just forex

Last Week and Times to Come!!!

2009-05-23T10:41:00.000-07:00

Hi This is my first blog on eToro . I had quite a chat with myself before wrting anything but finally I decided to go for it . This is more a record of my tradngs and my insights in the market.

Last week was in no way go trading week for me . I started with impression of a market where european currencies were not performing very well and not having any reason to perform very well. My trading style is alway high risk , high return which means big transactions (most 2000, 5000 at 200 lev). This gives me an opportunity to utilise my funds fully and earn a good benefit . One very important thing you should know in this kind of strategy is is when to get out of the market and that where I went wrong. I started with my fav currency GBP USD and tried on some trade in EUR USD .

Market was looking quite constricted in from monday onwards and I had an overhead of trying to trade through my two accounts. yes my santoshtiwari account got relased after a long analysis from etoro and if nothing I wanted to trade in it for old times sake … Well , they always say dont mix business and emotions

The place where my analysis went wrong was FOMC decision. I expected the quantitative easing my not the reaction. and thats where I made the cardinal mistake of a forex trader . Instead of following the market I willed the market to follow my chain of thought . The trades went against me and my count of loss of this week stands at -66000 USD .

That was past now lest looks at next week what do I think . My trades are usually longterm (atleast they are intended to be before I chicken out and take profit and run) so My views are

1) There is nothing strong happening on GBPUSD side except for few good comments from MPC members . Dont underestimate it , it is rarely that good comments come from MPC so that can make an impact. My view is the cross coming down has a probablity of 40/60.

2) EUR/USD is at overbought but it need a fundamental trigger to bring it down. I will be watching the comments from ECB very closely this week.

3) Keep an eye of bank/financial institutions results . GBPUSD is very sensitive to those comments

The other fundamental items I have in my radar is

Treasury to unveil bank rescue bid soon http://www.reuters.com/article/ousiv/idUSTRE52K1F520090321

Stock investors banking on toxic-asset plan http://www.reuters.com/article/wtUSInvestingNews/idUSTRE52K01M20090321

Geithner’s big week offers a chance at redemption http://www.reuters.com/article/topNews/idUSTRE52L0YU20090322

Euro halts its advance ahead of the German ZEW report,

2009-05-22T10:39:00.000-07:00

Although EURUSD did manage to break above 1.3 yesterday, it did not, as I suspected on my last post, managed to advance beyond 1.3080. Still, this morning we are not trading far from 1.3, and a second try upwards is still in the cards.

Attention this morning is set on the ZEW report which will be released at 10:00 GMT,
The ZEW report is a Survey of 350 German institutional investors and analysts which asks respondents to rate the relative 6-month economic outlook for Germany, when an Above 0 indicates optimism, and below 0 indicates pessimism.

Analysts forecast a -7.7 , down from last month’s -5.8, a worse than expected result could cup the Euro’s recent advance. If the EURUSD will not find enough steam to lift itself above 1.3 today, we can expect a retrace downwards possibly to meet the first support level at 1.2863.

also , pay attention to the U.S reports coming later in the day.

- Building Permits 12:30 GMT

- PPI m/m 12:30

Euro Accelerates Advance Following Better Than Expected IFO Report

2009-05-22T10:38:00.000-07:00

The Euro is trading with some remarkable upward momentum against the dollar this morning after the German IFO report turned out better than expected ( forecast 82.4 actual 83.7).

EURUSD was already in an upside momentum before the report, breaking the two resistance levels 1.3041 and then 1.3094 which were mentioned on yesterday’s post.

This morning the pair is trading well above 1.32 with a next week possible target of 1.3336. This level also marks the pair’s next resistance area.

The British pound was lagging behind other majors in its advance against the dollar this morning, thats ahead of the U.K GDP and Retail Sales reports due at 9:30 GMT. It is possible that later on the pound will join the party and target 1.47 or higher, but that play is likely only for as long as the above reports will not cripple whatever momentum the pound has against the dollar at this stage.

Later into the trading day we have the U.S Core Durable Orders (13:30 GMT), and the New HomeSales reports (15:00 GMT). These might affect risk aversion/risk appetite cycles in the market - with a worse than expected results possibly rising demand for safe haven currencies and the opposite.

Worse than expected Retail Sales in U.K pressure the Pound

2009-05-21T10:37:00.000-07:00

A report this morning is showing retail sales in U.K dropped by -1.9% , much worse than the expected -0.3% , in the forex arena this translates to Pound downside pressure entering the first trading hours of the London session.

Generally, the market remains lucked in an anti-dollar environment, as we have yet to experience a serious retrace preformed by any of the major pairs yesterday. This might limit GBPUSD downside potential today.

As for EURUSD, the lower it could drop yesterday was 1.3414, which now marks its most important support area. The pair saw some high volatility around 12:00 GMT after U.S. Treasury Secretary Timothy Geithner’s commented on television he was open for changes concerning the status of the dollar as the world’s reserve currency. The volatile move ended with little change after Geithner repeated and said the dollar would keep its status as the top reserve currency for a long time.

Next important report today would be the U.S Unemployment Claims at 12:30GMT, a report which indicates the number of individuals who filed for unemployment insurance for the first time during the past week,
the forecast number is 649k.

Safe Haven Cycle Accelerates On Worse Than Expected Retail Sales

2009-05-20T10:36:00.000-07:00

USDJPY was already trading freely above its problematic 100 level. Along came another risk aversion cycle and once again the pair was driven back under 100.
Of course, this last strengthening move of the Japanese yen can still be seen as a technical correction against considerable losses it suffered lately. Pairs like EURJPY, AUDJPY, GBPJPY and USDJPY have preformed very strogly since February ‘09, and as you know markets never move “only up” or “only down”.

A report yesterday, showing U.S Retail Sales have dropped by -1.1%, much more than the expected 0.3% change, pusshed traders towards risk aversion positions in the forex market. (Retail Sales are the primary gauge of consumer spending, which accounts for a majority of overall economic activity).

This was enough to trigger a Yen strengthening move against all major pairs yestreday and this morning.

First support for USDJPY is at 97, the second support level would be around 95.8. A clear break under 95.8 might signal the end of the USDJPY uptrend which started on February this year and topped at 101.4 so far.
On the up side, any clear break above 100 should signal the end of the correction move.

Worldwide Equity Decline Continues To Boost Safe Haven Currencies

2009-05-19T10:34:00.000-07:00

A second day of declines in stock market around the globe continue to fuel demand for the dollar and the Japanese Yen.

This is a period when many companies report their earnings, a period that creates tension and fear in stock markets which in return are translated into safe haven flee in the Forex market.

The Yen is trading once again under 100 versus the dollar, still we can consider this retrace as a normal correction to the recent uptrend. Such correction can drag us down as far as 97 if stocks will continue to decline next week. However, the overall direction of the trend is still bullish and will stay so for as long as we are trading above 97.

The British pound is also falling against the dollar, but at least for now the market seems reluctant to push GBPUSD lower than 1.46.
We can observe EURGBP and conclude the pound still has the upper hand against the Euro, thus we expect it to be a bit less vulnerable to the recent dollar strength when compared with EURUSD.

Will the Yen regain safe haven status?

2009-05-18T10:33:00.000-07:00

Last week Sentiment in Japan was elevated as the Japanese Economic data surprised for the better with the current account and trade balance data which were substantially better than expected .Core Machinery orders also surprised rising 1.4% against market expectations of a -6.8% MoM. The economic data aggregated with the Japanese government stimulus and bond purchase programs spurred enough optimism to fuel a rally in Japanese equities and raised hopes for an approaching Japanese recovery or at least a moderation in the pace of the economic deterioration.

Since bottoming at the 88 level against the Dollar the Japanese Yen has depreciated strongly reaching 6 month lows against the majors as fear for Japanese exports continued to loom. As fears for the Japanese exports grew the Yen began losing its safe haven status. The market it seems was betting the Japanese economy would lose its relative advantage causing the Yen to play a bipolar game as the market was still not willing to give up the Yen as a safe haven to a full extent and when risk aversion played a rule the Yen still gained and on the contrary the Yen has also been a strong gainer whenever the economic outlook seemed to improve. It is as if the market was not sure if the Japanese economy is relatively stable or sensitive. The Japanese economic data stream in the last months was exceptionally grim the GDP and exports figures were at historical lows. It was evident the Japanese economy was starting to contract and fast and with it the Yen status as a safe haven was beginning to fade. However recently investors are beginning to question how much time can the Japanese economy contract so rapidly. After the positive data of last week, another stream of positive data from Japan could add to the notion that maybe the worst for the Japanese economy is already priced. The Japanese economy contracted so fast that even if the Japanese economy will continue to contract investors might assume it is relatively stable to other economies. Since it is all about stability the Yen might resume its status as a safe haven.

This week- British Bank set to slash rates

2009-05-17T10:42:00.000-07:00

The British pound closed last week at a 7 year low against the dollar, ( 1.4500) after the Bank of England reported that U.K mortgage approvals are in its lowest since 1999.

The economic situation in the U.K is pressuring the Bank of England to perform further easing in interest rates.

After it had already cut interest 5 times during 2008, the Bank is expected to cut an additional half percent (from 2% to 1.5%) on its January 8 meeting (this week).

This event will be the main focus of pound trading for the week ahead.

It is hard to tell how much of the interest cut on the pound is already priced in the market, but any surprises from the Bank of England coming Thursday, should create short term trading opportunities on GBPUSD and GBPJPY.

Swine Flu Concerns Stimulate Risk Aversion

2009-05-17T10:32:00.000-07:00

The U.S dollar has moved higher against major currencies so far this week while the so called Swine Flu is starting to show first signs of global epidemic.

We have learned that when investors are worried these days, they tend to buy the dollar and the yen replacing other riskier options. This is precaicly What is happening since start of trading this week.

The question is, what’s next?

If the Swine Flu continues to provide us with an unfortunate everyday headline news-more sick, more dead, it is possible we will see fear continuing to spread among investors, triggering more dollar buying in the near future.

However, if the matter will slowly be contained, especially outside of Mexico, the market will stop regarding the situation as a threat and investors will look forward to reestablishing their positions.
In that case opportunities such as longing AUDJPY back to 70 and above or AUDUSD back to 0.72 and above, might present themselves immediately when first signs of risk appetite will appear in the Forex market.

Risk Aversion returns - rescue plan not clear enough

2009-05-16T10:31:00.000-07:00

Treasury Secretary Geithner’s speech yesterday contained a lot of big promises, but it was short of specific details.
The market was expecting something very clear, a course of action which will be both logical and stimulating, but Geithner failed to supply a good enough reason for investors to become moderated in present time.
In other words, the market did not get what it expected to get - and when the market does not get a good stimulus it expected to get, it goes down.

That’s what happened yesterday- stocks fell as a response to the speech, and a chain reaction of traders buying the Yen and the dollar against major currencies began.
For us - the Forex traders - this means another cycle of risk aversion is here.

For now - safe haven currencies are clearly back in demand!

Yen Opens Higher on Risk aversion

2009-05-15T10:30:00.000-07:00

Yen is gaining across the board on Monday’s first trading session as investors once again pressure towards safe haven currencies.

AUDJPY is trading under 56 this morning, pushing to test its 8 years low at 55. We have a lot to expect this week from Australia concerning reports - Trade Balance, Rate Statement, Building Approvals are all important releases that are due later this week with potential to create some volatility.

The Euro and British Pound are also trading lower against the dollar :
GBPUSD has already returned gains from last Friday, falling from 1.4550 to 1.42 this morning- the one major support area is at 1.4 if the pair can find sellers under it, it may accelerate its drop further. However, the buyers are still out there hoping to keep the pair well above 1.4 this week.

The Euro is trading lower ahead of an expected interest rate statement later this week.
At this moment the ECB is expected to keep interest rates on hold, a decision that makes many investors uneasy as they fear the ECB is not aggressive enough concerning interest rates. This creates additional selling pressure on the Euro besides the obvious safety run towards the Dollar.

We are in the midst of another risk aversion cycle- but we can expect a lot of new developments during the week that can eventfully move the market in any direction.

Risk Aversion is set to continue

2009-05-14T10:28:00.000-07:00

The central banks of the so-called emerging countries are sparing no efforts to stem the fall of their currencies in this period of high risk aversion. Especially with the gloomy predictions that the newly adopted U.S. rescue plan will fail to have quick and positive results. If that happens the atmosphere of risk aversion will continue. Mexico, for example, is working hard to support the peso (MXN). The Central Bank of Mexico has sold more than $1000 billion on the currency markets in an attempt to halt the decline of the MXN, which fell to an historic low against the USD on 3rd February. The peso was worth about 10 MXN to the USD in mid-2008, today it stands at 14.22 MXN to the USD.The succes of this attempt to halt the collapse of the peso is uncertain because the aversion to risk could even accelerate in the coming weeks. Traders on all financial markets are very disappointed with the reflationary rescue plan which was presented yesterday afternoon by the new Treasury Secretary, Tim Geithner. Indeed, although traders are broadly aware of the need for a large public intervention, they do not believe that the Obama administration can reverse the current trend of the U.S. economy quickly enough. If these fears are confirmed, the USD could see a sharp rise, once again benefiting from its status as a ’safe haven’.Meanwhile, it was the EUR that benefited yesterday from a technical adjustment between the EUR and the GBP to move a little against the USD. Indeed, the three currencies are closely linked. While the GBP appeared to rise on Monday it fell again yesterday against the EUR due to the gains made by investors who gambled in large numbers on a rebound of the GBP based on the observation that although the UK economy is not about to undergo an upturn, the prospect of a total collapse of the GBP is now more or less ruled out.

The Risk Still Looms

2009-05-13T10:28:00.000-07:00

The pound sterling is the third most commonly traded currency in the forex market and incidentally, the oldest currency still around. It originates from way back before the Magna Carta, when there was no United Kingdom and the British Isles were divided between the warrior kingdoms of the Anglo-Saxons. These kingdoms used a currency known as the sterling. After some considerate devaluation, what today would be known as inflation, these coins begun to be weighed by the pound when settling payments, thus originating the pound sterling, which is simply an abbreviation of “a pound of sterlings”. After the Norman Conquest the pound sterling was subdivided into 20 shillings and 240 pence, a system that lasted until Britain adopted the decimal coinage system in 1971.

Like any good old fashioned currency the pound sterling has many nicknames. The most often used colloquial name is the “quid” possibly derived from the location of the British mint in Quidhampton, but more probably from the Latin phrase “quid pro quo” which literally means an exchange of goods. In the forex world however, the pound sterling is more likely to be called “cable”. This is due to the fact that before the invention of the radio, GBP/USD quotes had to be transmitted through transatlantic cables, thus giving birth to the pound’s current nickname.

In recent years, the GBP has been harshly affected by the global market crisis, particularly during 2008. Now, for the first time in history it seems that the pound may find itself at par with the Euro, which has proven to be more resilient in tough circumstances. The British however, do not see this as a good reason to join the European Monetary Union, claiming that by having their own currency they can better regulate their economy by increasing and decreasing interest rates. Hopefully this philosophy pans out as they hope, although the beginning of 2009 is yet to signal an end to the GBP’s seemingly endless plummet.

Sterling at point critical

2009-05-12T10:26:00.000-07:00

The sterling has recently gained strong bullish momentum against the majors as the positive sentiment was elevated in recent weeks. The main drive for this sentiment was not only investors’ speculations the world economy is stabilizing but investors assessments the banking sector is slowly returning to profitability. The main service the British economy exports to the world is banking services. Hence the sterling tends to fluctuate with the sentiment in the banking sector. When the world banking sector was on the verge of claps the sterling depreciated strongly now with hops of recovery in the sector the sterling gains.

Technically after finding a strong bottom at the 1.32-1.35 the sterling dollar trade has moved in a steady bullish trend. However the pair has persistently failed to break the 1.5 price resistance. Each time the pair reached the 1.5 it seems the market was ready to sell the sterling. The pound dollar trade has moved yet once again to the 1.5 price area and is gearing up for another attempt to break that resistance. A success or the failure to break this price area could just be a critical faze for the sterling trend and its sustainability.

Get The Best Trading Tips!

2009-05-11T04:26:00.000-07:00

eToro would like to welcome you to the world of Forex trading.
To help you begin we would like to share with you a list of common mistakes that new traders tend to make and therefore you should try to avoid.
Remember, the key to becoming a successful trader is discipline and following a set of rules:

1. Accept that a part of trading is losing. Every new trader must understand that even experts lose on trades. The number one rule when making money is to make sure your profits are much larger than your losses.

2. Money management and a trading plan. Always enter a trade knowing how much you are willing to risk and how much you want to profit from the trade. This is called a risk/reward ratio. The difference between successful traders and unsuccessful ones is that the former always enters a trade with a plan and the latter doesn’t.

3. A man’s best friend- the Forex Market. Many new traders are often hesitant to open trades due to the risk and uncertainty involved in trading. Those who overcome their fears often go on to yield enormous profits.

4. Personal responsibility. Great traders accept personal responsibility for everything they do. Remember that you're the one who is pulling the trigger. Great traders know that they are responsible for all the trades they make, either good or bad.

5. Becoming greedy. When traders have an open trade that is making them profit they often forget their pre-determined target for the trade, as they are sure that the trade will continue to make them profits. Remember that the markets are dynamic and trends don’t last forever. If the price reaches your target, bank the profits or move your stop-loss to prevent a loss.

6. Trading the News. Despite what most people might think, most of the really big market moves occur around news event. Trading volume increases and the moves are normally significant allowing traders to grab quick and rapid movements. News-traders often make only one trade a day due to the large potential profits involved.

7. Never trade on wishful thinking. 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.

8. Psychological Factor. Emotions are the number one cause of losses. Don't let your emotions sway you, stick to your trading plan and remember to set your stop-loss.

9. "The Trend is Your Friend". When trading in the direction of the trend you're results are almost guaranteed to improve.

By following these set of rules, you will see almost immediately see an improvement in your trades.

Pound starts to regain lost ground

2009-05-10T09:59:00.000-07:00

Sterling was among the best performers this week, rallying against all other leading currencies after strong showings on UK equity markets by financial stocks.

Boosted by renewed appetite for risk, the pound gained 1 per cent against the dollar over the week to $1.4810 after briefly climbing above the $1.50 level mid-week. Against the yen, sterling rose 0.2 per cent to Y147.19 and versus the euro, it climbed 2 per cent to £0.8805.

Stronger-than-expected results from Goldman Sachs and JPMorgan Chase helped Britain’s financial stocks rally strongly, in spite of more mixed results from Citigroup on Friday. The FTSE 100’s banking index rose 5 per cent over the week.

The rally in financials mirrored a broader increase in risk appetite, which helped drive most equity indices higher. “Stock markets have rallied amid growing confidence that the financial sector might have passed the worst,” said Alex Dunn at CaxtonFX. “As a result the appetite for safe havens such as the dollar has diminished and there is more demand for riskier currencies such as sterling.”

By contrast, the euro was on the back foot. It fell 2 per cent against the yen this week to Y129.46 and by 1 per cent to $1.3054 against the dollar after hitting a one-month low of $1.3030.

Falling inflation and sharply reduced inflation expectations have left many believing the European Central Bank will announce a further quarter-point rate cut on May 7 and possibly additional measures to boost economic activity.

This was certainly the impression given by Axel Weber, a member of the ECB governing council, on Tuesday. ECB president Jean-Claude Trichet was more measured yesterday, saying the bank would wait until the meeting to decide on “non-standard” measures.

Concerns about the health of the eurozone were compounded when Moody’s, the ratings agency, said on Friday it may cut Ireland’s sovereign debt rating given the “severe economic adjustment” taking place there.

Gains for the dollar during the final two sessions of the week were partly driven by weak data on Thursday that showed slowing Chinese growth, tumbling eurozone production and a 10 per cent fall in new US home builds in March.

Although equity markets remained propped up by the earnings reports in the bank sector, the dollar also won support as some analysts suggested the recent pattern in risk strategy was beginning to unwind.

During the equity sell-off prior to March’s recovery the dollar benefited from its perceived safety as a reserve currency. However, in recent weeks investors have regained an appetite for risk, prompting a bounce in equity markets and a retreat for the dollar as the search for yield has brought about a revival of the carry trade.

But on Friday, equity markets and the dollar moved higher in tandem. “There is now a divergence taking place between equity market performance and foreign exchange,” said Hans Redeker at BNP Paribas.

“Even with equities trading higher, the dollar has made gains, albeit modest. Currency investors are trading currencies on a selective basis.”

Although the dollar was weaker over the week, it rallied 0.8 per cent against the pound on Friday. Over the week, the dollar was 0.9 per cent stronger against the Swiss franc at SFr1.1652, but fell 0.8 per cent against the yen to Y99.35.

TRADING THE WORLD

2009-05-09T09:55:00.000-07:00

To view the most recent indicators and relevant economic news please visit our Forex calendar page for live updated worldwide events.

World events affect the Foreign Exchange Market. Or rather, world events affect supply and demand forces, which then affect the Foreign Exchange market. World events (political, social, governmental, etc) and other economic factors shift the supply and demand forces constantly, which in return shift the price of one currency in relation to another.

Tuning in to what’s happening in the world is a very smart trading strategy as again and again we witness that the Foreign Exchange market undergoes movements soon after major news and/or economic reports are released. The size of the country determines the amount, and the frequency of its news/reports releases, and therefore it may be more useful (at first at least!) to trade currencies of economies that have plenty of releases (such as, for example: USD, EUR, JPY, GBP, CHF).

Useful Information:

Always Remember that the healthier a nation is, the better its economy will perform (and consequently, the stronger its currency will be)!! Health is measured (amongst other factors) by high employment levels, retail sales, capacity utilization, and gross domestic product. It is also measured by low government deficits and by little fluctuation in inflation.

To determine a nation’s health, look for reports on: (The below examples are taken from the US market)

Employment Growth
Gross Domestic Product (GDP)
Trade Balance
Interest Rate decisions
Retail Sales
Durable Goods
Inflation reports
Foreign Purchases report (TIC Data)

What do reports mean? Here are a few examples:

Employment:

Jobless Claims is released weekly and it measures how many people filed for unemployment insurance for their first time. The less people have applied, the better the economy is doing, because unemployed people tend to spend less money, which has a bad effect on the nation’s economy.

US: Nonfarm Payrolls is released monthly and it measures the number of new jobs created (excluding the farming industry). The more new jobs, the stronger the nation’s currency is, because the more people work, the more money they earn, the more money they are likely to spend.

Consumption:

Core PCE Price Index: measures the rate of inflation experienced by people; it reflects the price change in consumer goods and services (excluding Food and Energy). Large price changes have a negative effect on the economy, because they introduce uncertainty, and uncertainty inclines people to spend less.

Retail Sales: is released once a month and measures the value of retail sales. A rising trend means that the nation’s economy is growing stronger, because it means that people are spending more.

GDP (Gross Domestic Product) Annualized: measures the value of all goods and services that are produced by the nation’s economy. A rising trend means that the nation’s economy is growing stronger. It encourages people to invest in the domestic stock and bond markets, and attracts foreign investors.

Trade Balance: measures the value of the difference between imported and exported goods and services. A positive trade balance means that more goods and services were exported than imported. A rising trend means that the nation's currency is growing stronger, because the higher the demand for exports, the higher the employment and production rates in the exporting country. This usually means that foreigners will convert their currencies to purchase the currency of the exporter.

CPI—Consumer Price Index In simple terms, CPI measures the increase of price in a fixed basket of goods and services (such as food, transport, housing etc’). A higher CPI means that the price of the basket has increased and it now costs more to buy the same basket of goods. A rising trend has a positive effect on the economy (and consequently on the currency), because it reflects that people are able to purchase the goods and services despite the price increases.

Real Estate:

US: New Home Sales: The new home sales figure serves as a great indicator for the general direction of the economy. An upwards trend in new home sales suggests that all is well in the construction industry and that the nation’s consumers can afford to make large purchases. New home owners tend to purchase a large amount of goods, while construction companies need to hire workers and buy materials, thus creating a positive ripple effect in the nation’s economy and an encouraging effect on its currency.

US: Pending Home Sales: measures activity in existing (not new) home sales. This includes single-family homes, condos and co-ops. The higher the demand for housing, the better the economy is doing, because people must feel comfortable enough in order to invest in homes. Also, such investments are usually accompanied by purchases—electronic equipment, furniture—and revenues for realtors, both of which are good for the economy.

US: Housing Starts measures how much construction began on new residential buildings. The higher the number, the better that nation’s currency, because it indicates that the construction industry is healthy and that people are investing in it.

Manufacture:

US: ISM Mfg Index measures the activity of purchasing managers in the manufacturing sector. A rising trend means that the nation's currency is growing stronger. Purchasing managers are good indicators since they have access to a company’s performance, which oftentimes goes hand in hand with overall economic performances.

Industrial Production measures the value of output produced by factories, mines, and utilities. A rising trend means that the nation's currency is growing stronger, because high values indicate that large amounts of product are being manufactured and sold, and hence that people earn and spend money.

Producers Price Index examines differences in the selling prices of goods and services within Euro-zone producers. Since producers tend to increase retail prices as a result of higher production costs, PPI may be counted as an indicator for inflation. A higher PPI may result in higher interest rates determined by the European Central Bank. A falling PPI points at declining prices, and thus hints at an upcoming economic recession.

Durable Goods Orders: measures the value of goods with a life expectancy of more than 3 years, purchased by consumers looking for domestic manufacturing. This indicator predicts how busy the manufacturers are likely to be, since they need to work to fill the orders. Therefore, a rising trend will have a positive impact on the nation's currency.

Rate Announcements:

UK: BOE Announcement — the Bank of England (BOE) Monetary Policy Committee (MPC) votes every month on where to set the nation's short-term interest rate.

EU:ECB Announcement — the European Central Bank (ECB) Governing Council votes every month on where to set the union’s short-term interest rate.

US: FED Announcement — the Federal Open Market Committee (FOMC) votes eight times a year.

Shortly after each vote, the outcome is released (the BOE Announcement; the EU:ECB Announcement, and the FED Announcement). It is accompanies by a brief commentary on the economic conditions that effected the outcome. Interest rates depend mostly on inflation. The objective is to keep prices stable, so when inflation rises above an annualized rate of 2%, banks will usually raise interest rates in order to bring prices down. High interest rates attract foreign investors, who increase the demand for that nation's currency. This is to say that a rising trend in interest rates has a positive effect on the nation's economy.

FOMC Meeting Minutes:

The Federal Open Market Committee (FOMC) Meeting Minutes give people insight into the decisions that have been made with regard to interest rate and policy shifts.

Surveys:

EU: ZEW (Zentrum für Europäische Wirtschaftsforschung) Survey provides the opinions of financial experts with regard to the economic outlook for Europe. Every month the difference between investors that expect a growth in the economy and those that expect a decline is measured.

US: Chicago PMI measures the health of the Chicago business environment. Every month purchasing managers respond to a survey with regard to their organization's activity (whether it is higher than, the same as, or lower than it was in the previous month) in terms of output, purchases, employment, inventories, orders, and prices.

NET TIC—Treasury International Capital (TIC) Reviews the flow of money market funds (such as stocks, bonds etc’) to and from the United States. The key figure, expressed in millions of dollars, represents the difference between American spending of foreign securities and foreign spending of American securities. This is a major indicator of the American economy and gives insight into foreign demand for American investments and dollars. For example, if the US purchased $5 billion in foreign securities and foreigners purchased $20 billion in long-term US securities, then the net reading would be $15 billion.

Consumer Confidence: measures consumer attitudes towards economic conditions, how they evaluate future economic prospects. Higher readings suggest consumer optimism; this is to say that consumers are optimistic about economic prospects. As a result consumers tend to purchase more, which in return stimulates the economy.

Consumer sentiment: Measures consumer attitudes concerning both the present situation and future expectations.
It's derived from a monthly 500-person survey conducted by the University of Michigan. Higher sentiment levels are a leading indicator of rising consumer spending, which accounts for two-thirds of the economy.

A few more things worth knowing:

In general it can be said that news releases that follow expected reports do not cause strong market movements.
Differences between the market expectations and the news release may cause market volatility which in turn might lead to a developing trend in a specific direction.
Such opportunities are usually short-lived; they may last for only a few minutes or even a few seconds.
Markets in which constant movements occur will usually not be as strongly affected by news releases. A quiet market may move more significantly because of a news release.

DON’T FORGET : No matter how many current events you follow and news releases you absorb, and no matter how familiar you are with the Foreign Exchange market and its trends--Trading always involves a risk!!!

A simple trade example

2009-05-08T09:47:00.000-07:00

Are you ready? It's time to trade!

Here is a to-do list of actions to be taken as you open a trade:

- Identify the pair to buy/sell
- Decide on the initial investment amount
- Choose the appropriate leverage
- Consider applying trade limits (covered in the next chapter)
- Open trade

This is the place to emphasize: each trade you'll ever make would be consisted by each of these actions.

Make sure you get familiar with them!

Minimal leverage

2009-05-07T09:45:00.000-07:00

The Ratio between Minimal Lot Size, Trade Size and Leverage

Fundamentally, the minimal lot size for a trade is $10,000, thus the leverage limitations are set according to the amount you choose to trade:

Trade Size	Minimal Leverage	Lot
25	400	10,000
50	200	10,000
100	100	10,000

The advantage of trading with Leverage is that while your profits potential is virtually infinite, at eToro the maximum amount you can lose on a trade is limited to the initial investment of the trade. (With the rare exception of extreme market conditions) Once the rate drops below the rate covered by your investment, the trade is automatically closed. That is done through an automatic Stop Loss – explained in the next chapter.

Remember, Leverage can be a trader's best friend when used carefully, and his worst enemy when used recklessly. It is a great tool for increasing profits, in fact private traders rarely trade without it, but you should always keep in mind that the higher the leverage is – the higher the risk level involved.

Now that you're equipped with most of the basic tools, you can open your first trade!

Tactical usage of leverage

2009-05-06T09:44:00.000-07:00

If you trade with a leverage of 1:100 the market would have to move 100 points against you for your position to be wiped out. On the other hand, if you trade with a leverage of 1:400 the market would only have to move 25 points against you for your position to be wiped out.

We recommend first opening a position with a low 1:100 Leverage, and only once you see that you've hit a strong trend, consider opening one with a 1:400 leverage.

Leverage

2009-05-05T09:42:00.000-07:00

If you've been at all exposed to the world of Forex you've probably heard the word "Leverage" being tossed around. But what exactly is "Leverage"?

Leverage is a very important part of Forex trading, and it's critical that you know exactly how it works and how to use it. It is the term Forex traders use to refer to the ratio of invested amount related to the trade's actual value.

Online brokers usually provide their customers with the option to trade on borrowed capital, so that traders don't have to invest tens of thousands of dollars to make any real profit. When you trade at a leverage of 1:100, or X100, it means that for every $1 that you invest in the market, the broker invests additional $99. As a result, you can control an amount of $10,000 by investing $100. eToro provides traders with the opportunity of trading at up to 1:400 leverage.

It probably won't surprise you when we say that with greater opportunity for profit comes greater risk. Just like slight fluctuations in currency rates can make you significant amounts of money, it can also cause you to lose your money very quickly. The higher the leverage, the larger the profit that you stand to make and the quicker you might lose your investment. A leverage of 1:400 can make you more money than a leverage of 1:100, but it also puts your initial investment at more risk.

Fishing for trends

2009-05-04T09:40:00.000-07:00

The trend spotting strategy assumes that the present direction of the price rate will continue into the future. It can be used in three main time-frames: short, intermediate and long-term, with the trends being different for each.

For example, here is a possible scenario in the Forex market:

Over the last 12 months the trend is an uptrend, over the last 30 days the trend is a downtrend, and over the last 24 Hours (intra-day) trend is an uptrend.

Regardless of the chosen time frame, traders will remain in their position until they believe the trend has reversed.

So the goal is to spot a trend that you believe in and trade according to it. Needless to say, you will need to monitor the trade, in case you were mistaken and the trend vanishes or reverses. Then it's time to cut your losses by closing the losing trade or by reversing - closing the trade and opening a following, opposite trade.

Warning: Speculating on Forex rates involves great amount of risk. Be advised that even the most sophisticated traders can't always predict market movements' directions.

That is all well and good, but how am I supposed to make any money with the rates changing around 0.1% a day?

In the Forex market, movements of 0.1% in currency rates can mean profits of hundreds and thousands of dollars. How is that possible?

With the use of "Leverage", the Forex traders' best friend and worst enemy.

How do I identify a trend?

2009-05-03T09:35:00.000-07:00

When a trend is taking place in a Forex pair, the price movements start to form peaks and valleys in the chart of that pair, which are easily identified.

During an upward trend, the price movements form a series of ascending peaks and valleys. (Higher Highs and Higher Lows)

Since a picture's worth a thousand words, lets look at the following chart:

This chart suggests that the trader should buy the currency pair (and close the trade by selling at profit after the rate rises).

Throughout a downward trend, the price movements form a series of descending peaks and valleys: (Lower Highs and Lower Lows)

This chart suggests that the trader should sell the currency pair (and close the trade by buying at profit after the rate declines)

It's important to note that during some trading days the trend is hard to spot, some trading days show no trend (the price movements form a Range), and of course you're bound to run into the occasional reversal, so this is not a perfectly accurate or 100% reliable indicator for trading.

Here is what a trading Range looks like:

It is easier to make money with a trend than with a trading range. While you can still make money in trading ranges, you have to be more nimble on your feet, and ready to jump in and out of the markets at all times. Needless to say, this makes the trader's life a lot tougher.

Trading ranges can be really messy and unpredictable, which is why you should always look for trading trends. It's a good idea to stay out all together during a range, and get back in only when the markets start to trend again.

As a general strategy, it is best to trade with the trend rather than against it, meaning that if the general trend of the market is headed up, you should be very cautious about taking any positions that rely on the trend going in the opposite direction.

The trend is your friend

2009-05-02T09:33:00.000-07:00

Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future.

Although this may seem pretty basic, being able to identify when a pair is in a trend and when it isn't will help you to increase your chances to profit consistently in the Forex market.

When you can identify a trend, you can estimate what direction the rate of a currency pair is going to go in. You should exploit the direction of the trend you identify by placing a trade in that direction.

If it's an uptrend, meaning that the rate is increasing, buying the currency pair will give you a better probability for profit. If it's a downtrend, meaning that the rate is decreasing, selling the currency pair will give you a better chance of making money.

How do I identify a trend? What are the characteristics of a trend?

The simplest way to identify a trend is through the distinct patterns that the price forms. These can tell you if the market is moving in an uptrend or downtrend.

The Forex market

2009-05-01T20:32:00.000-07:00

Millions of people are drawn to the Forex market, the biggest financial market on the globe. The Forex market its where it’s at when it comes to investing and currency trading and is one of the fastest growing investment forums to date.Although the Forex is called a market, it is not a traditional market as all trading is conducted over the telephone or via computers - there is no central location for the trading in any country.

The Forex market is a cash inter-bank or inter-dealer system that was formed in 1971, at the time when floating exchange rates came about. Today the Forex market is enormous with over 3.5 trillion levels exchanged each day, making it, without a doubt, one of the most popular forms of trading worldwide.

The Forex, along with its never ending trading, is attractive to many traders because of the excitement it brings. Trading can be very exciting - the Forex offers never ending excitement for those willing to partake. With $1.5 to $3.5 trillion dollars per day, the Forex market has nearly perfect liquidity. The size alone makes this market a joy ride for traders. If you are looking for endless excitement, you will be glad to know that you can certainly find it in the Forex market. Unlike the other markets, the Forex is great because you can enjoy that excitement all day long. You won’t have to deal with the anxieties that occur with other markets after closing time. You can know that no matter what, the Forex will be open and you will be able to deal with business as needed. This adds a fun element to trading as removes the stress related to other markets.

Forex and Technical Analysis

2009-04-30T20:31:00.000-07:00

When looking at the technical analysis in the Forex market, there are three basic principles that are used to make projections.These principles are based on the market action in relation to current events, trends in price movements and past market history. When the market action is looked at, everything from supply and demand, current politics and the current state of the market are taken into consideration. It is usually agreed that the actual price of the market is a direct reflection of current events.

The trends in price movement are another factor when using technical analysis. This means that there are patterns in the market behavior that have been known to be a contributing factor in the Forex market. These patterns are usually repeating over time and can often be a consistent factor when forecasting the market. Another factor that is taken into consideration when forecasting the market is history. There are definite patterns in the market and these are usually reliable factors. There are several charts that are taken into consideration when forecasting the market using technical analysis. The five categories that are look at include indicators, number theory, waves, gaps and trends.

Most of these can be quite complicated for those who are inexperienced trading the Forex market. Most professional brokers understand these charts and have the ability to offer their clients well-informed advice about trading. That is why it’s best to do one of 2 things: either putting some learning time aside, and studying good about the market and it’s characteristics, or relying on a good broker to light your way in the currency path.

Types Of Accounts

2009-04-29T18:50:00.000-07:00

Live Account

Live account is for those people who are ready to explore and experiment with the real world of Currency Trading. These traders can register free of cost with Marketforex.net and once they sign up, they will be assigned an account number. Once an account has been open, they can start trading now! Before signing up on the live account its always worthy to read about Forex Scams and Frauds and how to avoid them

Practice Account

Practice Account is a great way to get started and learning the fact, features and specifics of the Forex Market. It gives you the best way to learn and practice trading for free, with no risk of losing money involved. It is a great opportunity for the beginners to get the feel of the real Currency Trading, for free! Also the Supervised Forex Accounts and its benefits are discussed in detail

Forex vs. Futures

2009-04-28T18:48:00.000-07:00

Being the largest financial market in the world, Foreign Exchange market deals in the business of trading of the world's various currencies, with more than $1.5 trillion changing hands every day. Futures, on the other hand, deals in contracts to buy or sell a foreign currency on a specific date in the future, the price for which is set today.

In other words, futures are the same as forward exchange deals, which are tailor made to the customer requirements and needs for the amount of funds and due date of deal.

There are plenty benefits of Forex over currency futures trading, especially with the difference between the two regarding their target audience, transactions fees and liquidity, as given below:

24-Hour Market
Currency market is a 24-hour market, unlike most of the futures exchanges, allowing its traders to react to the immediate news happenings by trading immediately. This facility cannot be availed with the futures market which only operates during business hours and not for 24 hours a day.

Superior liquidity
Forex markets hold unmatched liquidity as compared to currency futures. Especially with $1.5 trillion changing hands daily, Forex is the largest and most liquid market in the world. It can absorb a large trading volume and the transaction sizes are huge too, in comparison to any other market. Futures market, on the other hand, is a $30 billion market per day which provides only limited liquidity with a lesser trading volume.

Forex uses simple and easy price quotes
While the currency futures trading and price quotes have added complications of time factor and interest rates between various currencies, the Forex markets require no such adjustments of future calculations and consideration for the interest rate of future deals.

Forex trading is commission free
Futures trading contracts get along with them, trading costs, exchange fees and clearance fees which eat up most of the trader's profits. But this is not the case with Forex trading because here, the trader deals directly with the market through online exchange, thus saving the brokerage fees. Although, there is always an initiating cost to any trading being done, which is revealed in the bid/ask spread, present in all types of trading, be it Forex, Futures or Equities.

High execution quality and speed
It is only with Forex trading that a trader can experience high execution quality and speed because of its high trading ratio as compared to any other market. The reason why futures market does not offer rapid execution or price is due to the lesser volume of trading and liquidity and definitely due to uncertainty during normal market conditions, as the trading prices on market orders is far from certain. Read as to what makes the Forex currency to move.

Hints for Trading Forex with the help of News

2009-04-27T18:45:00.000-07:00

Why is it important to keep a track of the economic developments of a country whose currency you are planning to buy?

Every currency represents a country in the Forex market. And therefore, the economic status of each country or nation is valued into its exchange. But with so many currencies in the market to trade for, it can get a little challenging to keep a track of every countries economic growth and development.

This is the reason why Economic Indicators are used by the traders to assess the strength of an economy they are interested in. A trader should always remain vigilant and informed about when these indicators are due for release in the market. It is also equally important to be updated on all the news releases which are to be released and can make an impact on the market.

What makes some economic indicators more important than the others?

Every economic indicator has the power to influence the Forex market, it’s just the degree of influence that ranges from low to medium to high. Which ever indicator is carrying the news capturing most of market's attention gets more significance than the other ones.

News carrying high GDP data of a certain country or information about high employment rate in another is bound to make greater news than others, as these factors are directly effecting, rather boosting the economy of those countries.

Does difference between the consensus and actual results cause price movement?

It is not correct to just keep yourself updated as a trader with the latest of economic, political and geographical news. What is even more important is to know what effect has the current news caused in the market and why?

One of the ways to find this out is by also keeping a tab of the expectations of the fellow traders in the market, from the different economic indicators and the news they were supposed to carry according to the.

A study of whether or not a news flash is matching the market expectations is a highly significant aspect, as each market forecaster is expecting different news from each indicator, news in their favour.

Therefore, apart from knowing the current news update, what needs to be kept in mind is the consensus number which is met successfully. A huge variation between the consensus and actual results can be a valid source for price movement.

Should technical investors also focus on news releases?

Keeping in mind a case of any monetary market, whenever a market is being dominated by the fundamental factors such as economic data, Technical analysis are generally not in use. This is because of the reason that most of market traders become sensitive to these economic and political developments.

Also, with so many speculations arising in the market, more and more importance is given to such developments as well as the essential news releases like increase in a certain country’s export figures, which have the power to spike up volume as well as volatility in the market.

Economic Indicators

2009-04-26T18:46:00.000-07:00

Economic indicators can be anything, from the bits and pieces of financial and economic news, to the data published by different agencies on the statistics of government or private sector.

This data is regularly made public to help the common man keep track of the latest developments in the nation’s financial sector. Most benefited from these economic indicators are the market observers who are constantly keeping an eye on the overall economy and its effect on the market. This is the main reason why such indicators are consistently tracked by nearly everyone related to the financial markets in some way or another.

Also, this is the rationale behind the economic indicators containing great potential for creating levels and moving currency prices along with the whole markets, as so many people are expected to respond to the same data together.

Major Indicators

Industrial Production –

It is a measure of the variation in the manufacturing of the country’s industrial units and mines in addition to a measure of their business capability and their capacity utilization, which is the number of used accessible resources amongst the various industrial units and utilities.

Producer Price Index –

The Producer Price Index or PPI calculates the price variations in the industrialized sector. It determines the average variations in selling prices received by home manufacturers in the industrializing, mining, farming, and electric service business or trade for their production.
The PPIs mainly used for fiscal study are those for refined goods, intermediary goods, and unfinished goods.

Hard Goods Orders –

Durable or Hard Goods Orders calculates any new orders which have been placed with the home producers for instant and potential delivery of durable goods.

Retail Sales –

The retail sales report measures the entire revenue of retail houses from section on behalf of all range, class and type of industries in retail business all through the nation.
Retail sales contain both hard and soft commodities sold, and services and excise taxes accompanying the trade of commodities, not including the sales taxes.
The Gross Domestic Product –

Gross Domestic Product or (GDP) measures the total of all the merchandise and services created either by home or overseas companies, showing the speed at which a nation’s wealth and market is rising or falling.

(GDP) is regarded as the most extensive indicator of monetary productivity and development of a nation.

Housing Starts –

The Housing Starts report calculates the quantity of housing units which are being initiated into construction every month, where the initiation process is predefined as the start of an excavation for the groundwork of any residential structure.

To make full use of these economic indicators in the Forex market and trading world, you should always be aware as to when each economic indicator is due to be out in the markets. Keep track of all the release dates through a calendar or keeping in touch with the agencies which will be releasing these statistics or snippets for the public.

Also, keeping a record or a watchful eye on the release dates of these economic indicators will help you build a stronger decision whether to go forward or drop the position you were planning to go with by predicting the market movements based on gut feelings.

Forex Trading – More Technical than Intuitive

2009-04-25T18:40:00.000-07:00

The FX, Forex or foreign exchange, is all vis-à-vis money. Foreign currency from all around the world is available to be bought or sold here. Any individual Forex trader or big and powerful business firms can buy or sell currency freely, on this currency exchange platform.

When dealing in foreign currency exchange, there is an ongoing cycle of buying and selling in the market. A trader can buy one foreign currency and then sell it on a higher selling price, just to buy another foreign currency, while making profit in between.

The only way to make money in Forex trading market to avoid as much emotional involvement as you can. While making investment or trading related decisions, always plan out a cautiously thought out strategy that takes the recent market tends and history patterns into consideration while making a deal.

With Financial markets, being intuitive or going with your instincts does not help much. Forex being an extremely unpredictable trading market where, at times, emotions tend to cost more than a wrong strategy. Emotions can dominate your trading sensibilities and decisions, making you go ahead with a deal purely based on your gut instincts.

What needs to be understood is the fact that trading industry is hard core strategy driven business. Market trends, rises and falls, do not go by a trader’s instinct, but can be influenced by past patterns and trends. It happens a lot during the time when a deal is about to be finalized, that the investor goes through a moment of intuitive spurs and would want to change the trading decision at the last moment. This should be avoided at any cost.

Whatever you are seeing in the market at the moment your deal is being finalized, do not change your pre planned decision at the last minute. So by the strategy you had planned in advance. That’s the only way to deal successfully with Forex trading, to be systematic in your approach, analytical with your decisions and insistent with your stand.

Be firm in your decisions. If you correctly analyze the trends of the Forex market, you can easily come to know that although the trading patterns are by and large predictable, there is a lot of sinking and floating happening within those trends. Currency prices rise and fall immediately. There is seldom any trend which has a smooth rise or fall of currency prices.

These are the situations when intuitions can kill your deal, landing you into major loss at times too. For instance, when you find out that the currency you’re holding is taking sinking southwards suddenly, you might get tempted to sell it off in loss, pack your bags and leave. Similarly, if you see that the currency you are holding is going on a rise, you try to buy more of it, just to increase your profits. Now these are the situations where emotional actions can kill your deal and thus, your trading future.

These are the times when you should hold on for a moment and study what exactly is happening and bank on greatly on your trading system. Your pre planned strategies and tactics will tell you precisely when to trade, to reap highest profits.

Almost all the Forex professionals or pros will advise the new traders and investors to build up their own trading system. This planned trading system will tell you exactly what to buy, when to buy, when to deal and what to deal for. Developing a trading system based on technical and fundamental analysis can be of benefit to its trader. Studying the past as well as present market trends can be immensely effective in getting some knowledge about what’s the future trend going to be.

There may come times, when your trading system and your instincts may become opposites, and you might get caught in the dilemma not knowing which to follow. This is the time when you should follow your trading system, as it is not just a mere emotional spur of the moment, but a suitably studied, pre planned strategy for a market based on trends and patterns.

To make your trading system even more efficient, you should clearly recognize the entry and exit point of your trading. Also kept in mind should be the extenuating factors for these points, and systematic strategy to exit properly. You should always set up a stop-loss order and a take-profit order in your deal. Clearly defining these exit points will help you, either by increasing your profits, or by decreasing your losses.

Forex Day Trading Prospects

2009-04-24T18:37:00.000-07:00

Compared to Equities or Futures, it can be easily said that the Forex market has several advantages and benefits. And Forex being a 24-hour market gives Currency trading the biggest advantage ever.
With no external control and a market open to all, Forex is the perfect currency trading platform to invest in. with the power in the hands of the currency traders, to choose any time of day to trade, whenever they want to, Forex trading basically puts the traders or investors in charge of how they want to trade and how much as well.

This is also because of the fact that Forex currency trading requires a very less amount of starting investment, which can easily enable a trader to open an account and start trading, unlike the cases in Stock Exchange and Futures market, where in, a fair amount of capital is required to start trading.
This facilitates trading for individuals or small traders, who can easily start trading small in the Forex market.

Being a round the clock market, Forex day trading enables the investor to select any time to trade, whatever is more suitable to him/her. Allowing trading for 5 and a half days a week, 24 hours a day, provides Forex traders with incomparable freedom leaving the decision for currency trading in their hands, whenever they want to, and not when the market allows them.

The Forex market is known as the Day Trading market because of the reason that basically, it trails the sun going around the world, and shifting from one main economic or banking center to another, starting from the United States to Australia, to New Zealand to the Far East, and towards Europe and then, again back to the United States.

With Forex, all through a trading day, the currency trading volume on the whole is established by two factors, one being which markets are open, and second being the time when every one of these Forex markets partly overlap one another.

The currency price at Forex day trading market, changes every second. One second a currency is up, the other second the other beats it to go high. Currency trading volume at Forex market remains high throughout, but it hits the highest point when the U.S, London and European markets are open, all at the same time, which only happens between the time periods of 1 p.m. to 4 p.m. by the GMT (Greenwich Mean Time).

As compared to the high volume of the U.S market, the level of the Pacific border markets, Japan and Hong Kong for instance, is quite low, but this still provides a Forex investor the opportunity to study and explore the vastly traded markets and currencies of the Pacific Region.
With more than $2 trillions of money being traded every day, Forex market is indisputably the biggest fiscal or financial market in the whole world. Here, the investors need to focus only on a few major currencies, rather than hundreds of equity or stocks. Forex market also is known for its fair costs and thin spreads.
Furthermore, Forex market has high levels of liquidity as compared to any other financial market and this is what makes Currency trading market the biggest economic market in the whole world. This liquidity largely comes from the banks which provide liberal cash flow to individual investors, companies and trade houses. And since the Forex market is a 24 hour market, the currency exchange trading experiences superior liquidity around the clock, as compared to the stock market, which contains a limited time period for high liquidity.

The instant trading through various means of communication such as phone and internet makes Forex day trading an instant trading business alongside making it a global trading platform.

With such high levels of liquidity, round the clock trading and steady trading prospects, Forex currency exchange market is undoubtedly one of the most profitable and potential business sectors.
Another basic benefit offered by the Forex market is that it is a no-commission market. With this free of commission trading, an investor gets to keep whole of the profit that he has earned through a day’s trading at the market. Keeping 100% of the profit is indeed a great deal for any trader today!

Taking advice from proficiently experienced Forex brokers will get you standard features like 100:1 leverage and regulated FCM status along with commission-free trading, to make your trading experience more professional.

Adding Leverage To Your Forex Trading

2009-04-23T18:21:00.000-07:00

In the foreign exchange markets, it is common to find leverage of 100:1 or even more. However, just because the market maker or broker may offer you leverage as high as 100:1, it doesn't mean you have to use all the leverage available. In fact, if you are a savvy trader, you will only use high leverage when you can calculate and manage the risks associated with the high leverage to your advantage. We'll show you how this is profitable without being problematic.

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Margin and Leverage Basics
Using money borrowed from a broker/dealer to purchase securities or foreign exchange is known as "buying on margin". A trader will usually place a certain amount of money in his or her brokerage account and the broker will use that money as a deposit to allow the trader to buy securities or foreign exchange contracts valued at a multiple compared to the deposited amount.

Leverage is the use of other people's money to buy or sell contracts or securities. If a broker offers a 20:1 leverage, it means he is willing to allow the trader to borrow 20-times the amount of money in the account to make a trade. So, if a contract is worth $10,000 and the broker is offering 20:1 leverage, a trader will only need to have $500 in his or her account to purchase the contract worth $10,000. If the value of the contract goes to $11,000, the trader will make a profit of a $1,000. This would represent a return of 10% on the contract purchase price, but a return of 200% on equity. (For background reading, see Forex Leverage: A Double Edged Sword and Leverage's "Double-Edged Sword" Need Not Cut Deep.)

The extreme amounts of leverage that are common in the forex markets occur because the forex is the largest and most liquid market in the world, making it very easy to get into and out of a position. This allows a trader to control, with a certain certainty, how much he or she is willing to lose on a trade. Because it is possible to exit a position quickly and efficiently, forex brokers allow their clients to benefit from high leverage.

Forex Vs. Stocks and Futures Markets
Leverage in the forex markets is much higher than in most other markets. For example, if you trade equities, you will be able to borrow twice the amount of money you have in your account. In the case of futures, you may be able to borrow 20-times the amount of funds you have in your account. In the forex markets, because the leverage is so high, the broker or market maker will require you to sign an agreement specifying how a losing position will be dealt with. Because a highly leveraged account poses a greater risk for both the market maker and the trader, there is usually a mechanism in the agreement that will allow the market maker to automatically liquidate a trader's position if it loses 75% of the margin or deposit. To safeguard the broker/market maker and to ensure that the trader does not have to add extra funds to the account, the losing position will be automatically closed at a certain point in time if the losses on that position threaten to be more than the amount of money available in the trading account.

Traders should read the agreements they have with their market makers very carefully in order to understand how a losing leveraged position will be addressed.

Should a Trader Use All the Margin Available?
Generally, a trader should not use all of his or her available margin. A trader should only use leverage when the advantage is clearly on his or her side. For, example, a trader should plan a trade and know exactly where to exit the trade if the market moves in the desired direction. Once the amount of risk in terms of the number of pips is known, it is possible to determine how much money will be lost if the trader's stop-loss is hit. As a general rule, this loss should never be more than 3% of trading capital. If a position is leveraged too much, so that the potential loss could be, say, 30% of trading capital, then the leverage should be reduced until the potential loss is no greater than 3%. Each trader will have his or her own risk parameters and may want to deviate either more or less than the general guideline of 3%. (For more insight, read Limiting Losses.)

Another thing for the trader to note is that the larger the amount of money one has for trading, the easier is it to use leverage safely. Because a leveraged position can lose money just as quickly as it can make money, a trader should have enough funds to act as a cushion against any drawdown or adverse moves without the risk of being automatically liquidated and losing the bulk of his or her trading capital.

The specific risk of leverage is the fact that traders use borrowed money to buy or sell a contract. Unless the market is making a favorable move, losses will be magnified by the amount of leverage employed.

How Should a Trader Calculate How Much Margin to Use?
Suppose that you have $10,000 in your trading account and you decide to trade 10 mini USD/JPY lots. Each move of one pip in a mini account is worth approximately $1, but when trading 10 minis, each pip move is worth approximately $10. If you are trading 100 minis, then each pip move is worth about $100. Thus, a stop-loss of 30 pips could represent a potential loss of $30 for a single mini lot, $300 for 10 mini lots and $3,000 for 100 mini lots. Therefore, with a $10,000 account and a 3% maximum risk per trade, you should leverage only up to 30 mini lots, even though you may have the ability to buy or sell more than that. (For more, see Forex Minis Shrink Risk Exposure and Finding Your Margin Investment Sweet Spot.)

Conclusion
Trading in the forex markets offers many potentially profitable opportunities. Using leverage can magnify these opportunities to a very large degree. Using leverage requires a complete understanding of risk management and the use of properly defined stop-loss orders in the market. It also requires that traders be disciplined enough to follow the rules necessary for taking advantage of leveraged markets. Leveraged positions can be a trader's best friend or his or her worst enemy - it all depends on mindset and trading habits. Good traders are disciplined and adhere to their risk management rules.

9 Tricks Of The Successful Trader

2009-04-22T18:17:00.000-07:00

For all of its numbers, charts and ratios, trading is more art than science. And just as in artistic endeavors, there is talent involved, but talent will only take you so far. The best traders hone their skills through practice and discipline. They perform self analysis to see what drives their trades and learn how to keep fear and greed out of the equation. In this article we'll look at nine steps a novice trader can use to perfect his or her craft; for the experts out there, you might just find some tips that will help you make smarter, more profitable trades, too.

Step 1. Define your goals and then choose a style of trading that is compatible with those goals. Be sure your personality is a match for the style of trading you choose.

Before you set out on any journey, it is imperative that you have some idea of where your destination is and how you will get there. Consequently, it is imperative that you have clear goals in mind as to what you would like to achieve; you then have to be sure that your trading method is capable of achieving these goals. Each type of trading style requires a different approach and each style has a different risk profile, which requires a different attitude and approach to trade successfully. For example, if you cannot stomach going to sleep with an open position in the market then you might consider day trading. On the other hand, if you have funds that you think will benefit from the appreciation of a trade over a period of some months, then a position trader is what you want to consider becoming. But no matter what style of trading you choose, be sure that your personality fits the style of trading you undertake. A personality mismatch will lead to stress and certain losses. (For more, see Invest With A Thesis.)

Step 2. Choose a broker with whom you feel comfortable but also one who offers a trading platform that is appropriate for your style of trading.

It is important to choose a broker who offers a trading platform that will allow you to do the analysis you require. Choosing a reputable broker is of paramount importance and spending time researching the differences between brokers will be very helpful. You must know each broker's policies and how he or she goes about making a market. For example, trading in the over-the-counter market or spot market is different from trading the exchange-driven markets. In choosing a broker, it is important to read the broker documentation. Know your broker's policies. Also make sure that your broker's trading platform is suitable for the analysis you want to do. For example, if you like to trade off of Fibonacci numbers, be sure the broker's platform can draw Fibonacci lines. A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Make sure you get the best of both.

Step 3. Choose a methodology and then be consistent in its application.

Before you enter any market as a trader, you need to have some idea of how you will make decisions to execute your trades. You must know what information you will need in order to make the appropriate decision about whether to enter or exit a trade. Some people choose to look at the underlying fundamentals of the company or economy, and then use a chart to determine the best time to execute the trade. Others use technical analysis; as a result they will only use charts to time a trade. Remember that fundamentals drive the trend in the long term, whereas chart patterns may offer trading opportunities in the short term. Whichever methodology you choose, remember to be consistent. And be sure your methodology is adaptive. Your system should keep up with the changing dynamics of a market. (For related reading, see What is the difference between fundamental and technical analysis and Blending Technical And Fundamental Analysis.)

Step 4. Choose a longer time frame for direction analysis and a shorter time frame to time entry or exit.

Many traders get confused because of conflicting information that occurs when looking at charts in different time frames. What shows up as a buying opportunity on a weekly chart could, in fact, show up as a sell signal on an intraday chart. Therefore, if you are taking your basic trading direction from a weekly chart and using a daily chart to time entry, be sure to synchronize the two. In other words, if the weekly chart is giving you a buy signal, wait until the daily chart also confirms a buy signal. Keep your timing in sync.

Step 5. Calculate your expectancy.

Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners, versus all your trades that were losers. Then determine how profitable your winning trades were versus how much your losing trades lost.

Take a look at your last 10 trades. If you haven't made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made. Here is the formula:

E= [1+ (W/L)] x P – 1

where:

W = Average Winning Trade
L = Average Losing Trade
P = Percentage Win Ratio

Example:
If you made 10 trades and six of them were winning trades and four were losing trades, your percentage win ratio would be 6/10 or 60%. If your six trades made $2,400, then your average win would be $2,400/6 = $400. If your losses were $1,200, then your average loss would be $1,200/4 = $300. Apply these results to the formula and you get; E= [1+ (400/300)] x 0.6 - 1 = 0.40 or 40%. A positive 40% expectancy means that your system will return you 40 cents per dollar over the long term.

Step 6. Focus on your trades and learn to love small losses.

Once you have funded your account, the most important thing to remember is that your money is at risk. Therefore, your money should not be needed for living or to pay bills etc. Consider your trading money as if it were vacation money. Once the vacation is over your money is spent. Have the same attitude toward trading. This will psychologically prepare you to accept small losses, which is key to managing your risk. By focusing on your trades and accepting small losses rather than constantly counting your equity, you will be much more successful.

Secondly, only leverage your trades to a maximum risk of 2% of your total funds. In other words, if you have $10,000 in your trading account, never let any trade lose more than 2% of the account value, or $200. If your stops are farther away than 2% of your account, trade shorter time frames or decrease the leverage. (For further reading, see Leverage's Double-Edged Sword Need Not Cut Deep.)

Step 7. Build positive feedback loops.

A positive feedback loop is created as a result of a well-executed trade in accordance with your plan. When you plan a trade and then execute it well, you form a positive feedback pattern. Success breeds success, which in turn breeds confidence - especially if the trade is profitable. Even if you take a small loss but do so in accordance with a planned trade, then you will be building a positive feedback loop.

Step 8. Perform weekend analysis.

It is always good to prepare in advance. On the weekend, when the markets are closed, study weekly charts to look for patterns or news that could affect your trade. Perhaps a pattern is making a double top and the pundits and the news is suggesting a market reversal. This is a kind of reflexivity where the pattern could be prompting the pundits while the pundits are reinforcing the pattern. Or the pundits may be telling you that the market is about to explode. Perhaps these are pundits hoping to lure you into the market so that they can sell their positions on increased liquidity. These are the kinds of actions to look for to help you formulate your upcoming trading week. In the cool light of objectivity, you will make your best plans. Wait for your setups and learn to be patient.

If the market does not reach your point of entry, learn to sit on your hands. You might have to wait for the opportunity longer than you anticipated. If you miss a trade, remember that there will always be another. If you have patience and discipline you can become a good trader. (To learn more, see Patience Is A Trader’s Virtue.)

Step 9. Keep a printed record.

Keeping a printed record is one of the best learning tools a trader can have. Print out a chart and list all the reasons for the trade, including the fundamentals that sway your decisions. Mark the chart with your entry and your exit points. Make any relevant comments on the chart. File this record so you can refer to it over and over again. Note the emotional reasons for taking action. Did you panic? Were you too greedy? Were you full of anxiety? Note all these feelings on your record. It is only when you can objectify your trades that you will develop the mental control and discipline to execute according to your system instead of your habits.

Bottom Line
The steps above will lead you to a structured approach to trading and in return should help you become a more refined trader. Trading is an art and the only way to become increasingly proficient is through consistent and disciplined practice. Remember the expression: the harder you practice the luckier you'll get.

Be Careful, Someone Wants Your Money

2009-04-21T11:27:00.000-07:00

The United States Commodity Futures Trading Commission ('CFTC') warns consumers to take special care to protect themselves from the many types of commodities fraud being perpetrated in today's financial markets. The CFTC is the federal agency that regulates commodity futures and options markets in the United States. We have seen a great increase in the number of scams that falsely promise high profits with low risks. Many of these scams are targeted at ethnic communities in their language, from New York to South Florida and from the Southwest to California, among other areas.

The public should be wary of any firm that offers to sell commodities or commodity futures or options. They might be selling precious metals, such as silver or gold, or on foreign currency, such as Euros, Yen or Deutschmarks. They might be selling futures or options on precious metals or foreign currency, or on other commodities such as crude oil, heating oil, unleaded gas, or agricultural products such as corn, soybeans, or cattle. The firm might be offering to manage your money for you to trade in commodity futures or options, or to pool your money with other customers. If a firm offers any of these investments, and promises high profits and low risks, or claims that they have made profits for all of their customers, you should not believe them without proof. The commodities and futures markets are very risky, and you can lose your entire investment very quickly. Anyone who claims otherwise might be breaking the law.

Foreign currency trading scams often attract customers through advertisements in local newspapers, radio promotions or attractive Internet sites. These advertisements may tout high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly. Precious metals scams often work the same way.

Commodity pool operators often solicit investments from friends, neighbors, co-workers and fellow religious or social group members by using their reputations in the community or their personal relationships. In many cases, however, the investment schemes turn out to be fraudulent, and investors lose their entire investment, in many cases as a result of outright theft. Individuals and firms that fraudulently solicit funds from investors for commodity futures and options trading are usually not registered with the CFTC. They may operate 'Ponzi' schemes in which little or none of the money sent in by investors is ever invested as promised ' in the commodity markets. Instead, the operator of the scam steals the funds, and creates the illusion of a successful business by using some of the money put in by later investors to pay phony 'profits" to earlier investors. This tactic makes it appear to investors that the investment is actually making money, which in turn attracts additional investors. Be wary of such payouts if you do not fully understand the source of any purported profits.

Introducing Brokers often use advertisements on radio and television, as well as infomercials ' program-length television commercials ' to promote commodity futures and options. These advertisements may claim that seasonal trends in the demand for certain commodities or well-known current events create an opportunity to make big money by trading in commodity futures and options. The advertisements and infomercials promise quick riches ' such as turning $5,000 into $20,000 in just a few months ' with predetermined risk. The CFTC has brought actions against wrongdoers who lured customers by claims that one could earn large profits with little risk based on predictable seasonal demands, published reports, or well-known current events.

Warning Signs of Fraud

1. Stay Away From Opportunities That Sound Too Good to Be True

Get-rich-quick schemes, including those involving foreign currency trading, tend to be frauds.

Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.

2. Avoid Any Company that Predicts or Guarantees Large Profits

Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.

Be sure you get all the information about the company and its track record and verify the data. If you can, before you invest with any company, check the company's materials with someone whose financial advice you trust

3. Stay Away From Companies That Promise Little or No Financial Risk

Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.

If in doubt, don't invest. If you can't get solid information about the company and the investment, you may not want to risk your money

4. Question Firms That Claim To Trade in the "Interbank Market"

Be wary of firms that claim that you can or should trade foreign currency in the "interbank market," or that they will do so on your behalf. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.

5. Be Wary of High-Pressure Efforts to Convince You to Send or Transfer Cash Immediately to the Firm, via Overnight Shipping Companies, the Internet, by Mail, or Otherwise

6. Be Skeptical about Unsolicited Phone Calls about Investments, Especially Those from Out-of-State Salespersons or Companies with Which You Are Unfamiliar

For More Information and Contacts

Prior to Trading, Contact the CFTC or Other Authorities, Including Your State's Attorney General's Office's Consumer Protection Bureau, and the Better Business Bureaus. You can find out if someone is registered by calling the National Futures Association at 1-800-676-4632.

The U.S. Commodity Futures Trading Commission's (CFTC) Division of Enforcement has established a toll-free telephone number to assist members of the public in reporting possible violations of the commodities laws. Anyone who wishes to report possible wrong-doing should call the Division of Enforcement at 866-FON-CFTC (866-366-2382).

Commodities misconduct can also be reported to the Enforcement Division through a form on the CFTC's website, http://www.cftc.gov/enf/enfform.htm, or by mail addressed to Office of Cooperative Enforcement, CFTC, 1155 21st St., NW, Washington, DC 20581. In addition to this Advisory and Consumer Alerts, the CFTC has also issued the following Consumer Alerts that are posted on its website at http://www.cftc.gov/cftc/cftccustomer.htm.

Day Trade Futures Online

2009-04-20T11:21:00.000-07:00

For those who are well suited to day trading and short-term trading, the futures market is one of the best games in town. As the original short-term vehicle, the futures market allows the trader to collapse the time frame in which he or she can reach the desired profit target—or pain threshold. As a result, wins and losses are compounded much more quickly than in stock trading—and, in the case of wins, often more profitably.

The ability to gain leverage with very little on margin gives you, the trader, the ability to earn more off smaller swings. And enough home runs could allow you to become your own boss, work from home in your bathrobe, or even work from your cell phone while lying on the beach. So far, so good. But what does it take to win? In Day Trade Futures Online, award-winning veteran futures trader Larry Williams gives a no-holds-barred view of the risks and rewards of this increasingly accessible arena. His straightforward approach to helping you determine your trading personality is the first step. Then he offers traders what they really need: strategies and tactics designed to beat the futures markets. From hardware and software setup to trading psychology and successful strategizing, this highly readable book covers all the bases needed to prepare you to trade online, including:*Assessing your risk threshold*Streamlining the glut of trading and price information to make it work for you*The importance of knowing how to manage your money*Choosing an online broker and utilizing other online resources, such as news, chat rooms, and message boards*When to get out of your trades*Building a system based on Larry’s time-tested strategies… and that’s just for starters. Also included are an appendix of basic futures concepts and a select bibliography of some of the best learning resources. With good humor and brutal honesty, Williams guides you in building the trading system that will work best for you.

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March Madness's Trading Secret

2009-04-19T11:16:00.000-07:00

March Madness – aka the NCAA college basketball tournament – is known for its fabulous upsets and its infamous chokes: like Gonzaga choking against UCLA in the Sweet Sixteen last week, losing in the final 10 seconds of the game after leading all game long. We've all seen it happen, and some of us have even participated first hand – whether it's basketball, football, baseball, or even an individual sport like golf – you're ahead, the game's in the bag, the champagne is on ice, and then ... things start to unravel. Sometimes a team regains its composure, sometimes it chokes.

If you're a trader, you're all too familiar with that gut-wrenching feeling.

Just like a Final Four NCAA basketball team that follows its game plan, once you have a method for trading, your next job is to follow it. So, if the zone defense is working, the players stick with the zone. If your method tells you to stay with the trade, you stay with the trade. But, then, things happen – someone breaks the zone by dribbling into the paint and dishing off to his teammate who scores. Does that mean the team immediately switches to a man-to-man defense? Not if the coach says to stick with zone "d." You stick with the one that brung ya to the Big Dance.

It's the same with trading. So you take a loss, does that mean you change your method? No. You stick with it, but there's one thing more to learn to be a successful trader and to get to the Final Four: that is, once you've got your trading method in place and know how to follow it, you have to learn to accept your gains. Don't limit them, let them play out. In this last piece in our series on the Six Secrets of a Successful Trader, Bob Prechter describes how easy it is for a trader to lose the nerve to make a big profit. (That's a polite way of saying CHOKE.)

Bob Prechter's Six Secrets of a Successful Trader

1. Find a method. 2. Be disciplined. 3. Get experience. 4. Accept responsibility. 5. Accommodate losses. 6. Accept huge gains.

*****

Requirement No. 6 is "accept gains." This one doesn't sound like a problem.

Bob Prechter: You've got a point! And when I advocate having the mental fortitude to accept huge gains, the comment usually gets a hearty laugh. Which merely goes to show how little most people think it is actually a problem. But to win the game, you have to understand why you are in it. I have seen this problem stymie lifelong traders, people who have gained or lost one point for a living for so long that they cannot make the big money when it comes, even when they say they know what is happening.

The big moves in markets come only once or twice a year. Those are the ones that will pay you for all the work, fear, sweat and aggravation of the previous 11 months or even 11 years. Don't miss them for reasons other than those required by your objectively defined method. Stay with a position during those rare times when it is hugely successful. Most people can't do it. Even though their method is telling them, "Don't sell yet," they can't stand it. If they get double their usual profit, they get out, and they're thankful.

O.K., so No. 6 is a derivative of Requirement No. 1, get a method. But what's wrong with a 100% return?

Bob Prechter: What's wrong with it is that it may not make up for all your 15% losses. Let me give you an example of what can happen when you focus on how much money you're making instead of how it is you make it. Let's say for a full year, you trade futures contracts, making $1,000 here, losing $1,500 there, making $3,000 here and losing $2,000 there. Once again, you enter a trade because your method told you to do so. Within a week, you're up $4,000.

Your friend/partner/acquaintance/broker/advisor calls you and, looking out only for your welfare, tells you to take your profit. You have guts, though, and you wait. The following week, your position is up $8,000, the best gain you have ever experienced. "Get out!" says your friend. You sweat, still hoping for further gains. The next Monday, your contract opens limit against you. Your friend calls and says, "I told you so. You got greedy. But, hey, you're still way up on the trade. Get out tomorrow." The next day, on the opening, you exit the trade, taking a $5,000 profit. It's your biggest profit of the year, and you click your heels, smiling gratefully, proud of yourself.

Then, day after day, for the next six months, you watch the market continue to go in the direction of your original trade. You try to find another entry point and continue to miss. At the end of six months, your method finally, quietly, calmly says, "Get out." You check the figures and realize that your initial entry, if held, would have netted $450,000. You gave up on a trade that was going to deliver 4,000%.

And the problem was?

Bob Prechter: Simply that you had allowed yourself unconsciously to define your "normal" range of profit and loss. You looked at a job requiring the services of a Paul Bunyan and decided that you were just a Wee Willie Winkie. Who were you to shoot for such huge gains? Why should you deserve more than your best trade of the year? You then abandoned both method and discipline. In other words, it comes down to a question of self-esteem and personal limits. But perhaps more often, it is simply that you have substituted an unconscious, undisciplined observation – that the market had some kind of permanent "normal range" of fluctuation – and then superseded your method with that false idea. This is requirement No. 1 again, but it is such a common method of failing that I include it explicitly.

Some people – probably even a lot of people – are simply unable to accept the fact that they can earn a windfall just sitting around watching a monitor and guessing that a line on the screen is headed up instead of down.

Bob Prechter: But it's NOT a windfall. That's my point. There's no easy money on Wall Street. You earned it. By taking all those losses correctly and with the required discipline, you earned the big trade.

Doesn't the IRS categorize capital gains as "unearned income"?

Bob Prechter: Yes, but that's baloney. It's hard to make money in the market. You deserve your losses, don't you? Well, you richly deserve every dime you can make, too. Don't ever forget that.

Trade Less Win More

2009-04-18T11:12:00.000-07:00

I love to trade. 10, 20, 30, 40 round turns per day - the more the merrier! After all anyone who is really honest with themselves will admit that we trade not only for money, but for excitement. For a trader there is nothing sweeter than having the market go your way. Its our drug of choice and we are all junkies to one degree or another.

Trading is first and foremost a passion. How many jobs do you know where people can't wait for Monday (or in our case Sunday night)? We are all fortunate to be involved in an enterprise that we care so much about and enjoy. But trading is also a business. And the cold hard, truth of the business of trading is that the more you trade the more you lose.

Of course there are exceptions to this rule. Some traders are extremely adept at high frequency trading and can churn out profits doing 200 round turns per day. Those traders, however, are few and far between. I call them the idiot savants of trading because they tend to have a supernatural feel for price action. For the rest of us mere mortals. rapid trading is usually a suckers game. Many times have I booked hundreds of pips of profit in Europe only to give them all back during North America trade.

The reason why frequent trading is so hard is because most of the time price action is random. The more often you enter the market the more likely you are to step in front of some monster order on the other side and get rolled over by the flow.

While it is all good and well to pontificate about discipline and patience it is also utterly unrealistic to expect us flawed human beings to follow such advice. That is why it is crucial to have a garbage account in which we unleash all of our gambling instincts without doing any serious harm to our net worth.

With so many brokers now offering micro lots, the creation of a garbage/gambling account couldn't be easier. They key is to make sure your well reasoned. disciplined trades go into you real account, and all your impulse trades go into the garbage account. If we can't realistically follow the dictum of Trade Less Win More. we should at least attempt to minimize the damage of our cravings.

5 Tips for Trading During Volatile Markets

2009-04-17T11:09:00.000-07:00

Increased volatility leads many traders to seeing an increase in trading opportunities. The huge market swings trigger thoughts of monumental upside, but also for potential loss especially if traders do not take the necessary precautions. During times of volatility, traders need to adjust their strategy to compensate for erratic market. When trading during these market conditions, traders should follow the rules below.

1. Be More Selective Before Placing Trades

Wanting to take advantage of all the trading opportunities that present themselves in volatile markets, traders are tempted to place an increase number of trades. This temptation should be avoided. It is important to remember that in volatile times, losses are likely to be big. Before placing a trading, assess risk tolerance levels. Determine the level of risk that is acceptable for the trader both psychologically and financially before placing any trades.

2. Use Less Leverage

During high market volatility, losses can be traumatic. With the average trading range increased in volatile times traders should be considering how leverage will affect trades. At a one percent or even a half percent margin, investors should be mindful of how much leverage or even the size position being traded can affect their portfolio. In normal market conditions, placing a 2 lot position is fine when you are looking to make about 50-100 pips. During a more volatile time, when the potential loss is 100-200 pips, it stops being an effective risk to reward ratio. To compensate traders should look to taking on smaller trading positions, in this case only one lot as opposed to the average 2 lot position.

3. Trade with More Discipline

Traders should always follow their predetermined trading strategy regardless of market condition. During volatile markets, this is even more important to use that same level of restraint. Traders must adhere to any set stops, contingency plans or risk management benchmarks without hesitation. This will help to define how much risk is taken should price action be uncontrollable. Without this level of discipline and self control losses can be great.

4. Tighten Stops

Many traders are hesitant to use tighter stops in volatile markets because they see the large swings increasing the likelihood that the position will be taken out. Having tighter stops can also provide great risk managers in times of extreme volatility. For example, on a EURUSD trade, rather than setting an 80 pip stop to protect your position, consider placing a 50-60 pip stop. This will insure the protection of your currency position and if the stop is broken, there is a high likelihood that the trend will continue lower and the stop took you out before you could potentially lose more money.

The width of the stop being set does depend on the currency pair being trading as some pairs have wider ranges. In a Yen cross like the GBPJPY or AUDJPY, traders may be more likely to have wider stops as their average daily range is 50% more than that of the EUR/USD. With that said, stops during volatile market conditions should not as wide as before. Instead of a stop 100 pips below entry, traders may consider a 25 pip reduction and have a 75 pip stop. Below is a chart showing the EURUSD and the GBPJPY on the same very volatile day in the forex market. The EURUSD had an impressive range of nearly 600 pips! The GBPJPY far dominated though with nearly a 2000 pip trading range.

5. Be Prepared

It also helps a trader to know what is causing the current spate of volatility in the markets in order to be prepared for the unexpected. As such, an investor can accommodate their strategy to the market environment and not just the currency pair being traded. The first of these considerations is accounting for emotions in a market: is fear currently driving the market lower? Or is it buyer's mania that is keeping the bullish tone alive? Traders' overreaction and emotion tend to push markets to overextended targets. This fact alone creates volatility through simple supply and demand.

Volatility can also, and more than likely will, be sparked by economic events. In this instance, market participants may interpret fundamental data differently and not as cut and dry as the more novice trader. A perfect example of this is usually monthly manufacturing reports that are released in pretty much all industrial economies. The classic scenario has the market honed in on a particular number for the month. However, traders young and old will sometimes wonder why the market sold off if manufacturing showed positive growth. The answer is simple. The market had a different interpretation and positions were violently reshaped and shifted. These tend to create great opportunities for some and horrible memories for others. Below is an hourly chart of the EUR/USD during ISM Manufacturing for October 1, 2008. Here we can see the huge price gap that occurred due to market volatility as well as the resulting trend.

Panic and erratic momentum can additionally be found in certain market environments. Not to be confused with fear or greed, panic selling and buying can create very choppy and relatively untradeable markets. These conditions will lead some to flip flop their positions while leaving others gaping at the fact that the position was right, only to be stopped out prematurely. These two common examples will create further panic and volatility as traders abandon their own individual strategy for the possibility of instant profits or stoppage revenge. As a result, a vicious cycle of volatility ensues until a definitive market direction can be established.

The simple rules above, and a task of getting to know the current trading environment, can empower every trader through the ranks. Although some relate volatility with difficult and untouchable markets, opportunities continue to remain abound in these less than attractive conditions to those focused and fortunate.

By following these five simple steps, trading in volatile market conditions should be a little simpler. Don't forget to adjust leverage based on volatility, follow your trading plan, tighten your stops and know why you are getting into a trade before you place it.

A Trade or a Gamble?

2009-04-16T10:58:00.000-07:00

I love to trade a lot - which is of course a euphemistic way of saying I love to gamble. Although I have been to Vegas more than a dozen times I never laid down so much as a dollar bet in any casino. I have absolutely no interest in backjack, craps, slot machines or any other games of chance and I look down with disdain at the excited masses crowding the cavernous Vegas gambling halls. But deep down, if I am honest with myself, I have to admit that whenever I trade a lot I am just as much of a sucker as every hopeless loser that gives up his hard earned money to Steve Wynn or Sheldon Adelson

If you are constantly trading just for the sake of trading, just for the rush of being “in the game”, just for the momentarily thrill of being right you are gambling. You are trading without an edge, without any solid information and are therefore completely vulnerable to the random vagaries of price.

Towards the end of last year I decided to do something about my toxic addiction and created two separate accounts - one for trades that would only follow my trading plan - the other for all my trading/gambling impulses. But before I share my experience with you allow me to define the difference between a trade and a gamble. The key distinction is information. The less information you posses the more likely the chances are that your trade is gamble.

A techincal trader who only looks at the five minute chart to gauge his support and resistance points is just gambling. On the other hand a trader who looks through the hourly, daily, weekly and monthly support points, carefully calculates Fib retracement positions and only acts when multiple time frames confirm his analysis has a much greater chance of success. Similarly a fundamental trader who mindlessly reacts to the latest economic release without understanding the prior market expectations, the current price flow and and countervailing information on the other currency in the pair is also just gambling.

Notice the unifying theme? Like everything else in life success in trading requires hard work and homework. There is no magic formula, no simple 5 minutes per day method to make you money. In trading, working hard is no guarantee of winning, but not working hard is an assurance of losing, because trading at its core is a game of information and you must always be up to date on what' s gong on in the market or become the sucker at the table.

Now back to my experiment. I subdivided my trading into two accounts - one where I traded only calendar risk on a reactive basis with very disciplined entries and exit rules and strict adherence to money management. The other account was just for my whims and impulses. An interesting thing occurred. My “trading plan” account which I traded far rarely and more carefully became much more profitable and incurred much lower drawdowns. Meanwhile the equity in my gambling account bounced up and down like a hopped up rubber ball. Suddenly the thrill of “being in the game” wasn't so much fun. Like a reformed smoker who appreciates the smell of fresh air, I was no longer drawn to making impulsive trades. That's not completely true. I still dabbled in my gambling account (who amongst us can completely give up our vices?) but my need to trade constantly has been reduced substantially. The less you gamble, the more you realize how stupid it is and that has been the most valuable lesson learned so far.

Risk and Reward

2009-04-15T10:55:00.000-07:00

How do you determine proper risk and reward in trading? I don't think anyone can ever provide a definitive answer to that question because its is akin to asking how many layers do you need to walk outside of my apartment in New York City in the winter. Right now as the thermometer reads a balmy 8 degrees Fahrenheit as I type this at 3 in the morning, you need about four layers just to make it to the coffee shop across the street. But just last week you could have made the same journey in a T shirt without feeling a chill.

Trading, like the addled, globally warmed weather of my great metropolis is an imprecise and a highly volatile proposition. Therefore the question of risk and reward always changes with the circumstances of the moment. The traditional view on risk and reward is to set the ration to at least 2:1 - risking half the amount of pips as you are trying to make, so that if your profit target was 100 then your stop would be 50.

In theory this sounds like a terrific plan. You only need to be correct 4 out of 10 times to make money. However, I've never met a real life trader who actually put this principle into practice. I've received plenty of such advice on this matter from analysts, strategists, trading coaches and a whole host of others who have never wagered so much as their breakfast money on a trade, but I have never seen the 2:1 ratio employed by anyone who actually makes their living from the market.

Why?

The primary reason is that most people who never trade, do not realize that there is no such thing as reward in the market. There is only risk. Markets are not like factories that manufacture profits to your order. In fact, markets do everything possible to frustrate your goals. Imagine a trade where you risk 100 points with a profit target of 200. Initially the trade goes your way and the floating p/l quickly rises until it reaches +199. Disciplined in your 2:1 strategy you wait for the profit target to hit so you can book another good trade. But guess what? The market suddenly stalls and then reverses. You watch in horror as the positive trade quickly turns negative and then drops through your stop. What was you loss? On paper you lost 100 points, but in actuality you lost -299 points ( 100 points on your stop and -199 you did not book). Welcome to real life trading where the “theoretical” 2:1 risk reward is far more elusive than you think.

The fact of the matter is that profits cannot be forecast in the market. The only thing you can control is risk. That's why we always trade with two units. That's why we always take short first targets and that's why we assiduously control risk by trailing our stops. It may not be glamorous, but its the only way we know how deal with risk and reward at BKT.

Forex Trading Systems

2009-04-14T10:22:00.000-07:00

You should build your own trading system

A trading system on the Forex market is a type of strategy that allows traders to trade with a set of rules. There are many free trading systems and strategies printed in trading articles, journals, books and on trading-related websites. I would have to say that if you are not inclined to learn how to develop your own trading methodology, then perhaps you should consider giving your money for someone else to invest. Give it to someone who is trading a system that he developed and tested himself because he is more likely to have the confidence and courage to follow his own trading system.

Why you need a forex trading system?

It’s easy to trade with a system.

A good system provides consistent result.

What makes a good trading system?

It’s simple. Forget complicated systems with lots of rules - it’s a proven fact that simple systems work better - and are less likely to fail, in the brutal world of trading.

A trading system with profitable expectation.

It provides good ratio of reward/risk.

A system of comprehensive risk management including market exposure weightings, stop-loss provisions and capital commitment guidelines that preserve capital during trend-less or volatile periods.

Once you learn how to develop trading systems and strategies, you can then be better equipped to test them as well. By this point you might even find that the system created by yourself is the best one for you, because it becomes the system more suited to your profit objectives while operating within your risk tolerance levels. It is likely that once you develops this level of competence, you will simply acquire other trading systems only to dissect them, grab the parts you likes and add them to your own system. To me, the irony is that for a trader to know which system to purchase, you must first learn how to create a system. And after knowing how to create a system, he will no longer have the need to buy one.

Forex Trading: The Perfect Forex Trading System

2009-04-13T10:44:00.000-07:00

Trading the Forex market has become very popular in the last few years. But how difficult is it to achieve success in the Forex trading arena? Or let me rephrase this question, how many traders achieve consistent profitable results trading the Forex market? Unfortunately very few, only about 5% of traders achieve this goal. One of the main reasons of this is because Forex traders focus in the wrong information to make their trading decisions and totally forget about the most important factor: Price behavior.

Most Forex trading systems are made off technical indicators. But what are technical indicators? They are just a series of data points plotted in a chart; these points are derived from a mathematical formula applied to the price of any given currency pair. In other words, it is a chart of price plotted in a different way that helps us see other aspects of price.

There is an important implication on this definition of technical indicators. The fact that the readings obtained from them are based on price action. Take for instance a long MA crossover signal, the price has gone up enough to make the short period MA crossover the long period MA generating a long signal. Most traders see it as "the MA crossover made the price go up," but it happened the other way around, the MA crossover signal occurred because the price went up. Where I’m trying to get here is that at the end, price behavior dictates how an indicator will act, and this should be taken into consideration on any trading decision made.

Trading decisions based on technical indicators without taking price action into consideration will give us less accurate results. For example, again a long signal generated by a MA crossover as the market approaches an important resistance level. If the price suddenly starts to bounce back off that important level there is no point on taking this signal, price action is telling us the market doesn’t want to go up. Most of the time, under this circumstances, the market will continue to fall down, disregarding the MA crossover.

Don’t get me wrong here, technical indicators are a very important aspect of trading. They help us see certain conditions that are otherwise difficult to see by watching pure price action. But when it comes to pull the trigger, price action incorporation into our Forex trading system will definitely put the odds in our favor, it will generate higher probability trades.

So, how to create a perfect Forex trading system?

First of all, you need to make sure your trading system fits your trading personality; otherwise you will find it hard to follow it. Every trader has different needs and goals, thus there is no system that perfectly fits all traders. You need to make your own research on various trading styles and technical indicators until you find a concept that perfectly works for you. Make sure you know the nature of whatever technical indicator used.

Secondly, incorporate price action into your system. So you only take long signals if the price behavior tells you the market wants to go up, and short signals if the market gives you indication that it will go down.

Third, and most importantly, you need to have the discipline to follow your Forex trading system rigorously. Try it first on a demo account, then move on to a small account and finally when feeling comfortably and being consistent profitable apply your system in a regular account.

Mechanical systems

2009-04-10T03:28:00.000-07:00

There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.

We will first analyze the pros and cons about each system approach.

Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.

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

Discretionary systems

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

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

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

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

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

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

I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, I closely watch the price behavior and finally decide whether it is a good opportunity or not.

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

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

About the author:
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com a high quality Forex training company

Managing Islamic Forex Trading Accounts

2009-04-10T03:18:00.000-07:00

Forex trading also became popular to many Muslims. Like any other traders, they have an option to manage their own accounts or open a managed Islamic forex accounts. Forex accounts that are managed are created for people who do not have the ability in devoting their time on foreign exchange transactions. This is also an option for people who do not have the expertise in dealing with the forex markets. They can hire professionals who are available for managing forex accounts.

Forex account management is a very competitive and serious business. Many investors are allocating some portions of their funds on forex accounts that are managed by professionals. This is very helpful in reducing the risks and mitigating any losses arising from portfolios which include bond market and stock. Remember, the forex transaction is separated from the stock market, which is why the losses and profits are also separated.

Islamic forex trading accounts can enhance the portfolios of the traders in great ways. Keep in mind that Islamic forex trading accounts which are professionally managed regardless of the account or the manager of forex trading you have chosen should provide these things:

-The Islamic forex trading account is not tied on the operations of stock markets. It should provide better returns than treasury bonds or other money generating instruments in the market.

-It is very important that professionals who handle your account have expertise. The company should have a good reputation on the forex markets. The foreign trading accounts should be managed by experienced professionals. Take note, most transnational firms and foreign banks are employing the best people who always outperformed others. It does necessarily mean that you hired people who are graduates of Harvard. It only emphasizes that the traders should hire better trained people who can successfully manage their Islamic forex trading accounts.

-The company or professionals that handle your Islamic forex trading accounts should know how to leverage to gain maximum profits. The manager can book profits both from the rising and falling currency markets. It is recommended that weekly or monthly reports are provided for every forex transactions together with the real time reports.

-The Islamic forex trading accounts has liquidity. It should offer the traders easy money withdrawals from investors within specified intervals of time and during emergency cases.

-The Islamic forex trading accounts which are managed by professionals uses tools on statistical analysis to optimum results and maximum profits. It is because:

•The professionals know the market on trading forex. They are well educated about the currencies being trade therefore they can also accurately predict the direction of the money in the forex markets. They know the right speculation about the money being sold and bought in pairs. The rise and fall of the currency prices are well predicted so they can sell the currency with higher value and buy the currency with lower value.

•They have studied your Islamic forex trading accounts picking the forex trading system that will be compatible with it. They can choose the system letting your trades to be automated according to its history, or followed traditional valleys and peaks. This can ensure better execution of the trades preventing market manipulation.

•The professionals are well trained on dealing with real time forex market trading. Their learning experience can handle whatever market fluctuation and sees it as an opportunity in making huge profits. They are also well acquainted with the things needed in minimizing market losses.

•They know the margins of every forex trading. So, they can manage your Islamic forex trading account in such a way to avoid trading margins that can accumulate huge amount of money loss.

Global Market Trends

2009-04-10T03:15:00.000-07:00

Forex trading charts provide a trader with information on currency price trends, indicators, deals made and other pertinent data that could help him make the right trading decisions. These charts can be found online for free or a trader can purchase software that will generate data significant to the foreign exchange market.

Some of the most popular Forex trading charts used by online brokers and traders are line charts, candlestick charts and bar charts. A line chart is comprised of a single line tracing the path from one closing price to the next one. The line shows the price movement of a pair of currency over a given period of time.

A candlestick chart, on the other hand, is more graphical in nature and more sophisticated than a line chart. In candlesticks, the middle block represents the difference between the opening and closing price. Most of the time, the middle block is colored to show that the currency closed at a lower price than when it opened.

Bar charts in foreign exchange trade represent opening and closing prices at the same time. The bottom of the vertical bar in this chart represents the lowest traded price for a given time, while the top of the bar represents the highest price paid. The horizontal line on the left side shows the opening price and its continuous path traces price movements that will end at the closing price.

Currency market charts are commonly used by market analysts who favor the technical analysis method. Technical analysis is mainly concerned with price movements; hence, the use of these charts. This is different from fundamental analysis which relies mostly on economic indicators or in the status of a country's economy to determine the strength of its currency.

Interpreting charts to study market trends might sound like complicated practice. Why not just use fundamental analysis to evaluate currency strengths? According to market analysts, using both is the ideal way. Both fundamental and technical analysis are needed for a trader to make the right trading decisions in the currency market. Using economic indicators or price movement alone as basis for making trading decisions will not give a trader a complete idea of how the global market is doing. And that is what Forex is; a global trading market.

Knowing how to interpret Forex trading charts will give a trader an advantage in terms of making trading decisions. Samples of these charts are available online and a would-be trader can access them easily and use them to practice his analytical talents

basically two types of Forex trading systems

2009-04-08T20:07:00.000-07:00

There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.

We will first analyze the pros and cons about each system approach.
Mechanical systems Advantages.
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.

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

Discretionary systems

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

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

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

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

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

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

I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, I closely watch the price behavior and finally decide whether it is a good opportunity or not.

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

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

About the author:
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com a high quality Forex training company

Forex traders take Forex trading courses

2009-03-17T22:31:00.001-07:00

Should new Forex traders take Forex trading courses or join a Forex training program? Definitely yes; by now you have probably heard that only 5% of traders achieve consistent profitable results when trading the Forex market. The main reason for this is the lack of education. Don’t get me wrong here, taking a Forex training program or a Forex trading course won’t guarantee profitable results, nothing can, but choosing the right Forex training program or Forex trading course will definitely put the odds in your favor.

Before spending any amount of money on any Forex trading course or Forex training program there are some important aspects you need to take in consideration. There are many training programs available, but not every one of them suits the needs of every trader.

The first thing you should be looking in a Forex training program is the content of the material. Unfortunately, most courses or training programs focus or spend most of the time on basic concepts. Though these basic concepts are important, spending most of the course on them won’t help the trader to make consistent results.

The following subjects are what I consider the most important aspects of trading and every training program or trading course should address:

Forex trading basics.
Review basic concepts such as: margin, type of orders, a little background, bid/ask, rollover, etc. You need to make sure you understand every single concept to perfection.

Main drawbacks of Forex traders.
Being aware of the common mistakes made by Forex traders and knowing how to handle them will prevent new traders from making those mistakes.

Technical and fundamental analysis.
These are the two main approaches adopted by Forex traders. Knowing how to properly apply each concept will definitely put the odds in your favor.

The three pillars of Forex trading. I consider that these three subjects have the most impact on every trader trading account.

Forex trading system development.
Having the right system is a must if you want to have consistent profitable results. Having a system that doesn’t fit you will cause a series of problems that will make your trading account vanish away (second guessing the system, not following your system, etc.)

Money management.
This is considered by many successful traders to be the most important single aspect of trading. Money management helps to increase your profits geometrically and at the same time limit your losses (i.e. a good risk reward ratio of about 2:1 will make you money in a Forex trading system that is right only 38% of the time.)

Trading psychology.
Being aware and knowing hot to handle the psychological barriers that affect every trader decision will put the odds in your favor.

Other important aspects every training program should include are:
Developing habits for success (such as discipline patience, taking responsibility of every action, commitment, etc.,) understanding and taking our trading as a business, risk and trade management.

Another important aspect you should take into consideration when choosing a Forex training program is the mechanics of it, getting to know how the training program works.

A good course will have the following:

A live conference room, where you can apply everything learned under live market conditions.

One-on-one feedback, every trader has different needs and requires special attention. For instance a trader wanting to improve the system and requires individual feedback from the instructor about it.

Online trading course, a course that could be accessible through internet. A plus is a course where you are able to access the course at the convenient time for you, so you don’t have to change your lifestyle.

A forum, where members can talk just about everything related to the Forex market and the Forex training program.

Trading the Forex market is no easy task. It requires a lot of hard work. Making the right decision will definitely put the odds in your favor. Take your time when doing your diligence because it is a big and important step in a trader’s trading career.

About the author:
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.coma high quality Forex training company.

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