A recent divergence between the Euro futures contract and the US dollar index is just one piece of evidence suggesting that the EURUSD has reversed course. Additional evidence includes a long term cycle, wave structure at multiple degrees of trend, and recent momentum considerations.
Market turns almost always occur with divergence. The most commonly recognized divergence is momentum (such as RSI) divergence whereas a new high is not confirmed by a new high in momentum and vice versa. A different kind of divergence occurs when similar markets fail to confirm new highs or lows. Equity technicians watch the Dow Industrial average and the Dow Transportation average at potential turning points. If one index fails to confirm the other’s new high or low, then the probability of a reversal is increased. This dynamic has occurred on 3 occasions since mid 2008*.
July 2008: Euro trades above prior high set in April 2008 but USD index fails to drop below April 2008 low - USD bullish reversal
March 2009: USD index trades above prior high set in November 2008 but Euro fails to drop below November 2008 low - USD bearish reversal
Now: USD index trades below prior low set in December 2008 but Euro fails to exceed its December 2008 high - USD bullish reversal?
*there have been other instances of this divergence, but I am only showing the most recent instances in this report
This is a chart that I have shown numerous times over the last year. It is important to keep in mind how important a USD turn may have occurred at 1.6000. Since the end of the Bretton Woods era, the EURUSD (DEM rates are used before 1998) exchange rate has exhibited a long term rhythm of roughly a decade up and six years down. If the rhythm holds, then the EURUSD is in a multi-year bear market. Wave structure is in agreement with the roughly 10 year up / 6 year down sequence. While not perfect (what real life wave count is perfect?), the decline from 1.6000 is characteristic of an impulse (wave 5 truncated). Given the amount of time that the consolidation since has consumed, there is little doubt that everything since October 2008 is a correction. Although some may have qualms with labeling the rally from 1.2454 as a truncated wave C, there is strong evidence that this is the correct interpretation. The rally from 1.2454 is a clear 5 wave affair (C waves are in 5 waves). Wave v of C is a diagonal with a textbook throwover (in which price exceeds the top diagonal line before reversing). RSI divergence is present at the recent high as well. A view of the weekly chart will show that last week’s price action traced out a key reversal. Sentiment figures, including COT data, warn of a turn. On a weekly closing basis, last week’s high is over 250 pips higher than the December high. On a daily closing basis, last week’s high is just several pips shy of the December high. This may be explained by the lack of liquidity that is common in December.
Finally, the short term pattern confirms the bigger picture bearish view. The decline from 1.4452 is in 5 waves and 5 wave moves occur in the direction of the larger trend. One more low (below 1.4103) may be required in order to complete the decline from 1.4452 but a correction; back to at least 1.4223 and possibly 1.4300 will present an opportunity to sell the EURUSD with a stop above 1.4452.
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market. Follow his intraday market commentary at DailyFX Forex Stream.
Tuesday, September 8, 2009
TREASURY AUCTION
Treasuries Gain Prior to Three-Year Note Auction, Fed Meeting
Treasuries rose for a second day before a record $37 billion auction of three-year notes and as the Federal Reserve meets to discuss interest rates and its asset purchase program.
Ten-year notes gained yesterday for the first time in six days before the first of three debt auctions this week totaling $75 billion, the largest quarterly refunding to date. U.S. stock-index futures declined. The Federal Open Market Committee will keep its key lending rate between zero and 0.25 percent, according to all 45 economists surveyed by Bloomberg. The Fed may also decide whether to extend its $300 billion Treasury purchase plan.
“We’ve been able to sustain a bit of a bid today as yields are still attractive,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “There is a general feeling that the refunding will go well, and there are no surprises expected out of the FOMC meeting.”
The yield on the 10-year note fell three basis points, or 0.03 percentage point, to 3.75 percent at 9:05 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 rose 7/32, or $2.19 per $1,000 face amount, to 94 31/32.
The U.S. government plans to sell $23 billion of 10-year notes tomorrow and $15 billion of 30-year bonds on Aug. 13. President Barack Obama has boosted marketable U.S. debt to a record $6.78 trillion to stimulate the economy and service deficits.
Three-Year Notes
The three-year notes being sold today yielded 1.84 percent in pre-auction trading. The securities drew a yield of 1.519 percent at the last sale, on July 7, when investors bid for 2.62 times the amount of debt offered, compared with 2.82 at the June auction.
Indirect bidders, an investor class includes foreign central banks, bought 54 percent of the notes in July after purchasing 43.8 percent in the prior auction.
Ten-year yields surged 37 basis points last week, the most since 2003, as better-than-estimated employment, home-sales and manufacturing data boosted confidence that the U.S. economy is recovering from the worst slump since the Great Depression.
Fed policy makers meeting today are likely to discuss the purchases and other quantitative-easing measures, which include buying $1.45 trillion in mortgage-related securities, designed to drag the economy out of the recession.
“Policy makers at the FOMC will probably express more optimism about growth and no change to the quantitative easing program,” said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of the 18 primary dealers that trade with the Fed.
The central bank is scheduled to purchase Treasuries due from August 2026 to May 2039 today. It said in March it would buy as much as $300 billion of government securities over six months to cap consumer borrowing costs.
Productivity
The productivity of U.S. workers grew at an annual 6.4 percent pace in the second quarter, more than forecast, after a 0.3 percent gain in the prior three months, Labor Department data showed today in Washington.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 1.95 percentage points, from near zero at the end of 2008. The spread has averaged 2.20 percentage points for the past five years.
With the Fed on target to complete the planned purchase of $300 billion of Treasuries in September, the exit of this year’s biggest buyer is unlikely to raise yields by depressing prices, the world’s largest bondholders say.
Counterproductive
The market for TIPS shows traders expect inflation over the next 10 years to average 1.96 percent, which is 0.74 percentage points less than the past decade’s average and too little to erase the value of bonds’ fixed payments.
“At this stage it would probably be counterproductive for the Fed to extend this program,” said Mihir Worah, who oversees the $14 billion Real Return Fund for Pacific Investment Management Co. in Newport Beach, California. “The market does not want it to be continued” because an expansion would renew concerns that money printed to fund it would fuel inflation, he said.
Treasuries handed investors a loss of 5 percent this year, while U.S. corporate bonds returned 18 percent, according to Merrill Lynch
Treasuries rose for a second day before a record $37 billion auction of three-year notes and as the Federal Reserve meets to discuss interest rates and its asset purchase program.
Ten-year notes gained yesterday for the first time in six days before the first of three debt auctions this week totaling $75 billion, the largest quarterly refunding to date. U.S. stock-index futures declined. The Federal Open Market Committee will keep its key lending rate between zero and 0.25 percent, according to all 45 economists surveyed by Bloomberg. The Fed may also decide whether to extend its $300 billion Treasury purchase plan.
“We’ve been able to sustain a bit of a bid today as yields are still attractive,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “There is a general feeling that the refunding will go well, and there are no surprises expected out of the FOMC meeting.”
The yield on the 10-year note fell three basis points, or 0.03 percentage point, to 3.75 percent at 9:05 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 rose 7/32, or $2.19 per $1,000 face amount, to 94 31/32.
The U.S. government plans to sell $23 billion of 10-year notes tomorrow and $15 billion of 30-year bonds on Aug. 13. President Barack Obama has boosted marketable U.S. debt to a record $6.78 trillion to stimulate the economy and service deficits.
Three-Year Notes
The three-year notes being sold today yielded 1.84 percent in pre-auction trading. The securities drew a yield of 1.519 percent at the last sale, on July 7, when investors bid for 2.62 times the amount of debt offered, compared with 2.82 at the June auction.
Indirect bidders, an investor class includes foreign central banks, bought 54 percent of the notes in July after purchasing 43.8 percent in the prior auction.
Ten-year yields surged 37 basis points last week, the most since 2003, as better-than-estimated employment, home-sales and manufacturing data boosted confidence that the U.S. economy is recovering from the worst slump since the Great Depression.
Fed policy makers meeting today are likely to discuss the purchases and other quantitative-easing measures, which include buying $1.45 trillion in mortgage-related securities, designed to drag the economy out of the recession.
“Policy makers at the FOMC will probably express more optimism about growth and no change to the quantitative easing program,” said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of the 18 primary dealers that trade with the Fed.
The central bank is scheduled to purchase Treasuries due from August 2026 to May 2039 today. It said in March it would buy as much as $300 billion of government securities over six months to cap consumer borrowing costs.
Productivity
The productivity of U.S. workers grew at an annual 6.4 percent pace in the second quarter, more than forecast, after a 0.3 percent gain in the prior three months, Labor Department data showed today in Washington.
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 1.95 percentage points, from near zero at the end of 2008. The spread has averaged 2.20 percentage points for the past five years.
With the Fed on target to complete the planned purchase of $300 billion of Treasuries in September, the exit of this year’s biggest buyer is unlikely to raise yields by depressing prices, the world’s largest bondholders say.
Counterproductive
The market for TIPS shows traders expect inflation over the next 10 years to average 1.96 percent, which is 0.74 percentage points less than the past decade’s average and too little to erase the value of bonds’ fixed payments.
“At this stage it would probably be counterproductive for the Fed to extend this program,” said Mihir Worah, who oversees the $14 billion Real Return Fund for Pacific Investment Management Co. in Newport Beach, California. “The market does not want it to be continued” because an expansion would renew concerns that money printed to fund it would fuel inflation, he said.
Treasuries handed investors a loss of 5 percent this year, while U.S. corporate bonds returned 18 percent, according to Merrill Lynch
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International Insurance is the premier online site for international health insurance and international travel health insurance plans, offering a broad range of plans that provide comprehensive yet affordable international insurance coverage for around the world. If you need any assistance in your search for international insurance please do not hesitate to contact our customer support team who will be happy to assist you.
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When you travel around the world, you need to make sure you have the right travel insurance in place to protect you from the unexpected. Whether you are traveling for a short trip, or an extended world tour we have a range of international travel insurance plans that provide full coverage from 5 days up to 1 year (with renewability up to 3 years), plus a range of trip cancellation, emergency evacuation insurance and extreme sports insurance plans.
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If you plan to be residing outside of your home country for more than a year, we have a range of international health insurance plans that are specifically designed to offer world class health insurance benefits. We have 3 main plans that provide coverage from a basic health insurance plan for those on a budget, right up to the Platinum plan that provides coverage for those who require the very best plan money can buy.
International Student Insurance
We offer a range of study abroad insurance and international student insurance plan that are designed specifically for students, offering great benefits and at a great price. All the plans we offer will meet and exceed the USA State Department Student Insurance guidelines, plus the plans will meet and exceed most insurance guidelines around the world. Plans are available from 5 days up to 1 year, plus longer term annual coverage.
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For groups of 5 or more, we can offer a range of plans that offer discounted prices and better benefits than our standard individual plans. Our group plans are ideal for student groups, international employee groups, travel groups and much more. All our group plans are tailor made to your needs and wants, so please learn more about what we can offer and let our team provide a personalized quotation for you.
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International Association of Insurance Supervisors
Welcome to the website of the International Association of Insurance Supervisors (IAIS). Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers. Its objectives are to:
Cooperate to contribute to improved supervision of the insurance industry on a domestic as well as on an international level in order to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders
Promote the development of well-regulated insurance markets
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This website is designed to provide you with an overview of the activities of the IAIS and give you access to its publications
Welcome to the website of the International Association of Insurance Supervisors (IAIS). Established in 1994, the IAIS represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers. Its objectives are to:
Cooperate to contribute to improved supervision of the insurance industry on a domestic as well as on an international level in order to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders
Promote the development of well-regulated insurance markets
Contribute to global financial stability
This website is designed to provide you with an overview of the activities of the IAIS and give you access to its publications
Monday, September 7, 2009
FOREX PROS
But one of the main FOREX pros is margin. In this market, a trader's money can play with 5-times as much value of product as a futures trader's, or 50 times more than a stock trader's.
Just like futures and stock speculation, a FOREX trader has the ability to control a large amount of currency by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value if you are trading stocks. One of the FOREX pros is the margin requirements for FOREX are about 1%. For example, the margin required to trade foreign exchange is $1000 for every $100,000. This can be a very profitable way to trade, but it's important to fully understand the risks that are involved.
When you trade in futures, you have to pay exchange and brokerage fees. FOREX is commission free, a much better scenario and another FOREX pro. Currency trading occurs on a worldwide inter-bank market that lets buyers be matched with sellers in an instant. But even though you do not have to pay a commission charge to a broker to be matched up with a buyer or seller, the spread is usually larger than it is when you are trading futures. And the spread is where the brokerage makes their money.
For example, if you are trading a Japanese Yen/US Dollar pair, a FOREX trade would have about a 3 point spread (worth $30). Trading a JY futures trade would likely have a spread of only 1 point (worth $10), but you would also be charged the broker's commission on top of that. This price could be as low as $10 for self-directed online trading, or as high as $50 for full-service trading. However, this is generally all-inclusive pricing. It’s a good idea to compare both online FOREX and your specific futures commission charges to see which commission is the greater one.
This may seem complicated, and frankly, it is a bit. The FOREX market is a technical market, but if you are willing to take the time to understand the workings of the market as well as the FOREx pros and apply good trading discipline, you will realize substantial profits.
Just like futures and stock speculation, a FOREX trader has the ability to control a large amount of currency by putting up a small amount of margin. However, the margin requirements that are needed for trading futures are usually around 5% of the full value of the holding, or 50% of the total value if you are trading stocks. One of the FOREX pros is the margin requirements for FOREX are about 1%. For example, the margin required to trade foreign exchange is $1000 for every $100,000. This can be a very profitable way to trade, but it's important to fully understand the risks that are involved.
When you trade in futures, you have to pay exchange and brokerage fees. FOREX is commission free, a much better scenario and another FOREX pro. Currency trading occurs on a worldwide inter-bank market that lets buyers be matched with sellers in an instant. But even though you do not have to pay a commission charge to a broker to be matched up with a buyer or seller, the spread is usually larger than it is when you are trading futures. And the spread is where the brokerage makes their money.
For example, if you are trading a Japanese Yen/US Dollar pair, a FOREX trade would have about a 3 point spread (worth $30). Trading a JY futures trade would likely have a spread of only 1 point (worth $10), but you would also be charged the broker's commission on top of that. This price could be as low as $10 for self-directed online trading, or as high as $50 for full-service trading. However, this is generally all-inclusive pricing. It’s a good idea to compare both online FOREX and your specific futures commission charges to see which commission is the greater one.
This may seem complicated, and frankly, it is a bit. The FOREX market is a technical market, but if you are willing to take the time to understand the workings of the market as well as the FOREx pros and apply good trading discipline, you will realize substantial profits.
FINDING BROKER
It’s not always easy to know what to look for in a broker in any market, much less a market as complex as the FOREX. But, if you want to trade in FOREX you need a FOREX broker. While it might be tempting to simply ask the FOREX brokers what they can do for you, you can’t always depend on them to give you a straight answer. Here are a few things to consider when choosing your FOREX broker.
You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money.
Along with this, you should be looking for a broker attached to a reputable institution.
Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you’ve narrowed your choices down to brokers that won’t cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems.
Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any FOREX broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for FOREX brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the FOREX broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
You will want a broker that has low spreads. Since FOREX brokers don't charge a commission, this difference is how they make money. Low spreads will save you money.
Along with this, you should be looking for a broker attached to a reputable institution.
Unlike equity brokers, FOREX brokers are usually attached to large banks or lending institutions. The broker should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you’ve narrowed your choices down to brokers that won’t cost you too much, and that are reputable, consider the trading tools that they are offering you. FOREX brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real-time charts, technical analysis tools, real-time news and data, and may even offer support for the various trading systems.
Before you commit to any one broker, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a broker who will give you what you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential broker has. Leverage is a necessity in FOREX trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any FOREX broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for FOREX brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the FOREX broker you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
FOREX MARGIN
Any broker you consider will likely have a minimum account size, also known as FOREX account margins or initial margin available to traders. Once you have deposited your money into the account you will be able to begin trading. The broker will also stipulate how much equity they require per position, or lot, traded. Always make sure that you know how your FOREX account margin is going to work.
Read the margin agreement between you and your clearing firm carefully. Remember, a FOREX margin account is basically a loan. The margin agreement will describe how the interest on that loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed. Talk to your account representative if you have any questions.
Trading currencies on margin greatly increases your buying power. If you have $5,000 cash in a FOREX margin account that allows 100:1 leverage, you could purchase up to $500,000 worth of currency – because you only have to post 1% of the purchase price as collateral. This is particularly useful in the FOREX market, where traders work with small price changes to realize profits. But the FOREX market is a volatile market, and positions can quickly move against a trader. This is when the high margin rates can create spectacular losses.
If the market moves against you, the positions that you have in your account could be partially or completely liquidated if the available margin in your account falls below your maintenance level. Always remember that your broker may not berequired to make a margin call, and even if your agreement states that they do, they may not wait for you to respond to the call. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit risk. With care, margin can be a powerful and lucrative tool. Used wisely, as part of a carefully thought out approach to trading, Forex account margins make the FOREX market work for small traders.
Read the margin agreement between you and your clearing firm carefully. Remember, a FOREX margin account is basically a loan. The margin agreement will describe how the interest on that loan is calculated, how you are responsible for repaying the loan, and how the securities you purchase serve as collateral for the loan. Carefully review the agreement to determine what notice, if any, your firm must give you before selling your securities to collect the money you have borrowed. Talk to your account representative if you have any questions.
Trading currencies on margin greatly increases your buying power. If you have $5,000 cash in a FOREX margin account that allows 100:1 leverage, you could purchase up to $500,000 worth of currency – because you only have to post 1% of the purchase price as collateral. This is particularly useful in the FOREX market, where traders work with small price changes to realize profits. But the FOREX market is a volatile market, and positions can quickly move against a trader. This is when the high margin rates can create spectacular losses.
If the market moves against you, the positions that you have in your account could be partially or completely liquidated if the available margin in your account falls below your maintenance level. Always remember that your broker may not berequired to make a margin call, and even if your agreement states that they do, they may not wait for you to respond to the call. Because of this, you should monitor your margin balance on a regular basis and utilize stop-loss orders on every open position to limit risk. With care, margin can be a powerful and lucrative tool. Used wisely, as part of a carefully thought out approach to trading, Forex account margins make the FOREX market work for small traders.
FOREX STRATEGY
All successful traders have a carefully thought out FOREX strategy that they follow to make profitable trades. This FOREX strategy is generally based on a system that allows them to find good trades. And the FOREX strategy is based on some form of market analysis. Successful traders need some way to interpret and even predict some of the movements of the market.
There are two basic approaches to analysing market movements, in both equity markets and the FOREX market. These are technical analysis and fundamental analysis. However, technical analysis is much more likely to be used by traders. Still, it’s good to have an understanding of both types of analysis, so that you can decide which type would work best for your FOREX strategy.
There are two basic approaches to analysing market movements, in both equity markets and the FOREX market. These are technical analysis and fundamental analysis. However, technical analysis is much more likely to be used by traders. Still, it’s good to have an understanding of both types of analysis, so that you can decide which type would work best for your FOREX strategy.
Thursday, September 3, 2009
TECHNICAL TRADE GUIDE
1. Chart the Trends and Range Bound MarketsUse long term charts to decide trends or range bound markets. Begin a chart analysis with daily, weekly and even monthly charts spanning several years if possible. A larger scale chart essentially shows the life of the market and provides clearer visibility and a better long-term perspective on a market. Once the long-term has been established, consult daily and intra-day charts, these charts can include anything from say 10 minute to daily charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you're trading in the same direction as the intermediate and longer-term trends. If there is no trend then a different strategy is necessary, possibly playing the range until the market begins to trend once more.As can be seen in the 1-hour EUR/USD candle chart below there has been an uptrend with three peaks and three troughs. Long entry positions would at 1.2700, 1.2760 and 1.2800.
2. Follow the Trend
If you determine the trend, then follow it. Market trends come in a variety of terms - long-term, intermediate-term and short-term. The first thing you have to determine is what type of a trader are you, long term or day trader, that decision will determine which charts you should be using. For instance, if you're day trading, use the daily and intra-day charts, but always use the longer-range chart to determine the trend, and then use the shorter-term chart for timing. Make sure you trade in the direction of that trend and then buy on dips if the trend is up and sell on rallies if the trend is down.
3. Locate Support and Resistance Levels
Find the support and resistance levels. As above when you want to buy an instrument, its best to buy near support levels. The support is usually a previous reaction low. Using the same logic, the best place to sell an instrument would be near its resistance levels. The resistance level is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old high becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies - the old low can then become the new high.
4. Retracements
Measure retracements in percentage terms. Market corrections up or down often retrace a significant portion of the previous trend. One can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. Therefore popular buy points in an uptrend are usually between 33-38% retracement of the original trend.As can be seen from the chart below, when joining the trough at 1.2750 to the peak at 1.2890 in the 1-hour EUR/USD chart we can see the Fibonacci levels drawn out. The first retracement ended at the 38% line and the major retracement at the 62% line.
5. Trend Lines
One of the simplest and most effective charting tools are trend lines – use them. Draw a straight line that join two points on the chart. Up trend lines are drawn along two successive lows and down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines often signals a change in a trend. The longer a trend line has been in effect, and the more times it has been tested, the more significant it becomes; a trend line becomes valid if it is touched at least three times.
6. Moving Averages
Moving averages often provide objective buy and sell signals, hence they should be watched. They show you if an existing trend is still in motion and help confirm a trend change. Do not rely on moving averages to tell you in advance if there is a trend change imminent; use it as a back-up to your chart analysis for trend identification. A combination chart of two moving averages is the most popular way of finding trading signals. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day and 200-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.As can be seen in the EUR/USD 1-hour chart below the 5-period and 25-period moving averages project and confirm the trend in progress. The 5-period moving average crosses over the slower 25-period moving average at 1.2715 confirming the up-trend with an exit point at 1.2770. The same rate 1.2770 is another indication of a resume in the up-trend with an exit at 1.2850.
7. Oscillators
Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a trending market, oscillators can often warn us in advance that a market has rallied or fallen too far and will soon turn or retrace. Two of the most popular oscillators are the Relative Strength Index or RSI and the Stochastics. Both these oscillators work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Oscillator divergences often warn of market turns and as opposed to moving averages they work best in range bound markets. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.As can be seen in the EUR/USD 1-hour chart below, the Stochastics break through the 80-20 barriers and cross over themselves on corrections of the price. This occurs several times.
8. Know the Warning Signs
The Moving Average Convergence Divergence (MACD) indicator combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Longer-period signals take precedence over shorter-period signals. The MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a histogram because vertical bars are used to show the difference between the two lines on the chart.As can be seen in the EUR/USD 1-hour chart below, the MACD indicators cross over one another beneath the zero line to show a buy signal and vice versa for the sell signal. This occurs most prominently at 1.2760 to buy, 1.2870 to sell.
9. Trend or Range Bound Market
The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Study
Technical analysis is a skill that improves with experience and study. The more you learn and practice the better you'll be, keep studying, fine tune methods, learn what works for you and what doesn't and remain technical and not emotional.
2. Follow the Trend
If you determine the trend, then follow it. Market trends come in a variety of terms - long-term, intermediate-term and short-term. The first thing you have to determine is what type of a trader are you, long term or day trader, that decision will determine which charts you should be using. For instance, if you're day trading, use the daily and intra-day charts, but always use the longer-range chart to determine the trend, and then use the shorter-term chart for timing. Make sure you trade in the direction of that trend and then buy on dips if the trend is up and sell on rallies if the trend is down.
3. Locate Support and Resistance Levels
Find the support and resistance levels. As above when you want to buy an instrument, its best to buy near support levels. The support is usually a previous reaction low. Using the same logic, the best place to sell an instrument would be near its resistance levels. The resistance level is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old high becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies - the old low can then become the new high.
4. Retracements
Measure retracements in percentage terms. Market corrections up or down often retrace a significant portion of the previous trend. One can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. Therefore popular buy points in an uptrend are usually between 33-38% retracement of the original trend.As can be seen from the chart below, when joining the trough at 1.2750 to the peak at 1.2890 in the 1-hour EUR/USD chart we can see the Fibonacci levels drawn out. The first retracement ended at the 38% line and the major retracement at the 62% line.
5. Trend Lines
One of the simplest and most effective charting tools are trend lines – use them. Draw a straight line that join two points on the chart. Up trend lines are drawn along two successive lows and down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines often signals a change in a trend. The longer a trend line has been in effect, and the more times it has been tested, the more significant it becomes; a trend line becomes valid if it is touched at least three times.
6. Moving Averages
Moving averages often provide objective buy and sell signals, hence they should be watched. They show you if an existing trend is still in motion and help confirm a trend change. Do not rely on moving averages to tell you in advance if there is a trend change imminent; use it as a back-up to your chart analysis for trend identification. A combination chart of two moving averages is the most popular way of finding trading signals. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day and 200-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.As can be seen in the EUR/USD 1-hour chart below the 5-period and 25-period moving averages project and confirm the trend in progress. The 5-period moving average crosses over the slower 25-period moving average at 1.2715 confirming the up-trend with an exit point at 1.2770. The same rate 1.2770 is another indication of a resume in the up-trend with an exit at 1.2850.
7. Oscillators
Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a trending market, oscillators can often warn us in advance that a market has rallied or fallen too far and will soon turn or retrace. Two of the most popular oscillators are the Relative Strength Index or RSI and the Stochastics. Both these oscillators work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Oscillator divergences often warn of market turns and as opposed to moving averages they work best in range bound markets. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.As can be seen in the EUR/USD 1-hour chart below, the Stochastics break through the 80-20 barriers and cross over themselves on corrections of the price. This occurs several times.
8. Know the Warning Signs
The Moving Average Convergence Divergence (MACD) indicator combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Longer-period signals take precedence over shorter-period signals. The MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It's called a histogram because vertical bars are used to show the difference between the two lines on the chart.As can be seen in the EUR/USD 1-hour chart below, the MACD indicators cross over one another beneath the zero line to show a buy signal and vice versa for the sell signal. This occurs most prominently at 1.2760 to buy, 1.2870 to sell.
9. Trend or Range Bound Market
The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Study
Technical analysis is a skill that improves with experience and study. The more you learn and practice the better you'll be, keep studying, fine tune methods, learn what works for you and what doesn't and remain technical and not emotional.
LEARN FOREX
There is a saying I was taught at a very early age, which goes something like this, "People don't plan to fail, the fail to plan." Nothing rings truer in the FX markets than those words with so many new investors thinking they are going to become rich over night. They have heard that so many others have done it; they think it is easy, and they don't have the first inclination about what they are doing. Before you start investing, start trading or opening your Forex accounts, do yourself a favor and take time to learn Forex first. It is absolutely correct, that each and every day many people from every corner of the globe are becoming wealthy thanks to the currency markets. What most new comers don't realize, is that those people that have experienced great achievement in the markets had one common trait. Which was, they spent time learning Forex trading from its most central concepts to it most complex principles before they started investing. Today, with the internet stretching to almost every place imaginable, it has never been easier to get up to speed quickly and be well equipped for this wild adventure your about to enter. Where one second, you will swear you’re the smartest person every placed on the planet and fifteen minutes latter you won't believe you could do something that dumb. That's what these markets will do to you, and its not only novice investors that this will happen too. The professionals experience the same feelings almost everyday also. So don't feel bad. To learn Forex trading your going to need to enroll in a top rated currency course. A few of my favorites, that I have taken and taught me a great deal are the following; Forex Trading Made E Z, Fap Winner and Hector Trader. Yes, your going to need to invest in yourself and in your education before you start investing in the markets. That is, if you want to make money. If you don't care about making money then just open a few Forex accounts and see how you do. Real life is a great teacher and you will soon realize the mistake you have made and what you need to do to correct them. Our staff stand firm in out efforts to equip you with only the most exclusive Forex Trading Software, Automated Currency Software Trading Systems and Currency Trading Software. You can research our reports at Automated Currency Software Systems. The people who work at Trading Forex Reviews.Com have created an inventory of most competent Currency Training Classes and Forex Trading Courses to help you learn Forex trading at the uppermost point, to see them go to Learn How to Trade the Currency
EUROPEAN STOCK FOLLOW WALL
European stocks opened lower Wednesday, as investors take their lead from overnight losses on Wall Street amid concerns about the strength of the global economic recovery.The pan-European Dow Jones Stoxx 600 shed 0.3%. The U.K. FTSE 100 also lost 0.3%, while the French CAC-40 declined 0.6% and Germany's DAX slipped 0.1%."Equity markets could be set for another grueling session after the Dow Jones Industrial Average posted a triple-digit loss last night and Asian markets have followed suit," said Matt Buckland, a dealer at CMC Markets.On Tuesday, the Dow Jones Industrial Average fell 161.27 points, or 1.9%, to 8163.60. The Standard & Poor's 500-stock index lost 17.69, or 2.0%, to 881.03. The Nasdaq Composite Index lost 41.23, or 2.3%, to 1746.17."Commodity prices remain under pressure, which is clearly weighing on the resource stocks, whilst the downbeat economic outlook is hardly doing anything to impress the banks either," Mr. Buckland added.Attention will turn to the start of the second-quarter corporate earnings season in the U.S., with numbers from Alcoa leading things off.Elsewhere, Asian stock markets were lower Wednesday, dragged down by ongoing weakness in oil and metal prices."The market's in a holding pattern," said Macquarie Equities broker Brad Gordon in Auckland. "There's all the talk of green shoots yet there are also lagging indicators of job losses."NetResearch Asia chairman Kevin Scully warned the risk of further correction was high if the upcoming earnings season were to disappoint. "We might see some of the quick recovery premiums being given back, especially if and when the reporting season delivers or gives guidance that is lower than the forecasts."Japan's Nikkei 225 closed down 2.4% at 9420.75, closing below 9500 for the first time since May 28. South Korea's Kospi Composite closed 0.2% lower, while Hong Kong's Hang Seng Index was last seen down 1.4%.In the currency markets, the dollar gained against the euro Tuesday as risk appetite eroded with falling U.S. stocks ahead of the earnings season.The dollar also found some favor after world leaders dismissed previous reports that a new world reserve currency to replace the dollar would be on the Group of Eight leading nations' meeting agenda. The gathering of heads of state begins Wednesday in L'Aquila, Italy.The yen, which benefits from safe-haven flows as well, advanced against both the euro and dollar. The euro recently traded at $1.3872, and the dollar at 94.20 yen."A disappointing earnings season could push equities lower, and we expect further negative surprises to push the euro to test the downside of its recent $1.3750-$1.4350 summer range," said Ashley Davies at UBS.Crude-oil futures have continued to weaken as doubts over the prospect of an economic revival continue to plague the market.The August crude contract on Globex stood at $62.04 per barrel, down 89 cents, having settled Tuesday at $62.93 per barrel on the New York Mercantile Exchange.European government bond markets opened firmer, benefiting from a flight to quality as money leaves the equity markets. The September bund contract stood at 122.18,
FOREX EXCHANGE MARKET
This online guide aims at creating a coherent understanding of the foreign exchange market, by tying in real life market scenarios with the relevant theories of international finance and the classic schools of technical and quantitative analysis. Although there is a vast amount of literature on international finance, technical analysis and chartism, there is a scarcity of instructional materials incorporating actual market events such as interest rate decisions, interventions and geopolitical events.
Another area largely overlooked by currency guides is the integration of fundamental and technical analysis for making decisions. The distinctiveness between the two types of approaches dissuades many from factoring them together. But knowing how to combine them can be highly advantageous in unraveling the trend and timing of currency moves.This material focuses on teaching how to think for yourself in understanding global currency markets, rather than depending on a pre-set trading system which recommends decisions without providing input on the whys of making right and wrong decisions. Rather than rehashing the classic theories driving currency analysis, this guide will offer investors, researchers and students an innovative approach, paramount in grasping and anticipating the moves in the major currency pairs.
Another area largely overlooked by currency guides is the integration of fundamental and technical analysis for making decisions. The distinctiveness between the two types of approaches dissuades many from factoring them together. But knowing how to combine them can be highly advantageous in unraveling the trend and timing of currency moves.This material focuses on teaching how to think for yourself in understanding global currency markets, rather than depending on a pre-set trading system which recommends decisions without providing input on the whys of making right and wrong decisions. Rather than rehashing the classic theories driving currency analysis, this guide will offer investors, researchers and students an innovative approach, paramount in grasping and anticipating the moves in the major currency pairs.
CHARACTERISTICS OF FOREX
While there are many characteristics of the Forex market, there are three that help new traders learn exactly what the foreign exchange market is all about. These characteristics are those that every new trader should know long before they make their first trade. The Forex system is one that is made to encompass the entire globe.
It can be difficult to interpret and even more difficult to trade successfully within. Knowing how the system works is the first step to being a successful trader however. So, before you even think about opening a Forex account, be sure that you are familiar with the foreign exchange market’s geographical, functional, and participant characteristics.
Geographical Characteristics
The Forex is a huge market that encompasses the entire globe. This is a market that spans from the United States to Europe, to China, and back. There is no area it cannot touch. This is one thing that makes the market so popular. There is simply something for everyone with the Forex market. It is easily accessed due to it being open all day in every country. Its 24-hour access makes it even more attractive for investors.
No matter what time of day you want to trade, there will be someone trading in some distant location around the world. Although there is trading in the Forex in every corner of the globe, the major exchanges are Singapore, Hong Kong, Tokyo, Bahrain, London, New York, San Francisco, and Sydney. The geographical characteristics of the foreign exchange market can help new traders realize the size and volume of the Forex. It is simply unmatched in volume and size. This makes the Forex a powerful tool for investors everywhere.
Functional Characteristics
The entire Forex market functions to transfer purchasing power. This is done between countries. When trades are made, they are allowing partners to convert currency revenues into their domestic currency. When one country’s purchasing power is strong, another country’s may be weaker. It also functions to obtain and provide credit for international trade and to avoid an exchange rate catastrophe. When it comes to international trade, the Forex is helpful because it can help the movement of goods between countries and offer credit for financing.
Participant Characteristics
There are two main parts to the foreign exchange market. The first part is the interbank, which is often called the wholesale market. The second part is the client, which is often called the retail market. Throughout these two categories, there are approximately five different types of participants.
The bank and non-bank foreign exchange dealers are those that buy at bid prices and sell at asking prices. This helps the efficiency of the market as a whole. An interesting thing to note is that by trading currencies, banks often make up to 20% of their profits.
Individuals and commercial and investment firms make up the second type of participants. This group consists of importers, exporters, tourists, and other portfolio investors. They use the market basically to help them invest. These are often those participants that use the Forex to hedge, which is a way to reduce their risk.
Speculators and arbitragers are the third group type that seeks to profit from the foreign exchange market. These people are those that are out to make money for themselves. They are acting in their own self-interest. They seek profitable rate changes in order to help them profit and try to profit with the least possible risk involved. Large banks are sometimes a part of this group.
Central banks and treasuries are also involved in the Forex. They use it to change the value of their own currency, or to at least attempt to do so. This is something that they do with reserves. Their motive is not to profit but to influence the market. They want the value of their domestic currency to benefit their interests.
Lastly, foreign exchange brokers are the last of the five groups involved in the participant characteristic of the Forex. These participants are those who facilitate trading but are not partners in the transaction. They typically charge a fee for their service,which is most often on a commission scale. They are often seen as go betweens for large traders
It can be difficult to interpret and even more difficult to trade successfully within. Knowing how the system works is the first step to being a successful trader however. So, before you even think about opening a Forex account, be sure that you are familiar with the foreign exchange market’s geographical, functional, and participant characteristics.
Geographical Characteristics
The Forex is a huge market that encompasses the entire globe. This is a market that spans from the United States to Europe, to China, and back. There is no area it cannot touch. This is one thing that makes the market so popular. There is simply something for everyone with the Forex market. It is easily accessed due to it being open all day in every country. Its 24-hour access makes it even more attractive for investors.
No matter what time of day you want to trade, there will be someone trading in some distant location around the world. Although there is trading in the Forex in every corner of the globe, the major exchanges are Singapore, Hong Kong, Tokyo, Bahrain, London, New York, San Francisco, and Sydney. The geographical characteristics of the foreign exchange market can help new traders realize the size and volume of the Forex. It is simply unmatched in volume and size. This makes the Forex a powerful tool for investors everywhere.
Functional Characteristics
The entire Forex market functions to transfer purchasing power. This is done between countries. When trades are made, they are allowing partners to convert currency revenues into their domestic currency. When one country’s purchasing power is strong, another country’s may be weaker. It also functions to obtain and provide credit for international trade and to avoid an exchange rate catastrophe. When it comes to international trade, the Forex is helpful because it can help the movement of goods between countries and offer credit for financing.
Participant Characteristics
There are two main parts to the foreign exchange market. The first part is the interbank, which is often called the wholesale market. The second part is the client, which is often called the retail market. Throughout these two categories, there are approximately five different types of participants.
The bank and non-bank foreign exchange dealers are those that buy at bid prices and sell at asking prices. This helps the efficiency of the market as a whole. An interesting thing to note is that by trading currencies, banks often make up to 20% of their profits.
Individuals and commercial and investment firms make up the second type of participants. This group consists of importers, exporters, tourists, and other portfolio investors. They use the market basically to help them invest. These are often those participants that use the Forex to hedge, which is a way to reduce their risk.
Speculators and arbitragers are the third group type that seeks to profit from the foreign exchange market. These people are those that are out to make money for themselves. They are acting in their own self-interest. They seek profitable rate changes in order to help them profit and try to profit with the least possible risk involved. Large banks are sometimes a part of this group.
Central banks and treasuries are also involved in the Forex. They use it to change the value of their own currency, or to at least attempt to do so. This is something that they do with reserves. Their motive is not to profit but to influence the market. They want the value of their domestic currency to benefit their interests.
Lastly, foreign exchange brokers are the last of the five groups involved in the participant characteristic of the Forex. These participants are those who facilitate trading but are not partners in the transaction. They typically charge a fee for their service,which is most often on a commission scale. They are often seen as go betweens for large traders
FOREX TIPS
For those of you who are new to the forex market, or even for those of you who are considering becoming a forex market trader, this article is for you. Welcome to forex 101, where you will learn exactly who forex is and what it does. Also for the forex newbie’s, you will find a list of six trading tips that will help you in your transactions.
For those of you who are new to forex trading, first you should know the meaning of the term “forex,” which stands for FOReign EXchange market. This pertains to the international foreign currency exchange market where currencies of all kinds are bought and sold.
The forex market got its start back in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the only players on the market to decide upon the value of one type of currency against another, all solely based upon a particular currency’s supply and demand.
The forex market is very unique for a number of reasons. First of all, this is one of the few markets that require very little trading qualifications and is free from any external control and can not be manipulated in any way. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor to substantially affect the price of any major foreign currency.
In addition, unlike any stock that is rarely traded, forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.
1. To open a forex account, all you have to do is simply fill out an application and provide all the necessary identification. The application will include a margin agreement will state if the broker will be allowed to intervene with any trade when it appears too risky. This agreement is made to protect the interests of the broker because most trades are done by using the broker’s money. However, once you have established an account, you can fund it and begin trading in the forex market.
2. In order to become a successful trader, you will need to adapt your own trading strategy. There is no one strategy that will work for all the traders, each individual trader will need to develop their own approach to the market. While some traders may relay solely on technical analysis, others may prefer a more fundamental approach, while the more successful traders use a combination of both. Each individual trader will need to learn the best approach for them selves in order to gain a more comprehensive overview of the forex market in order to prepare for any entry and exit points.
3. Understand that prices move by trends. Forex has a popular saying, “The trend is your friend.” there are certain movements that have been studied over many years in order to identify a pattern in the trend. These trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most newbie’s will look to trade in any direction, when they should be trading with a trend.
4. Before you take any position, look over the top five currencies to make sure you’re not missing something. The top five foreign in forex are: USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.
5. For newbie’s, it would be safest to have two accounts because you learn as you play the trading game. Keep one real account, one that you will actually use to trade real money; and the second account should be a demo, one that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real account so you can widen your stops to see if you are being too conservative or not.
6. Always examine the one hour, four hour and daily charts that concern your trades. Although you can trade at 15 and 30-minute time intervals, doing so requires a handful of dexterity.
For those of you who are new to forex trading, first you should know the meaning of the term “forex,” which stands for FOReign EXchange market. This pertains to the international foreign currency exchange market where currencies of all kinds are bought and sold.
The forex market got its start back in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the forex market traders were the only players on the market to decide upon the value of one type of currency against another, all solely based upon a particular currency’s supply and demand.
The forex market is very unique for a number of reasons. First of all, this is one of the few markets that require very little trading qualifications and is free from any external control and can not be manipulated in any way. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor to substantially affect the price of any major foreign currency.
In addition, unlike any stock that is rarely traded, forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.
1. To open a forex account, all you have to do is simply fill out an application and provide all the necessary identification. The application will include a margin agreement will state if the broker will be allowed to intervene with any trade when it appears too risky. This agreement is made to protect the interests of the broker because most trades are done by using the broker’s money. However, once you have established an account, you can fund it and begin trading in the forex market.
2. In order to become a successful trader, you will need to adapt your own trading strategy. There is no one strategy that will work for all the traders, each individual trader will need to develop their own approach to the market. While some traders may relay solely on technical analysis, others may prefer a more fundamental approach, while the more successful traders use a combination of both. Each individual trader will need to learn the best approach for them selves in order to gain a more comprehensive overview of the forex market in order to prepare for any entry and exit points.
3. Understand that prices move by trends. Forex has a popular saying, “The trend is your friend.” there are certain movements that have been studied over many years in order to identify a pattern in the trend. These trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improving your odds when compared to bi-directional trading. Most newbie’s will look to trade in any direction, when they should be trading with a trend.
4. Before you take any position, look over the top five currencies to make sure you’re not missing something. The top five foreign in forex are: USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.
5. For newbie’s, it would be safest to have two accounts because you learn as you play the trading game. Keep one real account, one that you will actually use to trade real money; and the second account should be a demo, one that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real account so you can widen your stops to see if you are being too conservative or not.
6. Always examine the one hour, four hour and daily charts that concern your trades. Although you can trade at 15 and 30-minute time intervals, doing so requires a handful of dexterity.
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