intact as long as price remains below the pair’s falling trendline at approximately 97.00.
The British Pound/US Dollar pair remains in much the same situation as the Euro/US Dollar, as a false break above its recent trend channel leaves the GBP/USD confined within its month-long downtrend. Trendline resistance remains near the psychologically significant 1.5000 mark, while the pair currently trades near Fibonacci support levels at the 61.8 percent retracement of the 1.4555-1.5250 move at 1.4825. A break below said mark would likely precipitate a move towards subsequent spike-lows of 1.4639.
The US Dollar/Swiss Franc has shown little willingness to slow its ascent, and the pair now trades near 15-month highs at the 1.2213 mark. Said level marks the next plausible price ceiling, and a break higher would target subsequent spike-highs of 1.2314 and 21-month highs of 1.2464. Yet the USD/CHF remains in clearly overbought territory, and every point move higher leaves it at increased risk of a short-term retracement. The psychologically significant 1.2000 mark serves as the nearest price floor on any short-term USD/CHF declines.
The US Dollar/Canadian Dollar uptrend remains intact, and the pair recently cleared important resistance of the 61.8 percent Fibonacci retracement of 1.3015-1.1460 at 1.2420. Said USD/CAD resistance was the major stumbling block in the way of further rallies, and it now seems increasingly likely that the pair will go on to challenge recent multi-year highs of 1.3015. Former resistance now serves as immediate support at the aforementioned 1.2420 mark.
The Australian Dollar/US Dollar currency pair has broken out of its recent wedge formation, and the AUD/USD now eyes a challenge of recent lows near the 0.6000 mark. The break below the AUD/USD wedge formation likewise coincided with a break of the 61.8 percent Fibonacci retracement of the 0.6000-0.7010 move at 0.6390—confirming that a further move towards 0.6000 is likely. Previous support of 0.6390 is now resistance, and there remains little in the way of firm AUD/USD price floors until the aforementioned 0.6000 handle.
Further consolidation in the New Zealand Dollar/US Dollar pair leaves little directional bias for upcoming trade, as the pair trades almost exactly at the middle of its recent price channel. Overall momentum favors further NZD/USD declines, but the lack of conviction in recent price action suggests that the pair may continue to consolidate until further notice. Noteworthy support for the NZD/USD comes in at previous lows of 0.5348, and a recent test below said mark resulted in a reversal at April, 2003 lows of 0.5319. Resistance comes in at weekly highs of 0.5754.
The major currencies whipsawed in the Tuesday session, with the greenback recovering from earlier losses in New York trading. The dollar tumbled to lows against the euro and sterling at 1.2813 and 1.5248, respectively, before recovering by the afternoon session.
US economic reports released earlier in the session continue to confirm the dire conditions facing the economy. The consumer price index dropped by 1% in October, larger than expectations for a 0.8% decline from a flat reading in the previous month, marking its steepest decline on record. The headline annual CPI figure eased to 3.7%, down from 4.9% a year earlier. The core CPI figure also posted a 0.1% decline versus an increase of 0.1% in September and down to 2.2% from 2.5% in the previous year. The record declines in consumer prices again raises fears of deflation and highlights the quandary the FOMC currently finds itself in. Meanwhile, October housing starts posting a 4.5% decline compared with the 6.3% decline in September to 791k units and building permits plunged by 12% to 708k units.
The FOMC minutes from the October meeting revealed that economic developments could “force more rate cuts and review of liquidity facility adequacy”. The Fed said even after the 50-basis point rate cut, downside risks to growth remain and some officials acknowledged deflation risk posing a challenge as a result of the low Fed funds rate. The outlook in the minutes was largely bleak with the expectations for restrained growth in 2009 as a result of persistent credit market strains and housing woes. The FOMC also expects gloomy figures for 2009 with unemployment seen climbing to 7.1-7.6%, and GDP growth ranging from -0.2-1.1%. We anticipate a 50-basis point rate cut by the FOMC when it next meets to deliberate monetary policy on December 16th.
As the global financial crisis continues, there was carnage on the currency markets. The Japanese yen hit a 13-year high against the greenback and climbed 13% against the euro, its biggest weekly advance ever. The US dollar strengthened to multi-year highs against both sterling and the euro as traders abandoned the Europeans in their scramble to safety.
The trading week started quietly enough for eur/usd, with few signs of the bloodbath to come. Monday saw Fed chairman Ben Bernanke back plans for a second US stimulus package whilst testifying to the US House of Representatives and the White House followed up by saying it was open to the idea. The action started heating up on Tuesday. The Fed announced plans to prop up the US money markets with a further $540B. Tuesday trading saw oil fall towards $71 a barrel on fears of a global slowdown and under lined dollar support. Current sentiment is it that the States will weather a global recession far better than Europe. Europe’s situation is exacerbated by the current problems of a number of eastern and central European countries. The euro zone is vulnerable because of its strong investment and trading ties with these regions. Wednesday’s Wall Street plunge kept a downward pressure on the euro. However support held at 1.28. On Thursday, support was pushed down to 1.2750 before the euro recovered somewhat to test 1.30 by the end of US trading. Friday was the big day, of course. Falling Asian markets hastened the on-going flight to safety and the euro took a dive. As trading opened in Europe, euro zone PMIs came in much weaker than expected, confirming fears that the continent had slid into recession meaning that further rate cuts were on the cards. The euro plunged to 1.25. Oil prices had been on the slide all week and OPEC’s emergency meeting on Friday failed to stop the fall. Although the group announced plans to cut supply by 1.5M barrels a day, oil closed a touch above $64 a barrel, some 11% down on the week. The euro closed the week at around 1.26
Chart 1 EUR (hourly)
Sterling got hammered this week with the pain really kicking in on Tuesday evening after the governor of the bank of England, Mervyn King, finally admitted that the UK was in a recession. This came as no surprise to many in the light of the slump in the housing market, rising unemployment and falling consumer demand. Although the bank isn’t giving much away as regards future policy, it is looking increasingly likely the recent synchronized 50 bps cut is only the beginning of a BoE rate cutting cycle. The Sterling sell-off continued through the rest of the week and was given a helping hand when UK retail sales saw consumer spending fall by 0.4% in September. Friday morning’s global market melt-down and a much worse than expected UK GDP saw the pound crash some 1000 pips against the greenback until it recovered somewhat to close a little above 1.59.
The big news this week has to be the Fed’s interest rate announcement on Wednesday and the Fed is expected to cut 50bps to 1.00%. Other key data includes Wednesday’s Durable Goods Orders, Thursday’s GDP and regional manufacturing numbers on Tuesday and Friday. You can keep up to speed with the US housing market with Monday’s New Home Sales and Consumer Confidence is surveyed on Tuesday and Friday. Keep your eye out for Friday’s euro zone CPI data and key German numbers including the business climate on Monday, consumer climate on Tuesday and Retail Sales on Friday. It’s a quiet week in terms of UK data. We can expect the Nationwide House Price survey sometime this week, the CBI’s retail and wholesale numbers on Tuesday and UK consumer confidence on Friday.
The public speaking agenda is reasonably busy this week, see our economic calendar for listings.
Forecast
Last week saw the global economy slip into recession. We expect the dollar to continue to strengthen against the European currencies, however, be on the alert for snap rallies.
Current volatility accounts for this week’s wide ranges. Probably, the best strategy would be to sell on any corrections up and follow the trend down.
If EUR/USD breaks down 1.25, next target is 1.20. The pair will find resistance at 1.30.
If GBP/USD closes below 1.54, next target is 1.50, with resistance at 1.64.
If USD/JPY breaks through support at 90.90, the next target will be 86.
As the credit crunch is hitting hard the banking sector, the U.S. institutions are putting on the table various solutions to avoid a dominos effect. The U.S. dollar, in the mean time, could decline further, albeit some levels of support are emerging.
Rates eventually lower in the U.S., but not for now What a week! In an effort to avoid a dominos effect and trying to give some confidence to the shaky markets, the Federal Reserve and the Treasury department are putting on the financial table the highest cards in their hands. From guarantying a loan of USD 85 billion to AIG, the largest seller of credit fault swaps, to creating a counterpart that would absorb trouble assets from banks balance sheets, the U.S. institutions are making an enormous effort to get things going again. It will not be an easy process tough. So, the Fed announced that it would establish or increase new swap lines with major central banks by U.S. dollars 180 billion and some of the funding will come from various auctions conducted by the Treasury department. In effect, we are living a crucial moment in the long history of the world¡¯s economy. The cyclical turn of interest rates, from the bear market that began in 1980 to the current new bull market, has caught the most important institutions off guard.
The dollar extended losses against the majors in the early Thursday session, falling near the 1.47-level against the euro and relinquishing the 106-handle versus the yen. As Congress continues to scrutinize the $700 billion bailout plan proposed to calm the turmoil inflicting financial markets, traders remained concern about whether such a plan will be successful in staving off further rapid deterioration in economic fundamentals. Earlier in the session, President Bush warned that not passing the rescue plan would cost Americans much more in the long run given widespread loss of confidence and the current risk of major sectors of the financial system at risk of shutting down, ultimately resulting in a “long and painful recession”. He struck a somber tone, saying “without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold”.
Fed Chairman Bernanke offered a similar assessment when he testified to Congress on Wednesday, saying further delay in passing the plan would result in severely impacting “the overall performance of the US economy, perhaps over a period of years”. He added that “the intensification of financial stress in recent weeks, which will make leaders still more cautious about extending credit to households and business, could prove a significant drag on growth”. Nonetheless, despite the sense of urgency imparted by President Bush, Treasury Secretary Paulson and Fed Chairman Bernanke; lawmakers expressed skepticism over the staggering burden on taxpayers and questioned whether the bailout would be successful.
US economic reports return to focus in the session ahead, with markets focusing on August durable goods, initial jobless claims, and new home sales. The headline durable goods orders for August are seen reversing July’s 1.3% gain, falling by 1.6% while the excluding transportation figure is seen falling by 0.5% compared with an increase of 0.7% in the previous month. Meanwhile, August new home sales are seen little changed from the prior month, down slightly to 510k units, versus 515k units from July.
The U.S. dollar has been selling off on speculation that a government sponsored plan to buy illiquid mortgage assets from financial institutions will aggravate the budget deficit and make the U.S. tax payer more vulnerable to a slowdown in the U.S. economy. However, it seems we are seeing an overshoot of market sentiment against the U.S. dollar since it’s too early for market players to make conclusions regarding the true cost of this rescue plan. In fact, the U.S. government is going to hold both assets and liabilities and it’s even possible for them to make a substantial profit. It is difficult to make forecasts, particularly when the currency market is very volatile. Nonetheless, at DailyFX we expect the U.S. dollar to rebound sharply against the euro.
Fundamental Analysis Antonio Sousa, Chief Strategist for DailyFX
The U.S. dollar has been very weak against the world’s most heavily traded currencies. For instance, this Monday the U.S. dollar lost more than 3 big figures or 300 pips against the euro on speculation that a government sponsored plan to buy illiquid mortgage assets from financial institutions will aggravate the budget deficit and make the U.S. tax payer more vulnerable to a slowdown in the U.S. economy. However, it seems we are seeing an overshoot of market sentiment against the U.S. dollar since it’s too early for market players to make conclusions regarding the true cost of this rescue plan. In fact, the U.S. government is going to own both assets and liabilities and it’s even possible for the U.S. government to make a substantial profit if the housing market stabilizes in 2009. It is always difficult to make forecasts, particularly when currency market is very volatile. Nonetheless, at DailyFX we think that once investor’s confidence in the U.S. economy gets restored the U.S. dollar is likely to rebound. Indeed, a severe undervaluation of the U.S. dollar is now likely to lead to a substantial improvement of the U.S. Balance of Payments through continued strong export performance. In addition, a significant shift of interest rate expectations in favor of rate hikes by the Federal Reserve and rate cuts by the ECB is likely to help the U.S. dollar to rebound sharply against the euro.
Keeping a longer term perspective, especially when markets are as turbulent as they have been lately, helps to combat the emotional impulses that hinder most in their speculative activities. Since the 1970s (DM rates before 1999), the EURUSD has nearly tripled, but there have been large swings in both directions. A cycle is evident whereas the EURUSD falls for roughly half the time of the preceding advance. If this cycle holds, then a 4 or 5 year USD advance may be underway. Of course, no cycle holds forever. To get a better idea of future prospects, we’ll need to examine the structure of the advance from the 2000 low. EURUSD Weekly Bars 08-22-2008
The advance from the 2000 low counts well as a 5 wave impulsive. Following 5 waves, markets correct in the other direction in 3 waves. Weakness from 1.6040 is most likely the beginning of a 3 wave correction. An impulse usually experiences at least a 38.2% retracement. In this case, 1.2428 is the 38.2% level. The 50% at 1.1486 is defended by the 4th wave of one less degree (2005 low). Another sign that a larger EURUSD correction is underway is the position of weekly RSI, which recently dipped below 30. A dip below 30 indicates a rate of change extreme to the downside. Rate of change extremes typically occur in the beginning and middle of moves, not the end. This is why rate of change extremes rarely occur at the same time as price extremes and why divergence between price and rate of change / momentum oscillators warn of turns in price. For example, the highest RSI reading (14 weeks) during the entire 2000-2008 bull trend occurred in June 2002 and the lowest RSI reading during the decline from 1.3666-1.1640 occurred in May 2005 (the EURUSD did not bottom until November 2005).
Zooming in close and taking a look at the daily, it is clear that the decline from 1.6040 is in 5 waves, indicating that there is additional downside potential (there is a count that allows for the resumption of strength from here but we favor a larger decline…for reasons previously mentioned). Expect resistance in the 1.4919-1.52 zone. This is the 50%-61.8% of 1.6040-1.3877 as well as the former 4th wave. Be sure to view the Daily Technicals for short term pattern development.
The dollar sold off sharply against the majors at the start of the week amid a sharp run-up in crude oil prices and steep declines in the US equity bourses. Oil posted its largest single day advance, rallying by $16.37 to $120.92 per barrel, which was largely attributed to the expiration of October contracts. The US equity markets sold-off sharply as confidence in the government’s bailout plan and ability to steer the financial sector away from the current crisis wavered, sending the Dow Jones lower by 3.27% and the Nasdaq losing 4.17%. The greenback plunged by nearly 4-big figures against the euro from 1.4436 to above the 1.48-level while losing over 3-big figures versus the sterling from 1.8262 to 1.8588.
Uncertainty over the US government’s $700 billion rescue plan to purchase bad mortgage debts off banks’ balance sheets has triggered heightened volatility in the financial markets and raised fears on whether it will solve the current crisis. The plan is still pending Congressional approval, with additional details possibly not revealed until next week. The dollar will likely continue to bear the brunt of the sharp volatility and concerns of a potentially sharp spike in the deficit. Spot gold continues to trade above $900 per ounce, while crude oil was up by over $25 per barrel in the previous session.
EUR/USD trades near the 1.48-level, with interim resistance eyed at 1.4820, followed by 1.4865 and 1.49. Additional gains are seen at 1.4930, backed by 1.4960 and 1.50. On the downside, support will emerge at 1.4750, followed by 1.47 and 1.4660. Subsequent floors are seen at 1.4630, backed by 1.46 and 1.4550.
U.S. Dollar Trading (USD) had a very volatile day as weak US data was countered by a continued slide in commodity prices. US July Pending Home Sales came in weaker than expected at -3.2% vs. forecasts of -1%. Oil fell over $4 a barrel as OPEC signaled it wouldn’t cut production and Hurricane Ike looked likely to miss the Gulf. Equities were under severe pressure as Lehman Brothers fell by 30% on suggestions that South Korean regulators would scuttle its investment in the Banking firm. In the U.S. share markets, the NASDAQ was down 59 points (-2.64%) and the Dow Jones was down 280 points (-2.43%). Crude Oil closed down $0.11 ending the New York session at $106.34 per barrel. Looking Ahead, Crude Oil Inventories are expected at -4.6 Million.
The Euro (EUR) tested lows during the Asian session weak, US data and Stocks allowed the single currency to rally above 1.4200 before large losses in Oil pulled the pair lower. Heavy selling in the EUR/JPY also helped to cap gains. Overall the EUR/USD traded with a low of 1.4046 and a high of 1.4227 before closing the day at 1.4130 in the New York session.
The Japanese Yen (JPY) traded inline with equity movements as a recovery in Europe allowed a bounce off lows. Rumors swirled around Lehman Brothers in the US session causing heaving selling again as risk aversion spiked. AUD/JPY was hit especially hard heading towards the key 85 level. Overall the USDJPY traded with a low of 106.84 and a high of 108.45 before closing the day around 107 in the New York session. Looking ahead, August Leading Indicators and Current Account released today.
The Sterling (GBP) was able to recover from heavy selling on Monday, tracking the Euro higher and shrugging off poor data. July Manufacturing Production fell -0.2% vs. -0.1% expected and July Industrial Production fell -0.4% vs. -0.1% forecast. Overall the GDP/USD traded with a low of 1.7505 and a high of 1.7708 before closing the day at 1.7615 in the New York session. Looking ahead, July Trade Balance is expected at -7.5 Billion.
The Australian Dollar (AUD) initially bounced with the Euro but took the brunt of the Commodity sell off heading back towards the key .8000 level. July Retail Sales were mixed as a change in reporting made the number harder to digest and more volatile. The seasonally adjusted figure showed a jump of 1.4% much more than the 0.5% expected but was largely ignored. Overall the AUD/USD traded with a low of 0.8005 and a high of 0.8178 before closing the US session at 0.8010. Update AUD/USD breaks below .8000
Gold (XAU) was unable to gain on safe haven flows and USD weakness as Oil fell heavily dragging the precious metal to year lows early Wednesday. Overall trading with a low of USD$777.10 and high of USD$804 before ending the New York session at USD$778 an ounce.
TECHNICAL COMMENTARY
Currency
Sup 2
Sup 1
Spot
Res 1
Res 2
Euro – 1.4110
Initial support at 1.4047 (Sept 9 low) followed by 1.4015 (Oct 10 2007 low). Initial resistance is now located at 1.4201 (Sept 9 high) at followed by 1.4429 (Sept 8 high).
Yen – 107.15
Initial support is located at 106.68 (Sep 9 low) followed by 105.53 (Sep 5 low). Initial resistance is now at 108.43 (Sep 9 high) followed by 109.08 (Sept 8 high).
Pound – 1.7590
Initial support at 1.7472 (Sept 8 low) followed by 1.7371 (Apr 5, 2006 low). Initial resistance is now at 1.7669 (Sep 9 high) followed by 1.7976 (Sep 8 high).
Australian Dollar – 0.8030
Initial support at 0.7993 (Sept 10 low) followed by 0.7893 (Aug 20, 2007 low). Initial resistance is now at 0.8178 (Sept 9 High) followed by 0.8353 (Sept 8 high).
Gold – 770
Initial support at 768.60 (Oct 26, 2007 low) followed by 745.83 (Oct 22, 2007 low). Initial resistance is now at 804.98 (Sep 9 high) followed by 819 (Sep 5 high).
IMPORTANT NOTE: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
