Monday, December 14, 2009
Weekly report by Action forex
Dollar and yen benefited from European sovereign credit concerns last week and strengthened broadly. While we're not seeing decisive buying in then to push it through near term high against major currencies, dollar was additionally supported by solid data from US and break important near term resistance levels against Euro, Swissy and Sterling. The additional strength in the greenback can also be attributed to deeper fall in crude oil and gold last week which had them closed below 70 and 1120 level respectively. Aussie and Kiwi were relatively much more resilient in the wave of dollar buying. The Australian dollar was lifted by an unexpectedly strong employment report as well as solid data from China. Meanwhile, Kiwi benefited from RBNZ's shift of tone in its statement. After all, we believe that the case of medium term reversal in dollar continued to build up and some more strength in the greenback is anticipated in near term at least.
The worry of Dubai default was passed to concern on European debts last week. Fitch cut Greece's sovereign rating to BBB+ while S&P also put its A- rating on watch for downgrade. S&P also moved Spain's credit outlook to negative even though the rating was affirmed. There was a potential risk of downgrade on UK too but sterling somewhat stabilized against Euro after Moody's said ratings of Britain is not under threat of a downgrade right now. Euro and Swissy were the worst performer last week.
Fed Chairman Bernanke triggeredd to talk down the speculations of Fed hike last week and reiterated that Fed will keep rates low at an "extended period". He said that the US economy may face "formidable headwinds" and inflation might subside while joblessness may fall at a pace that’s "slower than we would like." Nevertheless, markets continued to respond positive to US data and sent the greenback higher. Among the data from US, retail sales was exceptionally strong which rose 1.3% in November with ex-auto sales rose 1.2%. U of michigan consumer sentiment also beat expectation by rising to 73.4 in December.
Four central banks met last week, BoC, RBNZ, SNB and BoE. Rates were all left unchanged. Not special reactions were seen from the markets except RBNZ which turned a bit more hawkish and suggests that rate hike could be coming in earlier than previously expected. BoC reiterated its conditional commitment to keep rates unchanged till Q2 of 2010. SNB announced to purchases of corporate bonds. BoE left asset purchase target unchanged too.
In the pre-budget release, UK Chancellor of Exchequer Darling admitted that UK's recession was worse than expected by remained optimistic that UK economy will recover from recession next year as stimulus measures take hold. He expects growth to be between 1% and 1.5% in 2010, no change from March forecast. Regarding borrowing Darling lifted forecasts net borrow by just GBP 4b to GBP 707b by the 2013 financial year. But he remained optimistic that deficit will be halved over the next four years in an "orderly way".
Looking at the charts, dollar index surged sharply to as high as 76.73 last week and is set to taken on 76.82 resistance. We'd anticipate a break there as equivalent levels in EUR/USD and USD/CHF were broken already. The sustained trading above 55 days EMA affirmed the case that the index has bottomed out in medium term at 74.19 already, on bullish convergence condition in daily MACD, after hitting 74.31 support. Decisive break of 76.82 will confirm the case that medium term fall from 89.62 has completed. The least bullish scenario will bring a correction to such medium term fall from 89.62 and target 38.2% retracement of 89.62 to 74.19 at 80.08. The most bullish is that whole three wave consolidations from 88.46 has completed at 74.19 too (77.69, 89.62, 74.19) and we'd be looking at the prospect of a rest of 89.62 high. It's still early to favor either case yet and we'd pay attention to the strength of the current rise from 74.19, as well as the ability to sustain above 55 weeks EMA (now at 78.94) for indications.
Looking at other markets, crude oil's sharp fall last week and sustained trading below the 55 days EMA affirm the case that medium term rebound from 33.2 has completed at 82.0 already, on bearish divergence condition in daily MACD. We'd expect further decline towards 58.32 cluster support (50% retracement of 33.2 to 82.0 at 57.6) in medium term and that should provide additional support to dollar. Such bearish view will remain as long as 79.04 resistance holds.
Gold's sharp fall from 1227.5 extended further last week and the precious metal closed below 1120 level at 1119.9. The rise from 931.3 should have made a top at 1227.5 already and correction from there is set to extend further as long as 1170.2 resistance holds. Nevertheless, strong support is expected at 1026.9/1072 support zone to bring rebound. Hence, short term bearishness in gold should provide some support to the rebound in greenback. However, the longer term fate of dollar will likely depend on whether gold would receive strong support at mentioned 1026.9/1072 support zone.
As noted before, while European currencies are generally weak, AUD and NZD are relatively resilient so far. Comparing the two, NZD seems to be even stronger. Last week's sharp fall in AUD/NZD confirmed that rise fro 1.1925 has completed at 1.2836 already, on mild bearish divergence conditions in daily MACD and RSI. We'd anticipate deeper fall in the cross to 61.8% retracement of 1.1925 to 1.2836 at 1.2273 and possibly below. In other words, we'd expect Kiwi to outperform the Aussie in near term.
The worry of Dubai default was passed to concern on European debts last week. Fitch cut Greece's sovereign rating to BBB+ while S&P also put its A- rating on watch for downgrade. S&P also moved Spain's credit outlook to negative even though the rating was affirmed. There was a potential risk of downgrade on UK too but sterling somewhat stabilized against Euro after Moody's said ratings of Britain is not under threat of a downgrade right now. Euro and Swissy were the worst performer last week.
Fed Chairman Bernanke triggeredd to talk down the speculations of Fed hike last week and reiterated that Fed will keep rates low at an "extended period". He said that the US economy may face "formidable headwinds" and inflation might subside while joblessness may fall at a pace that’s "slower than we would like." Nevertheless, markets continued to respond positive to US data and sent the greenback higher. Among the data from US, retail sales was exceptionally strong which rose 1.3% in November with ex-auto sales rose 1.2%. U of michigan consumer sentiment also beat expectation by rising to 73.4 in December.
Four central banks met last week, BoC, RBNZ, SNB and BoE. Rates were all left unchanged. Not special reactions were seen from the markets except RBNZ which turned a bit more hawkish and suggests that rate hike could be coming in earlier than previously expected. BoC reiterated its conditional commitment to keep rates unchanged till Q2 of 2010. SNB announced to purchases of corporate bonds. BoE left asset purchase target unchanged too.
In the pre-budget release, UK Chancellor of Exchequer Darling admitted that UK's recession was worse than expected by remained optimistic that UK economy will recover from recession next year as stimulus measures take hold. He expects growth to be between 1% and 1.5% in 2010, no change from March forecast. Regarding borrowing Darling lifted forecasts net borrow by just GBP 4b to GBP 707b by the 2013 financial year. But he remained optimistic that deficit will be halved over the next four years in an "orderly way".
Looking at the charts, dollar index surged sharply to as high as 76.73 last week and is set to taken on 76.82 resistance. We'd anticipate a break there as equivalent levels in EUR/USD and USD/CHF were broken already. The sustained trading above 55 days EMA affirmed the case that the index has bottomed out in medium term at 74.19 already, on bullish convergence condition in daily MACD, after hitting 74.31 support. Decisive break of 76.82 will confirm the case that medium term fall from 89.62 has completed. The least bullish scenario will bring a correction to such medium term fall from 89.62 and target 38.2% retracement of 89.62 to 74.19 at 80.08. The most bullish is that whole three wave consolidations from 88.46 has completed at 74.19 too (77.69, 89.62, 74.19) and we'd be looking at the prospect of a rest of 89.62 high. It's still early to favor either case yet and we'd pay attention to the strength of the current rise from 74.19, as well as the ability to sustain above 55 weeks EMA (now at 78.94) for indications.
Daliy report from daliy report
Dollar pares some recent gains on news that Abu Dhabi is providing $10b to help Dubai World to meet it's obligations. Dubai will use $4.1b to repay an Islamic bond maturing today for Nakhell PJSC, its real-estate unit. The rest of the money will be used to pay trade creditors, contractors, interest expenses and be the working capital through April 2010. The news came in as a relief for the market and sent stocks higher.
Japanese yen trades higher today after release of better than expected quarterly tankan survey. The large manufacturers index improved from -33 to -24 in Q4 while the non-manufacturing index rose from -24 to -22. Both were above expectation of -26 and -23 respectively. However, the outlook of capex is bleak as large manufacturers said they'll lower their spending by -28.2% in the fiscal year to March 2010, the biggest drop on record while all large firms plan to cut spending by -13.8%.
According to BoE's Quarterly Bulletin, Chief Economist Spencer Dale said that "employment to date has not fallen by as much as we might have feared given the falls in output." "A substantial element of the workforce appears to have been able to protect their jobs by accepting slower wage growth." "Despite the severe recession, the proportion of households who reported difficulties keeping up with bills and credit commitments had fallen slightly."
Looking at the dollar index, it's retreats mildly ahead of 76.82 resistance and some sideway trading might be seen today. But after all, short term outlook will remain bullish as long as 75.83 support holds. Rise from 74.19 is still expected to continue for 76.82 resistance. Break there will confirm that the index has bottomed out in medium term already. In such case, we'll be looking at a strong rebound to 38.2% retracement of 89.62 to 74.19 at 80.08, as a correction to fall from 89.62, in the least bullish scenario.
Japanese yen trades higher today after release of better than expected quarterly tankan survey. The large manufacturers index improved from -33 to -24 in Q4 while the non-manufacturing index rose from -24 to -22. Both were above expectation of -26 and -23 respectively. However, the outlook of capex is bleak as large manufacturers said they'll lower their spending by -28.2% in the fiscal year to March 2010, the biggest drop on record while all large firms plan to cut spending by -13.8%.
According to BoE's Quarterly Bulletin, Chief Economist Spencer Dale said that "employment to date has not fallen by as much as we might have feared given the falls in output." "A substantial element of the workforce appears to have been able to protect their jobs by accepting slower wage growth." "Despite the severe recession, the proportion of households who reported difficulties keeping up with bills and credit commitments had fallen slightly."
Looking at the dollar index, it's retreats mildly ahead of 76.82 resistance and some sideway trading might be seen today. But after all, short term outlook will remain bullish as long as 75.83 support holds. Rise from 74.19 is still expected to continue for 76.82 resistance. Break there will confirm that the index has bottomed out in medium term already. In such case, we'll be looking at a strong rebound to 38.2% retracement of 89.62 to 74.19 at 80.08, as a correction to fall from 89.62, in the least bullish scenario.
Pounds go low
The U.K. economy is being one of the slowest to recover from the global slump that started in the second semester last year, and as economies recover globally faster than in the British Isles, the pound may decline further versus the euro and the dollar.
After posting the fourth consecutive weekly decline versus the greenback, the outlook for the British currency remains rather unattractive, as forecasts suggest a higher than previously expected budget deficit for the following years in the U.K., forcing the currency down versus most of the 6 majors traded inforeign-exchange markets. The Federal Reserve is likely to increase borrowing costs in the world’s wealthiest nation as several reports coming from different sectors of the economy indicate a rebound that would make possible earlier than expected increases in interest rates, affecting positively the dollar in currency markets, which is likely to climb further versus the pound.
Even if the Moody’s Investors Service affirmed last week that it will not downgrade the U.K.’s top credit rating, investors are not confident that the British economy will provide better data which could stop a losing streak set for the sterling for the upcoming weeks.
GBP/USD closed the week at 1.6251 from an opening rate of 1.6484 in the beginning of the week.
After posting the fourth consecutive weekly decline versus the greenback, the outlook for the British currency remains rather unattractive, as forecasts suggest a higher than previously expected budget deficit for the following years in the U.K., forcing the currency down versus most of the 6 majors traded in
Even if the Moody’s Investors Service affirmed last week that it will not downgrade the U.K.’s top credit rating, investors are not confident that the British economy will provide better data which could stop a losing streak set for the sterling for the upcoming weeks.
GBP/USD closed the week at 1.6251 from an opening rate of 1.6484 in the beginning of the week.
Dollar news
The dollar ended this week with the highest rate versus the European common currency after positive reports in the U.S. suggested that the North American economy’s pace of recovery is accelerating, attracting investors to dollar priced assets.
After a report indicating better than expected figures for retail sales and an increase in consumer sentiment were published in the United States, the dollar gained versus most of the 16 main traded currencies reverting a losing streak this week that set it to the lowest level in 2009 in the beginning of December. The New Zealand dollar was one of the very few currencies that found support to gain versus the greenback as the South Pacific nation is likely to start a series of interest rates hikes as suggested by the Reserve Bank of New Zealand, which would be following its neighboring Australia, the first wealthy nation to raise borrowing costs after the global slump.
A part of analysts affirm that the dollar bearish days are over, as positive reports are likely to continue to be published which will lead the Federal Reserve to raise borrowing costs sooner than previously expected, causing a massive capital inflow to the U.S. and recovering the greenback’s attractiveness inforeign-exchange markets.
EUR/USD closed the week at 1.4611 as of 15:43 GMT from a previous rate of 1.4733 on Thursday. GBP/USD traded at 1.6260 from
If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.
After a report indicating better than expected figures for retail sales and an increase in consumer sentiment were published in the United States, the dollar gained versus most of the 16 main traded currencies reverting a losing streak this week that set it to the lowest level in 2009 in the beginning of December. The New Zealand dollar was one of the very few currencies that found support to gain versus the greenback as the South Pacific nation is likely to start a series of interest rates hikes as suggested by the Reserve Bank of New Zealand, which would be following its neighboring Australia, the first wealthy nation to raise borrowing costs after the global slump.
A part of analysts affirm that the dollar bearish days are over, as positive reports are likely to continue to be published which will lead the Federal Reserve to raise borrowing costs sooner than previously expected, causing a massive capital inflow to the U.S. and recovering the greenback’s attractiveness in
EUR/USD closed the week at 1.4611 as of 15:43 GMT from a previous rate of 1.4733 on Thursday. GBP/USD traded at 1.6260 from
If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.
Saturday, October 3, 2009
More Euro News from forex profesionals by dailyfx
There are more than a few concerns for fundamental euro traders in the days ahead. Where just a few months ago, the single currency was considered among the best speculatively positioned economies given its optimistic outlook for growth and hawkish bearings; we now see the euro struggling to find its place in a broad spectrum of relative risk and safety.
Euro: Will Risk Appetite Hold EURUSD Up or Will the ECB Ease a Break?
Fundamental Forecast for Euro: Neutral
Just this past week, the EU completed a five-month long stress test of its financial markets; and according to policy officials, the results are promising. ECB President Jean-Claude Trichet required the evaluation of the banking system be put up against an “adverse” scenario. In the end, none of those institutions surveyed were expected to see their tier one capital ratios fall below 6 percent (the Basel minimum is 4 percent) even in the worst of conditions. However, skepticism is likely to develop just as surely as it did after the US test. It is reasonable to question why there were only 22 banks for such a broad region and what the methodology they measure risk; but the real concern Is in the 400 billion euros of additional losses the market could sustain under the most extreme conditions. We have already seen 489 billion n losses so far; but other outfits have suggested the region could see far more ahead with the IMF suggesting European banks have disclosed only 40 percent of their losses.
In the near-term, the outlook for growth and interest rates will take center stage. The World Economic Outlook has upgraded its outlook for expansion for the union with 0.3 percent expansion expected in 2010 and a more restrained (than previously expected) 4.2 percent contraction for the currency year. That a sluggish pace when compared to the 1.3 percent growth expected from the US or 2.7 percent positive turn for Japan. These are forecasts that are certainly weighing on the euro now; but data can quickly eat into this discounted scenario. It is worth mentioning that the timely, September PMI composite indicator has reported expansion for two months (after deteriorating since June of 2008). Maintaining the pace of production after inventories build up and facilitating consumer spending will be the keys to sustainable growth. Yet, officials are also looking for a crutch for recovery in a unified “strong dollar” position that could bolster export revenue. In a recent address, Trichet stated blatantly that a healthy greenback was “extremely important.” This can be interpreted indirectly that he is very concerned about the high level of his own currency.
Where growth goes, interest rates will follow; but at this pace, it seems like the hawkish turn from the ECB will be far down the line. Yet, with the market being told that the benchmark will be held well into next year, we have the makings for speculation to gauge the likelihood that we will in fact see a move sooner. Overnight index swaps measured by Credit Suisse price in no chance of a rate hike on Thursday – not a surprise. At the same time, there is a total of 82.8 basis points of firming priced in over the coming year. With the central bank already announcing it was culling its unlimited fund auctions, we already have the first steps towards hikes. This is a policy body that won’t be able to telegraph its intentions to hike with a preceding trimming of abnormal monetary stimulus (like the UK cutting its bond fund); but they will try to be as transparent as possible. And, that is why we will have to absorb everything said after this week’s rate decision. – JK
Written by: John Kicklighter, Currency Strategist for DailyFX.com
Euro: Will Risk Appetite Hold EURUSD Up or Will the ECB Ease a Break?
Fundamental Forecast for Euro: Neutral
- EU receives the results of its own financial stress test and the prognosis is promising
- Euro Zone Unemployment is now at a 10-year high of 9.6%
- German and regional inflation gauges still pitched into negative territory
There are more than a few concerns for fundamental euro traders in the days ahead. Where just a few months ago, the single currency was considered among the best speculatively positioned economies given its optimistic outlook for growth and hawkish bearings; we now see the euro struggling to find its place in a broad spectrum of relative risk and safety. In the normal scale of yield and risk, the euro stands just in the middle of the spectrum which leaves it to be jostled by speculative winds that find greater response from high yield (Aussie dollar) and struggling funding currencies (the US dollar). However, speculation is ever active; and some long-term considerations are starting to come to term. Among the most pressing concerns is the pace Euro Zone’s recover (especially in comparisons to that of the US) and the lingering potential for financial instability. - Euro Zone Unemployment is now at a 10-year high of 9.6%
- German and regional inflation gauges still pitched into negative territory
Just this past week, the EU completed a five-month long stress test of its financial markets; and according to policy officials, the results are promising. ECB President Jean-Claude Trichet required the evaluation of the banking system be put up against an “adverse” scenario. In the end, none of those institutions surveyed were expected to see their tier one capital ratios fall below 6 percent (the Basel minimum is 4 percent) even in the worst of conditions. However, skepticism is likely to develop just as surely as it did after the US test. It is reasonable to question why there were only 22 banks for such a broad region and what the methodology they measure risk; but the real concern Is in the 400 billion euros of additional losses the market could sustain under the most extreme conditions. We have already seen 489 billion n losses so far; but other outfits have suggested the region could see far more ahead with the IMF suggesting European banks have disclosed only 40 percent of their losses.
In the near-term, the outlook for growth and interest rates will take center stage. The World Economic Outlook has upgraded its outlook for expansion for the union with 0.3 percent expansion expected in 2010 and a more restrained (than previously expected) 4.2 percent contraction for the currency year. That a sluggish pace when compared to the 1.3 percent growth expected from the US or 2.7 percent positive turn for Japan. These are forecasts that are certainly weighing on the euro now; but data can quickly eat into this discounted scenario. It is worth mentioning that the timely, September PMI composite indicator has reported expansion for two months (after deteriorating since June of 2008). Maintaining the pace of production after inventories build up and facilitating consumer spending will be the keys to sustainable growth. Yet, officials are also looking for a crutch for recovery in a unified “strong dollar” position that could bolster export revenue. In a recent address, Trichet stated blatantly that a healthy greenback was “extremely important.” This can be interpreted indirectly that he is very concerned about the high level of his own currency.
Where growth goes, interest rates will follow; but at this pace, it seems like the hawkish turn from the ECB will be far down the line. Yet, with the market being told that the benchmark will be held well into next year, we have the makings for speculation to gauge the likelihood that we will in fact see a move sooner. Overnight index swaps measured by Credit Suisse price in no chance of a rate hike on Thursday – not a surprise. At the same time, there is a total of 82.8 basis points of firming priced in over the coming year. With the central bank already announcing it was culling its unlimited fund auctions, we already have the first steps towards hikes. This is a policy body that won’t be able to telegraph its intentions to hike with a preceding trimming of abnormal monetary stimulus (like the UK cutting its bond fund); but they will try to be as transparent as possible. And, that is why we will have to absorb everything said after this week’s rate decision. – JK
Written by: John Kicklighter, Currency Strategist for DailyFX.com
Lets take a look at the latest news that might impact forex trading
The US Dollar finished the week higher against the Euro and other key counterparts, but a sharply disappointing Nonfarm Payrolls report nearly derailed the nascent Greenback recovery through Friday’s close.
- US Dollar may have set an important bottom against the Euro
- US Unemployment Rate hits 26-year high on NFPs disappointment
- US ISM Non-Manufacturing key barometer on domestic economic activity
The US Dollar finished the week higher against the Euro and other key counterparts, but a sharply disappointing Nonfarm Payrolls report nearly derailed the nascent Greenback recovery through Friday’s close. The trade-weighted US Dollar Index hit fresh monthly highs near 77.50 just ahead of the release. Immediate declines in the US S&P 500 initially sent the dollar higher, but markets clearly expressed their displeasure with the worse-than-expected payrolls release and sold USD through in subsequent trading. Sudden USD losses complicate our otherwise bullish near-term Dollar forecast, but we continue to forecast further Greenback recovery through near-term trade. Comparatively limited event risk in the days ahead has left volatility expectations lower, but flare-ups in financial market tensions could nonetheless force major moves across USD currency pairs.
Earlier in the week we argued that the US Dollar set an important bottom against the Euro on fairly clear sentiment extremes. US CFTC Commitment of Traders data shows that Non-Commercial traders—a group mostly comprised of hedge funds and other large speculators—remained the most net-long the Euro/US Dollar since it traded near 1.6000 in early 2008. Though sentiment can and does remain extreme for extended periods of time, early signs of EURUSD reversal support our calls for a broader US Dollar reversal. Strong correlations between the US Dollar and key risky asset classes nonetheless leave the currency at the throes of the recent upheaval in the S&P 500. It will subsequently be critical to watch for any signs that the recent equity market tumble is the start of a larger decline.
US Dollar traders should almost certainly keep an eye out for abrupt shifts in risk sentiment, but a relatively empty US economic calendar leaves limited scope for major day-to-day shifts. The notable exception is Monday’s US ISM Non-Manufacturing report, which will shed further light on the state of the domestic services industry. According to 2008 estimates, the Services industry accounts for nearly 80 percent of US GDP. Suffice it to say, any noteworthy surprises in the highly-anticipated report could force major moves in the US Dollar and broader financial markets. Indeed, the ISM Non-Manufacturing survey tends to be one of the most market-moving events on release.
Outside of the ISM report, forex traders should keep a look out for a number of important global central bank interest rate decisions. Uncertainty surrounding Australian, British, and European central bank announcements may make for an interesting run of days across key forex pairs. It is near-impossible to predict how markets to react to any of these important announcements, and as such traders should be sure to control risk on open US Dollar positions.
We have seen early signs of a sustained US Dollar reversal. Yet very recent price action has shown markets were not yet willing to push the Greenback materially higher versus key counterparts. The coming week may prove especially important to overall trends in major US Dollar pairs. – DR
US Dollar Forecast for Recovery Will be Put to the Test
Fundamental Outlook for US Dollar: Bullish- US Dollar may have set an important bottom against the Euro
- US Unemployment Rate hits 26-year high on NFPs disappointment
- US ISM Non-Manufacturing key barometer on domestic economic activity
The US Dollar finished the week higher against the Euro and other key counterparts, but a sharply disappointing Nonfarm Payrolls report nearly derailed the nascent Greenback recovery through Friday’s close. The trade-weighted US Dollar Index hit fresh monthly highs near 77.50 just ahead of the release. Immediate declines in the US S&P 500 initially sent the dollar higher, but markets clearly expressed their displeasure with the worse-than-expected payrolls release and sold USD through in subsequent trading. Sudden USD losses complicate our otherwise bullish near-term Dollar forecast, but we continue to forecast further Greenback recovery through near-term trade. Comparatively limited event risk in the days ahead has left volatility expectations lower, but flare-ups in financial market tensions could nonetheless force major moves across USD currency pairs.
Earlier in the week we argued that the US Dollar set an important bottom against the Euro on fairly clear sentiment extremes. US CFTC Commitment of Traders data shows that Non-Commercial traders—a group mostly comprised of hedge funds and other large speculators—remained the most net-long the Euro/US Dollar since it traded near 1.6000 in early 2008. Though sentiment can and does remain extreme for extended periods of time, early signs of EURUSD reversal support our calls for a broader US Dollar reversal. Strong correlations between the US Dollar and key risky asset classes nonetheless leave the currency at the throes of the recent upheaval in the S&P 500. It will subsequently be critical to watch for any signs that the recent equity market tumble is the start of a larger decline.
US Dollar traders should almost certainly keep an eye out for abrupt shifts in risk sentiment, but a relatively empty US economic calendar leaves limited scope for major day-to-day shifts. The notable exception is Monday’s US ISM Non-Manufacturing report, which will shed further light on the state of the domestic services industry. According to 2008 estimates, the Services industry accounts for nearly 80 percent of US GDP. Suffice it to say, any noteworthy surprises in the highly-anticipated report could force major moves in the US Dollar and broader financial markets. Indeed, the ISM Non-Manufacturing survey tends to be one of the most market-moving events on release.
Outside of the ISM report, forex traders should keep a look out for a number of important global central bank interest rate decisions. Uncertainty surrounding Australian, British, and European central bank announcements may make for an interesting run of days across key forex pairs. It is near-impossible to predict how markets to react to any of these important announcements, and as such traders should be sure to control risk on open US Dollar positions.
We have seen early signs of a sustained US Dollar reversal. Yet very recent price action has shown markets were not yet willing to push the Greenback materially higher versus key counterparts. The coming week may prove especially important to overall trends in major US Dollar pairs. – DR
Monday, September 28, 2009
Great Article by golearnforex
this is not my article. Its from the Online Trading Academy. Iread it and I think its great. You should read it too... Here it is...
I am a winner
My whole life, I have been very involved in sports. Ice hockey, soccer, golf, and tennis are the sports I love to compete in. Playing hockey at such a high level, I learned how to win, consistently. There were always teams in the league that would win consistently and others that would lose. When we would play a team that had a bad record, sometimes they would be leading the game for a while but I never worried. It was almost like we could be down by a few goals and we knew we were going to win. This is because of attitude. Sure enough, most of the time no matter what the score was during much of the game, we would come back and win. The winning attitude almost always beats the losing attitude. The winning teams play with one thought, that's "to win." The losing teams also play with one thought, "not to lose." The latter equates to a lack of confidence and fear and that is a recipe for consistent failure.
Like many of you, I love the game of golf. I have a childhood friend whom I play with sometimes. While our skill levels are near equal, I almost always beat him. What happens is that as soon as he hits a bad shot, and I mean a really bad shot, he can't recover mentally. He allows this shot to have such a big impact on his game that the rest of the round of golf is a disaster for him. I, too, have a bad shot once and a while; we all do. The difference is that I don't let it have anything to do with my next shot. I know the bad shot will happen sometimes which means it's actually a part of winning the game. As soon as my friend hits a bad shot, he is finished, I win, game over.
I love to win, I hate to lose
Having so much success in a sport growing up, you feel like there is nothing in life you can't do. No matter what the task, not succeeding is never an option or thought. So, you can imagine how shocked I was when I entered the trading world and was told that you have to be a good loser in order to win. HA!! That had to be a joke I thought... There is no way I am going to lose because I hate losing, I hardly ever lose. It didn't take long to realize that this was 100% true, I had losses and that didn't sit well with me. I tried to eliminate them but as I did, I also eliminated the winning trades, as well. This was not good; I hated losing. Slowly though, I figured out the secret to trading from experience and a friend of mine. It all depends on your definition of losing. In my early trading days, I had the wrong definition of the word "loss."
Perception is everything
Think about all the setbacks and losses you have had in other parts of your life; financial, relationships, job promotions, and more. Haven't they always made you stronger and led to something "better?" Losing is a very necessary part of winning in my humble opinion. As our founder at Online Trading Academy, Eyal Shahar says, "Life is all about perception." If I had a dollar for every time I have heard him say that, I wouldn't have to trade. He is so right... The key is to categorize. If I perceive each trading loss as a loss or losing, it's not going to sit right with me; I can't stand losing! However, if I put each trading loss in its proper place which is in the "winning" category, all of a sudden a trading loss is a must for winning.
Apple Inc. (AAPL)
I was in the Extended Learning Track (XLT) class, leading a session and I pointed out a trading opportunity in a popular stock, Apple. I went over the factors that led me to this conclusion and everything seemed fine.
Figure 1
I pointed out that area "A" on the chart appeared to be a resistance (supply) level where we may have some sellers. As price rallied back up to that level at "B," I was an interested seller. Some of the 300 or so people in the XLT asked about area "C." I said that was also a supply level and could be a good one but price was going to hit area "A" first. At "B," price touched the level and actually fell for a bit; the trade was profitable. A couple of days later, the unthinkable happened; AAPL rallied through the level and stopped out for a loss. How could I have been wrong? How do I deal with this loss? What is wrong with my trading plan? I better email an Online Trading Academy instructor and figure out my mistake.
Well, if you're thinking along the lines of the last four or five sentences, you are on the wrong mental path. That loss should be NO big deal and small. It should represent a tiny percentage of your account. Your position size should be such that you are not risking more than what you determine to be a truly acceptable loss. You should make sure this number, which is really your ultimate risk, is a number you are very comfortable with. In one of my lower risk accounts, I keep the losses to $1000 or less. Let's take a look.
Figure 2
Here is a picture of the AAPL profit and loss window just as the loss was taken. If that $960 dollar loss appears scary to you, then that is simply too much risk for your comfort level. If the loss itself makes you cringe with anger or fear, you simply have the wrong perception of losing. You have "losing" in the wrong category. The loss is taken and we move on. While Area "A" represents the picture of a supply and demand imbalance that typically causes price to turn, this one didn't have as much supply as I thought. As price went past supply area "A," it quickly zoomed up to supply area "C." Applying the very rule-based strategy that I employ, it was time to short again.
Figure 3
As price reached that level, there were plenty of willing sellers; supply exceeded demand. Price quickly turned and reached a 3:1 reward/risk profit threshold. Based on rules, the protective buy stop was moved to breakeven which meant this was a free trade, the risk was minimized to no loss. Taking another "bite at the apple" was profitable. Had I focused on the first loss being a losing activity and felt bad about it, the gain on the second trade never would have happened because of a fear of being wrong. Taking a small loss in trading is not wrong at all, it's the right thing to do and a MUST if you are ever to enjoy gains.
While I was writing this piece, a couple of trading opportunities in the S&P Futures came up. With no fear of losing when trading because the action is not losing, it's winning, the trades were taken.
Figure 4
This is a picture of one of my Futures trading accounts that I use more for demonstration. This is live and real money, however, not a simulator. At the end of the day, the account had a gain of $1,562.50 from two trades taken during the trading session. There were two trades taken this day, one was a loss and the other was a win. Like Las Vegas, I don't care at all that I was only 50% accurate that day. I know that as long as I stick to my rules, I am running a strategy that is very profitable because the odds are stacked in my favor and the risk management is proper. I know that I will only achieve profits if I include and accept losses. When you shift your attitude and understand this, the word "loss" all of a sudden means the same thing as the word "win." On this day, the first of the two trades was the loser. Just like AAPL, if you go and beat yourself up over a loss or think you did something wrong and become paralyzed by fear and failure, you will stop executing your plan and never see the gains.
From my experience, the rules that truly stack the odds in your favor are not that difficult. I go over these rules each week in the Extended Learning Track (XLT) program. This is the easy part of my job in the program. The hard part is helping people shift perception of loss to the win category. I meet people often that actually think I and other instructors hardly ever lose. They want to take our classes because they think they will learn to never lose and only have winning trades all the time. We have a high winning percentage but we certainly have losses. None of us like to lose, I know firsthand from competing in sports. Just like in sports, however, falling down in practice is a must if you are going to skate faster. Striking out from faster pitches is a much if you are going to make it to the big leagues. Swinging your driver harder and slicing the ball 100 times is a must if you are ever going to hit a 300 yard drive straight.
Imagine what would happen to the casino if they tried to eliminate the losses. They would be out of business and none of us would have a playground in the middle of the desert to enjoy. Losing in trading is great as long as it's proper losing. To become a professional winner, you have to first become a professional loser. This is a road block that many people never overcome which is why many people fail at market speculating. It's the few market speculators with the proper perception that get paid from those with the wrong perception, the transfer of accounts. If you want to change, change your perception of loss.
I am a winner
My whole life, I have been very involved in sports. Ice hockey, soccer, golf, and tennis are the sports I love to compete in. Playing hockey at such a high level, I learned how to win, consistently. There were always teams in the league that would win consistently and others that would lose. When we would play a team that had a bad record, sometimes they would be leading the game for a while but I never worried. It was almost like we could be down by a few goals and we knew we were going to win. This is because of attitude. Sure enough, most of the time no matter what the score was during much of the game, we would come back and win. The winning attitude almost always beats the losing attitude. The winning teams play with one thought, that's "to win." The losing teams also play with one thought, "not to lose." The latter equates to a lack of confidence and fear and that is a recipe for consistent failure.
Like many of you, I love the game of golf. I have a childhood friend whom I play with sometimes. While our skill levels are near equal, I almost always beat him. What happens is that as soon as he hits a bad shot, and I mean a really bad shot, he can't recover mentally. He allows this shot to have such a big impact on his game that the rest of the round of golf is a disaster for him. I, too, have a bad shot once and a while; we all do. The difference is that I don't let it have anything to do with my next shot. I know the bad shot will happen sometimes which means it's actually a part of winning the game. As soon as my friend hits a bad shot, he is finished, I win, game over.
I love to win, I hate to lose
Having so much success in a sport growing up, you feel like there is nothing in life you can't do. No matter what the task, not succeeding is never an option or thought. So, you can imagine how shocked I was when I entered the trading world and was told that you have to be a good loser in order to win. HA!! That had to be a joke I thought... There is no way I am going to lose because I hate losing, I hardly ever lose. It didn't take long to realize that this was 100% true, I had losses and that didn't sit well with me. I tried to eliminate them but as I did, I also eliminated the winning trades, as well. This was not good; I hated losing. Slowly though, I figured out the secret to trading from experience and a friend of mine. It all depends on your definition of losing. In my early trading days, I had the wrong definition of the word "loss."
Perception is everything
Think about all the setbacks and losses you have had in other parts of your life; financial, relationships, job promotions, and more. Haven't they always made you stronger and led to something "better?" Losing is a very necessary part of winning in my humble opinion. As our founder at Online Trading Academy, Eyal Shahar says, "Life is all about perception." If I had a dollar for every time I have heard him say that, I wouldn't have to trade. He is so right... The key is to categorize. If I perceive each trading loss as a loss or losing, it's not going to sit right with me; I can't stand losing! However, if I put each trading loss in its proper place which is in the "winning" category, all of a sudden a trading loss is a must for winning.
Apple Inc. (AAPL)
I was in the Extended Learning Track (XLT) class, leading a session and I pointed out a trading opportunity in a popular stock, Apple. I went over the factors that led me to this conclusion and everything seemed fine.
Figure 1Well, if you're thinking along the lines of the last four or five sentences, you are on the wrong mental path. That loss should be NO big deal and small. It should represent a tiny percentage of your account. Your position size should be such that you are not risking more than what you determine to be a truly acceptable loss. You should make sure this number, which is really your ultimate risk, is a number you are very comfortable with. In one of my lower risk accounts, I keep the losses to $1000 or less. Let's take a look.
Figure 2
Figure 3
While I was writing this piece, a couple of trading opportunities in the S&P Futures came up. With no fear of losing when trading because the action is not losing, it's winning, the trades were taken.
Figure 4
From my experience, the rules that truly stack the odds in your favor are not that difficult. I go over these rules each week in the Extended Learning Track (XLT) program. This is the easy part of my job in the program. The hard part is helping people shift perception of loss to the win category. I meet people often that actually think I and other instructors hardly ever lose. They want to take our classes because they think they will learn to never lose and only have winning trades all the time. We have a high winning percentage but we certainly have losses. None of us like to lose, I know firsthand from competing in sports. Just like in sports, however, falling down in practice is a must if you are going to skate faster. Striking out from faster pitches is a much if you are going to make it to the big leagues. Swinging your driver harder and slicing the ball 100 times is a must if you are ever going to hit a 300 yard drive straight.
Imagine what would happen to the casino if they tried to eliminate the losses. They would be out of business and none of us would have a playground in the middle of the desert to enjoy. Losing in trading is great as long as it's proper losing. To become a professional winner, you have to first become a professional loser. This is a road block that many people never overcome which is why many people fail at market speculating. It's the few market speculators with the proper perception that get paid from those with the wrong perception, the transfer of accounts. If you want to change, change your perception of loss.
Saturday, September 26, 2009
Weekly updates for all of you forex fans
Well this week could have been a spectacular one but it was sadly a case of missed opportunities. I've been talking about the GBP/USD entering a new downward trend for a few weeks now but when it did finally break downwards this week, it left me behind. I was waiting for a slight pull-back yesterday morning after the initial breakout so I could get a good entry point, but sadly there wasn't one. It was a similar story on the EUR/GBP and GBP/JPY pairs as well.
not my story byt a interesting one
not my story byt a interesting one
Wednesday, September 23, 2009
Take a traiding course
From ancient times, people have been engaged in different types of businesses. Buying, and selling of commodities, is still the backbone of any business. Businesses have not only provided bread and butter to generations but have also helped build many great nations.
Trading is also one of the very old ways of doing business. Long ago, people traded goods for other goods. Later on, goods were traded for services and services were traded for money.
Forex trading is just one of the many forms of trading business. Simply put, forex trading is the trading of different currencies in the world. Known as the largest financial market in the world, forex trading is the least regulated market which provides absolute liquidity to most investors.
In the beginning forex trading seems very easy. But in reality, it’s quite difficult. To make money in forex trading, you should be able to buy currencies at a cheaper rate and sell them later at a higher rate. If you don’t have proper knowledge about it, you will lose a whole lot of money.
To become a pro in forex trading, you will need to learn the basics and then practice with some advanced learning tools. If you do it right, it won’t be long when you will become a master.
There are many forex trading courses that you can choose from. They vary not only by the content but also by the audience type. For example, you can choose to attend a forex trading class traditionally (inside the classroom) or online over Internet. There are courses designed for beginners, intermediate level and even for professional traders.
Whichever course you choose, you will definitely learn more and benefit from it. Practicing what you learn is also important. Although the actual trading requires additional expenses on your part, the amount that you’ll be spending will be doubled or even tripled once you do your actual forex trade.
Trading courses offered to the new forex traders teaches all the basic principles and aspects of forex trading. There are many institutions which offer the latest software and tools used in forex trading. Apart from detail on forex trading, many institutions educate the first time traders about the difference between equities and forex trading. They show how the pros make use of different instruments when doing the actual trade, which helps the beginner to choose the best possible instrument.
Since trading in forex goes on across the world, you can actually engage in forex trading twenty four hours a day and six days a week. You can just imagine how much money you can make in very little time; but this can only be realized if you attend forex trading courses.
Some new traders initially enjoy and benefit from forex trading even without attending any proper course. But in due time, they realize that they can lose a lot of money if they don’t seek professional help. As you can guess, a little help from outside can prove to be very useful.
Forex trading requires a lot of knowledge about the market itself, and if you hardly have any knowledge about it, you’re in big trouble. People who want to engage in business naturally want to make money, and to achieve that in forex trading, you must have a good grip of the different aspects of the trade.
One of the very important traits in doing forex trading is discipline. It’s not enough to have your own plan; you also need to stick to it at all times. With the help of adequate technical tools, you can go a very long way.
It would be wise to find a course in physical offices so that you can get the most professional and comprehensive learning experience. Check if they also offer study materials to be used at home. The opportunity brought about by the different courses offered in the market is infinite, and any trader can highly benefit from it.
Trading is also one of the very old ways of doing business. Long ago, people traded goods for other goods. Later on, goods were traded for services and services were traded for money.
Forex trading is just one of the many forms of trading business. Simply put, forex trading is the trading of different currencies in the world. Known as the largest financial market in the world, forex trading is the least regulated market which provides absolute liquidity to most investors.
In the beginning forex trading seems very easy. But in reality, it’s quite difficult. To make money in forex trading, you should be able to buy currencies at a cheaper rate and sell them later at a higher rate. If you don’t have proper knowledge about it, you will lose a whole lot of money.
To become a pro in forex trading, you will need to learn the basics and then practice with some advanced learning tools. If you do it right, it won’t be long when you will become a master.
There are many forex trading courses that you can choose from. They vary not only by the content but also by the audience type. For example, you can choose to attend a forex trading class traditionally (inside the classroom) or online over Internet. There are courses designed for beginners, intermediate level and even for professional traders.
Whichever course you choose, you will definitely learn more and benefit from it. Practicing what you learn is also important. Although the actual trading requires additional expenses on your part, the amount that you’ll be spending will be doubled or even tripled once you do your actual forex trade.
Trading courses offered to the new forex traders teaches all the basic principles and aspects of forex trading. There are many institutions which offer the latest software and tools used in forex trading. Apart from detail on forex trading, many institutions educate the first time traders about the difference between equities and forex trading. They show how the pros make use of different instruments when doing the actual trade, which helps the beginner to choose the best possible instrument.
Since trading in forex goes on across the world, you can actually engage in forex trading twenty four hours a day and six days a week. You can just imagine how much money you can make in very little time; but this can only be realized if you attend forex trading courses.
Some new traders initially enjoy and benefit from forex trading even without attending any proper course. But in due time, they realize that they can lose a lot of money if they don’t seek professional help. As you can guess, a little help from outside can prove to be very useful.
Forex trading requires a lot of knowledge about the market itself, and if you hardly have any knowledge about it, you’re in big trouble. People who want to engage in business naturally want to make money, and to achieve that in forex trading, you must have a good grip of the different aspects of the trade.
One of the very important traits in doing forex trading is discipline. It’s not enough to have your own plan; you also need to stick to it at all times. With the help of adequate technical tools, you can go a very long way.
It would be wise to find a course in physical offices so that you can get the most professional and comprehensive learning experience. Check if they also offer study materials to be used at home. The opportunity brought about by the different courses offered in the market is infinite, and any trader can highly benefit from it.
Forex trading software description
In many ways, the Forex trading software has made forex markets carry out the trades with efficiency and ease. The ability of software to integrate different currencies in their respective markets worldwide has made it possible for forex traders to do business 24 hours a day.
Two kinds of forex trading software are available today. The first is known as service side software. This software is an online version of software program in which the users log in using their forex market accounts’ user ids and passwords and connect to the trading portal or platform. Then they can execute any operation associated with the accounts that they wanted.
Another type of forex trading software is known as client side software. This type of software, which is installed by technicians in the computers of the traders, is a program that runs on users’ computers and allows them to execute different transactions.
Both varieties of forex trading software are popular among the traders since they allow them to conduct business transactions across the world any time of the day or night.
Forex trading software provides a number of other benefits to the traders than the basic ability to perform transactions. It includes the relationships of currencies to trading and vice versa. One of the greatest benefits is the real time accessibility on forex quotes. It can also provide useful information about past behavior of real time quotes and rates. The charting mechanism is also a very good advantage. It can help the trader to gain excellent profits if it is properly interpreted.
One advantage of forex trading software is that it can embed charting software and provide access to various charts and graphs that assist the traders in making decisions about their transactions. With the complete background information, the traders get the correct details they need in making the best possible decision.
Another important aspect of Forex trading software is the security it provides to traders. The software usually operates at various security layers that would be difficult for hackers to crack into. Due to the exposure of forex trading all over the world, this security is much needed when huge traffic volumes occur in the forex market. The general security of the forex trading software ensures that the personal data of the traders are also protected.
Security in the software works at 2 levels- data integrity and privacy. This prevents the hackers from getting into the trader’s account or change currency rates during a high amount transaction.
Forex trading software also allows the traders to see the entire forex market conditions at once. This is necessary because without the overall knowledge of the forex market, one can not decide the best time to perform transactions.
It also helps in increasing forex sales volumes in the market. Take note, forex market can be sometimes difficult to determine. You need to understand every detail to select the best to make it work for you. As much as possible, learn the latest forex trading software and apply it. Most of the software available today is a two-in-one. They include both the trading software and useful charting software. You can gain a lot if you are able to interpret and use the charts correctly.
Two kinds of forex trading software are available today. The first is known as service side software. This software is an online version of software program in which the users log in using their forex market accounts’ user ids and passwords and connect to the trading portal or platform. Then they can execute any operation associated with the accounts that they wanted.
Another type of forex trading software is known as client side software. This type of software, which is installed by technicians in the computers of the traders, is a program that runs on users’ computers and allows them to execute different transactions.
Both varieties of forex trading software are popular among the traders since they allow them to conduct business transactions across the world any time of the day or night.
Forex trading software provides a number of other benefits to the traders than the basic ability to perform transactions. It includes the relationships of currencies to trading and vice versa. One of the greatest benefits is the real time accessibility on forex quotes. It can also provide useful information about past behavior of real time quotes and rates. The charting mechanism is also a very good advantage. It can help the trader to gain excellent profits if it is properly interpreted.
One advantage of forex trading software is that it can embed charting software and provide access to various charts and graphs that assist the traders in making decisions about their transactions. With the complete background information, the traders get the correct details they need in making the best possible decision.
Another important aspect of Forex trading software is the security it provides to traders. The software usually operates at various security layers that would be difficult for hackers to crack into. Due to the exposure of forex trading all over the world, this security is much needed when huge traffic volumes occur in the forex market. The general security of the forex trading software ensures that the personal data of the traders are also protected.
Security in the software works at 2 levels- data integrity and privacy. This prevents the hackers from getting into the trader’s account or change currency rates during a high amount transaction.
Forex trading software also allows the traders to see the entire forex market conditions at once. This is necessary because without the overall knowledge of the forex market, one can not decide the best time to perform transactions.
It also helps in increasing forex sales volumes in the market. Take note, forex market can be sometimes difficult to determine. You need to understand every detail to select the best to make it work for you. As much as possible, learn the latest forex trading software and apply it. Most of the software available today is a two-in-one. They include both the trading software and useful charting software. You can gain a lot if you are able to interpret and use the charts correctly.
Tuesday, September 22, 2009
What is Currency Trading?
The Currency trading market is a multi trillion dollar market where world currencies are exchanged back and forth on a daily basis.
How is currency trading done?
Retail currency trading is typically done through brokers and market makers. Traders can place trades through their brokers who will in turn place a corresponding trade on the interbank market.
Why do currency values change?
Currency values can change for many reasons. Sometimes they react to political and economic news, sometimes they are driven by speculators, and sometimes they are driven by international business flows. If companies in the United States are importing large quantities of products made in Europe, they will need to exchange their US Dollars for Euros to pay for the products. When this is done in very large quantity over a short period of time, it raises the demand for Euros and the value of the Euro versus the US Dollar increases. This happens because dollars are being sold on the open market, while Euros are being bought.
Is currency trading risky?
Currency trading can be very risky. Currencies tend to be very volatile compared to other markets. The real key to success with currency trading is to use conservative risk management. There are many components to effective currency risk management, but the bottom line is to use caution and have a trading plan.
Who trades currencies?
Currencies are traded by individual retail investors, financial institutions, and corporations doing business. Retail investors and banks are trade to make profits and corporations usually trade in the normal course of the international business process.
source: About.com
How is currency trading done?
Retail currency trading is typically done through brokers and market makers. Traders can place trades through their brokers who will in turn place a corresponding trade on the interbank market.
Why do currency values change?
Currency values can change for many reasons. Sometimes they react to political and economic news, sometimes they are driven by speculators, and sometimes they are driven by international business flows. If companies in the United States are importing large quantities of products made in Europe, they will need to exchange their US Dollars for Euros to pay for the products. When this is done in very large quantity over a short period of time, it raises the demand for Euros and the value of the Euro versus the US Dollar increases. This happens because dollars are being sold on the open market, while Euros are being bought.
Is currency trading risky?
Currency trading can be very risky. Currencies tend to be very volatile compared to other markets. The real key to success with currency trading is to use conservative risk management. There are many components to effective currency risk management, but the bottom line is to use caution and have a trading plan.
Who trades currencies?
Currencies are traded by individual retail investors, financial institutions, and corporations doing business. Retail investors and banks are trade to make profits and corporations usually trade in the normal course of the international business process.
source: About.com
Holiday Forex Trading: Reasons to Avoid
For beginning forex traders in particular, holiday trading is very tempting. It can be difficult to pull yourself away from the excitement on the market and take a break from the action. Let’s examine some of the reasons to avoid trading on holidays.
1. No Liquidity
Banks are usually closed on holidays and professional traders and big institution are on vacation. Because of this, two way trading is very limited. That means that prices can move very easily in one direction if any surprise large orders come in.
2. Unexpected Behavior
Building on the previous idea about liquidity, sometimes a surprising event will happen and because the markets are not liquid, they will move very quickly and sharply. These moves can take place in a blink and if you are trading, the market can make a move against you before you even have a chance to act.
3. Inactivity
The unexpected behavior is usually the exception rather than the rule. Most of the time, there is very little action in the forex market on US holidays. For daytrading purposes, technical analysis usually fails. The market is usually so slow that even if you can make money, it will probably be so little that it isn’t worth it.
4. Everyone Needs Personal Time
Above all, you shouldn’t be trading on holidays because you have to rest sometime. It’s better to take time off and spend it with your family. That time does not come around often and it’s better to take that time off while you can. The forex trading markets are busy most of the time. Holidays are a perfect time to rest , reflect, and recharge.
source: About.com
1. No Liquidity
Banks are usually closed on holidays and professional traders and big institution are on vacation. Because of this, two way trading is very limited. That means that prices can move very easily in one direction if any surprise large orders come in.
2. Unexpected Behavior
Building on the previous idea about liquidity, sometimes a surprising event will happen and because the markets are not liquid, they will move very quickly and sharply. These moves can take place in a blink and if you are trading, the market can make a move against you before you even have a chance to act.
3. Inactivity
The unexpected behavior is usually the exception rather than the rule. Most of the time, there is very little action in the forex market on US holidays. For daytrading purposes, technical analysis usually fails. The market is usually so slow that even if you can make money, it will probably be so little that it isn’t worth it.
4. Everyone Needs Personal Time
Above all, you shouldn’t be trading on holidays because you have to rest sometime. It’s better to take time off and spend it with your family. That time does not come around often and it’s better to take that time off while you can. The forex trading markets are busy most of the time. Holidays are a perfect time to rest , reflect, and recharge.
source: About.com
Japanese Candlesticks
Japanese candlesticks originate from the Japanese rice trading markets in the 1700’s. They were used to track rice futures on the world’s first futures exchange.
In recent years, Japanese Candlesticks have become popular in the US trading markets. They can be viewed as simple colorized indicators that show when price is going up, or when it’s going down.
When the price is increasing, the candle turns blue as it heads higher. When the price is decreasing, the candle turns red as it moves lower. Candlesticks have a 2 wicks and a body in the middle. One end of the body represents the opening price, and the other end represents the closing price. The wicks on either end indicate the high and the low.
Candlesticks have their own science to them. Understanding them is essential for basic chart reading skills for almost any market.
source: About.com
Best Times to Make Forex Trade
The forex markets are great because they are open almost all of the time and there are a wide range of currencies to choose from. This brings up an important question.
What are the most active hours for forex trading?
Generally speaking, the most active hours all around are between the London markets opening around 8:00 GMT and end with the markets in the US closing around 22:00 GMT. The absolute busiest time in the forex markets are during the London to US overlap between 13:00 GMT to 16:00 GMT. These are the hours that are the most liquid or when the most traders are in the markets making trades. If your intention is todo daytrading, these are key hours!
What are the major sessions for forex trading?
There are 3 major sessions each day in the forex markets. They are the London session, the US session, and the Asian Session.The London SessionThe London session starts around 8:00 GMT and winds down around 1600 GMT. The currencies that are the most active during these hours are EUR, GBP, and USD. The US SessionThe US session starts around 1300 GMT and winds down around 22:00 GMT. The currencies that are the most active during these hours are AUD, EUR, GBP, JPY, and USD.The Asian SessionThe Asian session is a reasonable quiet session on most days. All pairs are pretty slow moving and it is not a good time to day trade. The only real currency that has noteworthy activity is the JPY and the activity is slow unless a major financial event happens.
Summary
The best hours for trading the forex markets, no matter your method, are during the London and US session overlap. The markets are full of active participants during these hours and the currencies really move. For the most part, even the larger fundamental news comes out during these times. Trading during these hours is your best chance to get in while the market is making decisive moves and it will be your best chance to score quick profits.
source: About.com
Forex Trading on Margin
In the forex world, brokers allow trading of foreign currencies to be done on margin. Margin is basically an act of extending credit for the purposes of trading. For example, if you are trading on a 50 to 1 margin, then for every $1 in your account, you are able to trade $50 in a trade. This has both its drawbacks and advantages.
Advantages
The advantage of trading on margin is that you can make a high percentage of gains compared to your account balance. For instance, let’s assume that you have a $1000 account balance and you are not trading on margin. You initiate a $1000 trade that nets you100 pips. In a $1000 trade, each pip is worth 10 cents. The profit from your trade would be $10 or a 1 percent gain. If you were to use that same $1000 to make a 50 to 1 margin trade giving you a trade value of $50,000, the same 100 pips would net you $500 or a 50 percent gain.
Disadvantages
The disadvantage of using margin is risk. Let’s make the opposite assumption that we made while discussing advantages. You are still using a $1000 account balance. You initiate a $1000 trade and lose 100 pips. Your loss is only $10 or 1 percent. This is not too terrible, you would have plenty of capital left to try again. If you were to make a 50 to 1 margin trade for $50,000 a loss of 100 pips takes $500 or 50 percent of your capital. One more trade like that and your account is finished. On the first example, you only lost $10 or 1 percent, you could make that same losing trade 99 more times before your account was empty.
Summary
Margin trading is just another tool. You can use it to make impressive gains and simultaneously risk excessive loss. Trading on margin effectively is best done with a reasonable amount of experience and a strict risk management policy.
source: About.com
Stop Loss Forex Basics
One of the trickiest concepts in forex trading is management of stop orders. A stop loss order is an order that closes out your trading position with the intent of cutting your losses when the market moves against you.
There is no clear rule of thumb when it comes to placing stops, it all depends on your trading strategy.
If your trading strategy is more of a daytrading style, you might place a stop just outside of the daily range of the currency pair that you are trading. This way, if the market suddenly breaks the trend that you are trading and moves far enough in the opposite direction, your account is protected because your position is closed.
If your trading style is more of a swing trading style, you might set your stop loss outside of twice to three times the daily range.
Remember, the point of the stop loss is to end the trade when the market goes far enough in the opposite direction, that your trade no longer makes sense. It can be difficult facing the fact that you made the wrong decision, but the markets are as unpredictable as the weather. Sometimes you look at things expecting what seems obvious, only to have the market behave unexpectedly. Setting the stop loss at the time that you enter the trade can help you to draw a “line in the sand” for protection.
No matter what stop loss strategy you choose, remember not to move your stop loss further out to prevent the trade from being stopped out. There are exceptions to every rule, but generally if your stops are getting hit on good trades, you aren’t placing them correctly to begin with. It is better to modify your stop loss strategy. By moving your stop loss to avoid having it hit, you are defeating the protective purpose of it.
When coming up with your stop loss strategy, just remember to set stops that make sense for your account and trading style. The whole point is to limit your losses when you are wrong. If your losses continue to be excessive or your stops are constantly hit, you may need to rethink your system.
source: About.com
Introduction to Moving Averages in Forex Trade
Moving averages are one of the most commonly used technical indicators in forex trading. The moving average helps traders to track the overall pricing trend of a currency. It is called a moving average because it incorporates the new pricing data as it develops.
Main Objective
The main objective of moving average is to give you a simple view of the trend. The moving average can reduce the amount of “noise” and the chart and give you a simple direction to base your trades on.
Time Period Options
Moving averages come in several different flavors. They can be adjusted for the level of average that you want. If you are trading on an hourly chart, you can set a moving average that will give you the average price over the past 8 hours. This is called an 8 period moving average. Traders develop their own theories on what average works best for them. It’s best to experiment with different settings until you find one that makes sense to you.
Types of Moving AveragesSMA – Simple Moving Average
A simple moving average is the most basic style of moving average. It simply tracks price data as it occurs and gives you the average direction based on the time period you select.
WMA- Weighted Moving Average
A weighted moving average focuses on more recent price action. The moving average line will consider recent price movements to be more important than older price movements. This is also commonly referred to as an exponential moving average or EMA.
Using moving averages alone is not a catch all solution, but they will help you determine the overall trend. Used in conjunction with your other preferred technical indicators, they are an asset to any trading system.
A weighted moving average focuses on more recent price action. The moving average line will consider recent price movements to be more important than older price movements. This is also commonly referred to as an exponential moving average or EMA.
Using moving averages alone is not a catch all solution, but they will help you determine the overall trend. Used in conjunction with your other preferred technical indicators, they are an asset to any trading system.
source: About.com
Forex Chart Timeframes
When using charts to make trading decisions, you can choose between different spans of time when it comes to your chart.
Charting systems can offer timeframes ranging from tick by tick to monthly bars. Monitoring multiple timeframes can give you a greater perspective on the personality of a currency pair.
The smaller timeframes such as 5 minute and 15 minute are best suited for daytraders looking to scalp for quick pips. They are also good for swing traders looking for an opportune moment to make an entry.
The 1hr chart is for swing traders and long term traders looking for the momentary trend. The 1hr chart is well known for it’s reliability on short term changes in momentum.
The 4hr chart is for long term traders. The 4hr chart is most useful for traders wishing to trade the daily chart that want to make a carefully timed entry.
The daily chart is best used for setting up long term positions on a currency pair.
Each of the different timeframes can give you clues to the personality of a trading pair. You can find out whether the pair tends to move steady during it’s trends, or if it tends to stall often. You can find out if it’s volatile during daily sessions, but steady over the week.
Viewing a currency pair in multiple timeframes can help you find good entry and exit points, depending on the strategy that you want to use. Daytrading a currency can make a lot of sense for traders looking to take maximum advantageof daily volatility, but keeping the daily trend in mind can help daytraders focus on the bigger picture.
The Bottom Line
Forex trading attracts many different types of traders with many different types of systems. If you want to trade a currency pair, it’s best to become as familiar with it as possible. Viewing the currency pair in multiple timeframes is part of the process of learning it’s personality. Understanding the currency pair’s personality can help you in your success with trading it.
Forex trading attracts many different types of traders with many different types of systems. If you want to trade a currency pair, it’s best to become as familiar with it as possible. Viewing the currency pair in multiple timeframes is part of the process of learning it’s personality. Understanding the currency pair’s personality can help you in your success with trading it.
source: About.com
Forex Orders
In forex trading, there are several different types of orders that you can use to make and control your trades. There are orders that control both how you enter and how you exit the market.
Market Orders
Market Orders are orders that are executed live on the market at the current price. A market order can be used to open or close a trade at the market price.
Limit Orders
Limit Orders are typically orders used to exit the market in profit. If you are going long, the limit order will be above the market price and if you are going short, the limit order will be below the market price. You can think of a limit order to be like a finish line. Once the market price crosses the limit order, your trade will be closed and your profit will be realized to your account balance.
Stop Orders or Stop Loss Orders
Stop Orders are also an exit order that will close your trade. Commonly referred to as a stop loss order, this type of order is intended to limit the amount of loss incurred by your trade. A stop loss order will close your trade at a designated level of loss. Stop losses can also be used to lock in gains as your trades progress into profit.
Entry Orders
Entry Orders are orders to enter the market at a specified price. It is almost impossible to monitor the market every second and this is why an entry order can be handy. If you feel the market may take a certain action, such as break through a price that it has been touching but it has not been able to break, you would want to use an Entry Limit Order. Once the price crosses your Entry Limit Order, you are in the market.
Market Orders
Market Orders are orders that are executed live on the market at the current price. A market order can be used to open or close a trade at the market price.
Limit Orders
Limit Orders are typically orders used to exit the market in profit. If you are going long, the limit order will be above the market price and if you are going short, the limit order will be below the market price. You can think of a limit order to be like a finish line. Once the market price crosses the limit order, your trade will be closed and your profit will be realized to your account balance.
Stop Orders or Stop Loss Orders
Stop Orders are also an exit order that will close your trade. Commonly referred to as a stop loss order, this type of order is intended to limit the amount of loss incurred by your trade. A stop loss order will close your trade at a designated level of loss. Stop losses can also be used to lock in gains as your trades progress into profit.
Entry Orders
Entry Orders are orders to enter the market at a specified price. It is almost impossible to monitor the market every second and this is why an entry order can be handy. If you feel the market may take a certain action, such as break through a price that it has been touching but it has not been able to break, you would want to use an Entry Limit Order. Once the price crosses your Entry Limit Order, you are in the market.
Entry Orders can be a double edged sword.
The advantage is that you can enter the market when it moves while you are away or not paying attention. The disadvantage is the market can touch your Entry Order and take it negative before you have the chance to evaluate the move. This is where good risk management practices come into play.
Summary
Understanding different types of forex orders and their uses is an essential basic skill. Take the time to study them and try them out using a demo account.
source: About.com
Summary
Understanding different types of forex orders and their uses is an essential basic skill. Take the time to study them and try them out using a demo account.
source: About.com
The Top 5 Benefits of Forex Trading
1. 24 Hour Market
Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.
2. High Liquidity
Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.
3. Low Transaction Cost
In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.
4. Leverage
Forex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital.
5. Profit Potential from Rising and Falling Prices
The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.
source: About.com
Since the forex market is worldwide, trading is continuous as long as there is a market open somewhere in the world. Trading starts when the markets open in Australia on Sunday evening, and ends after markets close in New York on Friday.
2. High Liquidity
Liquidity is the ability of an asset to be converted into cash quickly and without any price discount. In forex this means we can move large amounts of money into and out of foreign currency with minimal price movement.
3. Low Transaction Cost
In forex, typically the cost for a transaction is built into the price. It is called the spread. The spread is the difference between the buying and selling price.
4. Leverage
Forex Brokers allow traders to trade the market using leverage. Leverage is the ability to trade more money on the market than what is actually in the trader's account. If you were to trade at 50:1 leverage, you could trade $50 on the market for every $1 that was in your account. This means you could control a trade of $50,000 using only $1000 of capital.
5. Profit Potential from Rising and Falling Prices
The forex market has no restrictions for directional trading. This means, if you think a currency pair is going to increase in value; you can buy it, or go long. Similarly, if you think it could decrease in value you can sell it, or go short.
source: About.com
What is Forex Trading?
Forex Trading is the act of trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.
How Does Forex Trading Work?
Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you feel is going to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to close your trade at that point, you would have made $100.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
source: About.com
For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD.
How Does Forex Trading Work?
Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you feel is going to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to close your trade at that point, you would have made $100.
Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds.
source: About.com
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