EUR/USD Technical Analysis 26 November 2010

November 26, 2010 · Posted in Forex Exchange · Comments Off 

On Wednesday the Euro/Dollar was trading within a narrow, around 100 pip range. The European currency first depreciated to 1.3286, than climbed to 1.3388 yesterday, matching the positive Interbank sentiment projection at nearly +6%, closing the day at 1.3358. This morning the pair is showing weakness, but is still moving within yesterday’s range.

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Daily forex forecast – 07/10/2010

October 7, 2010 · Posted in day trading · Comments Off 

The Australian Dollar took a break yesterday, moving in a very quiet 30 pip range against the USD after recent volatile trade.

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Forex Signals – EUR/USD Consistent Uptrend

September 30, 2010 · Posted in day trading · Comments Off 

As you can see in the chart below the pair continues to accelerate upward and, as I said yesterday, overbought or not all signals point north so I will continue to look for technical buying opportunities on dips and breakouts. Yesterday I settled for the latter (breakout) which netted some quick pip.

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Forex Currency Trading – How to Harness Today’s Trading Technology

January 31, 2010 · Posted in Currencies · Comments Off 

Self control and discipline can be nurtured and strengthened over time and are extremely valuable qualities to develop. In this article we’ll talk about how these qualities relate to current and projected future developments in the Forex industry.

Manual Forex trading is a time-tested and market proven method for trading Forex. There is no doubt that manual Forex trading is here to stay. Many of the most skilled full-time Forex traders prefer this method. The key words here are skilled full-time traders.

You see, manual Forex trading can be time consuming. While the process of Forex technical analysis gets a bit easier and more efficient with practice in manual Forex trading it can never be completely eliminated. Manual Forex traders will always need to complete their technical and perhaps even fundamental analysis prior to executing their Forex trades.

As you know, fundamental Forex analysis has to do with looking at economic indicators within and between nations. Fundamental Forex indicators such as Consumer Price Index, Non-Farm Payroll, Gross National Product, Industrial Production, Producer Price Index, Retail Sales, Balance of Payments and Interest Rates are many of the most common fundamental Forex indicators traders seek to incorporate in their analysis.

Needless to say using both fundamental and technical analysis is quite complex and can be a very time consuming challenge. Except for “news” traders many Forex traders default to primarily using Forex technical analysis.

A prime example of “news” is the Non Farm Payroll announcement. This announcement normally takes place on the first Friday of each month at 8:30am Eastern Time. Forex traders who trade the news position themselves in the market to capture as many PIP’s as possible during the market corrections that take place just after a “news” release. Forex traders who trade the news rely quite a bit on fundamental indicators in making their trade decisions.

New Forex software programs that gather and interpret Forex fundamental indicators have been around for a while and they will continue to improve their accuracy with time.

Speaking of Forex software programs, one of the most rapidly developing forms of Forex software are “Expert Advisors”. Forex Expert Advisors (EA’s for short) are software programs that operate within your Forex trading platform. So far, the industry leading Forex trading platform for EA’s is the Metatrader 4 Trading Platform designed by ODL Securities.

There are several advantages to using an EA. Perhaps chief among these advantages is the fact that the “on-board” programming of the EA eliminates the need for the Forex trader to spend a lot of time doing technical analysis. Once an EA is properly initiated, it will automatically trade a specified Forex pair, or pairs, using a predetermined strategy or Forex trading approach.

This can be a huge time-saver.

With an EA the Forex technical analysis is handled by the Forex trading logic programmed into the EA. The EA functions off of a set of predetermined “rules” which guide its operation. The EA enters the Forex trade when the entry conditions are met and exits the Forex trade when the exit conditions are met. Each EA has a different set of predetermined rules. Each rule is typically controlled by one or more user adjustable “switches”. These switches are optimized at the time the EA is delivered to the user and can be saved as a switch settings profile. Once the default switch settings are saved, the user can make changes to the switch settings if they wish. It is important to remember that the best way to determine EA switch settings is through the back testing process.

Back testing is a process by which each switch or set of switches are methodically tested using actual past market data from your Forex trading platform. While back testing takes much less time than forward testing it is still a painstaking and time consuming process but the results can be very revealing and informative. This process will tell you such things as, for example, which time frame(s) and currency pair(s) are the most profitable to trade.

Back testing is absolutely necessary in order to optimize the settings for an EA and as such it is very valuable process but the process is not perfect. Data mismatches can occur during the back test process which can degrade the results somewhat. The source of these data mismatches is not known at this time but it is an industry wide problem and the solution to the mismatch problem is being vigorously pursued.

Even with its flaws the back test process remains of utmost importance when it comes to optimizing the performance of any EA.

The time saving nature of using an EA coupled with the stress reducing effect that it has on the Forex trader has boosted the popularity of this kind of Forex trade automation.

It is just this kind of Forex trade automation that is helping to fuel the explosive growth of the retail Forex market. It is no longer necessary to stay glued to your computer monitor and “baby sit” your Forex trades. Not only that but a properly designed EA can perform functions that even the most skilled and experienced Forex traders find difficult. For example, there are EA’s on the market today that can trade multiple currency pairs simultaneously. Other EA’s can trade multiple Forex hedge trades at the same time!

We are in the midst of a quiet revolution toward increased Forex trade automation. It is safe to say that the trend toward Forex trade atomization is likely to continue and strengthen over the next several years. Because the advantages of using an EA outweigh the disadvantages, the popularity of using EA’s is at an all time high and likely to set new records in the near future.

Even though EA’s are reducing the need for Forex technical analysis they are not reducing the importance of self-control and discipline. It is common for Forex traders who are new to EA trading to have an urge to “manual” trade using the EA. This is a mistake, first of all it defeats the purpose of the EA and second it can result in preventable loses.

With EA trading the EA is your Forex trading method. The EA trader is well advised to allow the EA to do its work without trying to manually over-ride it (Plan your trade – trade your plan).

If possible, examine the back testing and forward testing results of an EA before you purchase it. Always demo trade with a new EA to confirm its operation before using it in a live account.

EA trading is gaining in popularity by leaps and bounds. EA trading is part of a major trend toward increased automation in the world of Forex. This trend is expected to expand and strengthen in the years ahead.

Being skilled in Forex technical analysis is always an asset but EA trading relies more on the Forex trading logic of the EA than it does the technical skill of the trader.

Self control and discipline are equally important whether you are Forex manual trading or EA
trading. Combine the personal qualities self control and discipline with using a well designed EA and you are on your way to profiting in Forex – the world’s largest market.

Disclaimer – This article is for educational purposes only. It is not offered as investment or legal advice. The reader assumes all responsibility for any and all profits or losses incurred by his or her trading activities.

Author: David R Jaymes
Article Source: EzineArticles.com
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Forex Overview

January 10, 2010 · Posted in Currencies · Comments Off 

Each day, millions of trades are made in a currency exchange market called Forex. The word “Forex” directly stems off of the beginning of two words – “foreign” and “exchange”. Unlike other trading systems such as the stock market, Forex does not involve the trading of any goods, physical or representative. Instead, Forex operates through buying, selling, and trading between the currencies of various economies from around the world. Because the Forex market is truly a global trading system, trades are made 24 hours a day, five days a week. In addition, Forex is not bound by any one control agency, which means that Forex is the only true free market economic trading system available today. By leaving the exchange rates out of any one group’s hands, it is much more difficult to even attempt to manipulate or corner the currency market. With all of the advantages associated with the Forex system, and the global range of participation, the Forex market is the largest market in the entire world. Anywhere between 1 trillion and 1.5 trillion equivalent United States dollars are traded on the Forex market each and every day.

Forex operates mainly on the concept of “free-floating” currencies; this can be explained best as currencies that are not backed by specific materials such as gold or silver. Prior to 1971, a market such as Forex would not work because of the international “Bretton Woods” agreement. This agreement stipulated that all involved economies would strive to hold the value of their currencies close to the value of the US dollar, which in turn was held to the value of gold. In 1971, the Bretton Woods agreement was abandoned. The United States had run a huge deficit during the Vietnam Conflict, and began printing out more paper currency than they could back with gold, resulting in a relatively high level of inflation. By 1976, every major currency worldwide had left the system established under the Bretton Woods agreement, and had changed into a free-floating system of currency. This free-floating system meant that each country’s currency could have vastly different values that fluctuated based on how the country’s economy was faring at that time.

Because each currency fluctuates independently, it is possible to make a profit from the changes in currency value. For example, 1 Euro used to be worth about 0.86 US dollars. Shortly thereafter, 1 Euro was worth about 1.08 US dollars. Those who bought Euros at 86 cents and sold them at 1.08 US dollars were able to make 22 cents profit off of each Euro – this could equate to hundreds of millions in profits for those who were deeply rooted in the Euro. Everything in the Forex market is hanging on the exchange rate of various currencies. Sadly, very few people realize that the exchange rates they see on the news and read about in the newspapers each day could possibly be able to work towards profits on their behalf, even if they were just to make a small investment.
The Euro and the US dollar are probably the two most well-known currencies that are used in the Forex market, and therefore they are two of the most widely traded in the Forex market. In addition to the two “kings of currency”, there are a few other currencies that have fairly strong reputation for Forex trading. The Australian Dollar, the Japanese Yen, the Canadian Dollar, and the New Zealand Dollar are all staple currencies used by established Forex traders. However, it is important to note that on most Forex services, you won’t see the full name of a currency written out. Each currency has it’s own symbol, just as companies involved in the stock market have their own symbol based off of the name of their company. Some of the important currency symbols to know are:

USD – United States Dollar

EUR – The Euro

CAD – The Canadian Dollar

AUD – The Australian Dollar

JPY – The Japanese Yen

NZD – The New Zealand Dollar

Although the symbols may be confusing at first, you’ll get used to them after a while. Remember that each currency’s symbol is logically formed from the name of the currency, usually in some form of acronym. With a little practice, you’ll be able to determine most currency codes without even having to look them up.

Some of the richest people in the world have Forex as a large part of their investment portfolio. Warren Buffet, the world’s richest man, has over $20 Billion invested in various currencies on the Forex market. His revenue portfolio usually includes well over one-hundred million dollars in profit from Forex trades each quartile. George Soros is another big name in the field of currency trading – it is believed that he made over $1 billion in profit from a single day of trading in 1992! Although those types of trades are very rare, he was still able to amass over $7 Billion from three decades of trading on the Forex market. The strategy of George Soros also goes to show that you don’t have to be too risky to make profits on Forex – his conservative strategy involves withdrawing large portions of his profits from the market, even when the trend of his various investments seems to still be correlating upward.

Thankfully, you don’t have to invest millions of dollars to make a profit on Forex. Many people have recorded their success with initial investments of anywhere from $10,000 to as little as $100 for an initial investment. This wide range of economic requirements makes Forex an attractive venue for trading among all classes, from those well entrenched in the lower rungs of the middle class, all the way up to the richest people alive on the planet. For those on the lower end of the spectrum, access to the Forex market is a fairly recent innovation. Within the past decades, various companies began offering a system that is friendlier to the average person, allowing the smaller initial investments and greater flexibility that is seen in the market today. Now, no matter what economic position you are in, you can get started. Although it’s possible to jump right in and start investing, it’s best that you make sure you have a better understanding of the ins and outs of Forex trading before you get started.

The world of Forex is one that can be both profitable and exciting, but in order to make Forex work for you it is important that you know how the system works. Like most lucrative activities, to become a Forex pro you need a lot of practice. There are many websites that offer exactly this, the simulated practice of Foreign Exchange.

The services provided by online practice sites differ from site to site, so it is always a good idea to make sure you know all of the details of the site you are about to use. For example, there are several online brokers who will offer a practice account for a period of several weeks, then terminate it and start you on a live account, which means you may end up using your own money before you are ready to. It’s always a good idea to find a site that offers an unlimited practice account. Having a practice account allows you to learn the ways of the trade with no risk at all.
Continuing to use the practice account while you use a live account is also a beneficial tool for even the most seasoned Forex traders. The use of a no risk practice account enables you to try out new trading strategies and tread into unknown waters. If the strategy works, you know that you can now implement that strategy into your real account. If the strategy fails, you know to refrain from the use of that strategy without the loss of any actual money.

Of course, simply using a no risk account won’t get you anywhere. In order to make money with Forex, you need to put your own money in. Obviously, it would be ridiculous to travel to other countries to purchase and sell different currencies, so there are many websites that you can use to digitally trade your money. Almost all online brokerage systems have different features to offer you so you have to do the research to find out which site you wish to create an account with.
All brokers will require specific information of you to create your account. The information they will need from you includes information required to communicate with you, including your name, mailing address, telephone number, e-mail address. They also require information needed to identify who you are, including your Social Security number, Passport number or Tax Identification number. It is required by law that they have this information, so they can prevent fraudulent trading. They may also collect various personal information when you open an account, including gender, birth date, occupation, and employment status.

Now that you have practiced trading currency and set up your live account, it is time to truly enter this profitable yet risky world. To make money with Forex, you do need to have money to begin with. It is possible to trade with very small amounts of money, but this will also lead to very small profits. As is with many other exchange systems, high payouts will only come with high risks. You can’t expect to start getting millions as soon as you put money in to the market, but you can’t expect to make any money at all if you don’t put in at least a 3-digit value.

As most Forex brokers will warn you, you can loose money in the foreign exchange market, so don’t put your life savings into any one trade. Always trade with money that you’d be able to survive without. This will ensure that if you get a bad trade and loose a lot of money, you wont end up on the streets, and you’ll be able to make a comeback in the future.

So how does trading currency work? Logically, trades always come in pairs. For example, a common trade would be the United States Dollar to the Japanese Yen. This is expressed as USD/JPY. The way to quote a trade is kind of tricky, but with practice it becomes as natural as reading your native language. In a Forex quote, the first currency in the list (IE: USD in USD/JPY) is the base currency, and in the quote the base is always one. This means if (hypothetically of course) One USD was worth Two JPY, that the quote would be expressed as 1/2.

When trading in Forex, we use pips. Pip is an acronym for “percentage in point”. A pip a certain decimal place in a number compared to the same decimal place in another number. Using pips, we track the gains and losses of a currencies value compared to another’s. Let’s take a look at an example. Say a value is written as 1.0001/1.0004. This would indicate a 3-pip spread, because of the 3 number difference in the fourth decimal place. Almost all currency pairs go to the fourth decimal place. The only currency pair that doesn’t is that of the USD/JPY, and it goes to the second decimal place. For example, a USD/JPY quote with a 3-point spread would look like this: 1.01/1.04.

A very common aspect to the foreign exchange is leverage. Leverage trading, also known as trading on margin, is a way to amplify the amount of money you are making. When you use leverage trading, you borrow a certain amount of money from your broker and use that to make your transaction. This allows you to trade with more money then you are actually spending, meaning you can make higher profits than you would normally be able to make.

There are risks associated with leverage trading. If you increase the amount of money you are using, if a trade goes bad, then you’ll loose more money than you’d usually loose. The risks are worth it though, because a big win on margin means a huge payout. As mentioned before, it is definitely a wise idea to try out leverage trading on your practice account before you use it excessively on your live account, so you can get a feel for the way it works.

Now that you’re an expert on the way Forex trading works there are some things about foreign exchange that you should know. Forex is just like the stock market in that there are many benefits and risks, but if you are going to invest your time and personal money into this system, you should be fully aware of all of the factors that may change your decision to invest in the currency market.

Generally speaking, Forex is a difficult subject to opinionate on, because of the different factors that may alter the currency over the years. “Supply and demand” is a major issue affecting the Forex organization, because the world is in constant variable to change, one significant product being oil. Usually the currency of all the nations around the globe is described as a huge “melting pot”, because of the fact that all of the interchanging controversy, political affairs, national disputes, and possibly war conflicts, all mixed together as a whole, altering the nature of Forex every second! Although problems such as supply and demand, and the whole “melting pot” issue, there are a numerous amount of pros to Forex; one being benefited profit from long term stock. Because of the positive aspects of Forex, the percentage of the use of electronic trading in the FX market (shortened from Foreign Exchange) increased by 7% from 2005 to 2008. Despite the controversial realm of Forex, it is still recognized today by many, and is still popular amongst many of the nations in the world.

Of all the organizations that recognize Forex, most of them practice fiscal policy, and monetary policy. Both policies are dependent on the nation’s outlook on economics, and their standards set. The government’s budget deficits, or surpluses against the country, is widely affected by the country’s economic status of trade, and may critically inflict the nation’s currency. Another factor for the nation’s deficit spending is what the nation already has, in terms of necessities for the citizens, and the society. The more the country already has, prior to trade, the greater the budget for other demands from the people, such as technology, innovations in existing products, etc. Although a country may have an abundance in necessities, greed may hinder the nation’s economic status, by changing government official’s wants, to want “unnecessary” products, therefore ruining or “wasting” the country’s money. This negative trend may lead to the country’s doom, and hurt the Forex’s reputation for positive change. There are some countries which hold more of a product (such as oil stated above), the Middle East dominating that sector in the circle of trade; Since the Middle East suffers much poverty, as a result of deficit spending, and lack of other resources, they demand for a higher price in oil, to maintain their economic status. This process is known as the “flights to quality”, and is practiced by many countries, wanting to survive in the trading network that exists today. Interest rate, and leveraged financing, is due to the inflations that occur in many parts of the world from one point to another. Inflations wear down purchasing abilities, causing the currency to fall with it. In some cases, a country may observe the trends that it takes, and beforehand, take action to avoid any mishaps that had been experienced before. Sometimes, the country will buy more of a product, or sell more of a product, otherwise known as “overbought” or “oversold”. This may aid in the country’s future, or devastatingly hurt the country, because of lack of thought, as a result of fraud logic.
“What started out as a market for professionals is now attracting traders from all over the world and of all experience levels” is part of a letter of the chairman of Forex, and it is completely true. There is even a 30-day trial for Forex online at http://www.forex.com/forex_demo_account.html if anyone interested in Forex wants to learn more about the company. Although affected by leveraged financing, interest rate, and causing an increase or decrease in exchange rate risks, Forex can be a great way for quick profits and integrated economy for the country. In investing in stocks that are most likely to be successful for a long period of time, and researching these companies for more reference and background that you need to know, Forex can aid in these fields. In the Forex market of different levels of access, the inter-bank market composed of the largest investment bank firm, which contains “spreads”, which are divided into bid, and ask prices. Large amounts of transactions, with large amounts traded, and requesting a small amount of difference is known as a better spread, which is preferred by many investors.

In comparison to the Stock Market, the Forex organization is just as stable, and safe, if the users on it are aware, and decently knowledgeable about the topic. The Stock Market Crash in 1929 was a result of lack of thinking, because of the extremely cheap shares, replacing the shares originally costing thousands of dollars. When the Stock Market crashed, and the New Deal was proposed by Franklin D. Roosevelt, leveraged finance was present, and utilized to stabilize the economy at the time. The United States was extremely wealthy and prosperous in the 20s (prior to the depression), and had not realized what could happen as a result of carelessness in spending. This is a result of deficit spending, and how it could damage a society, in less than a decade! When joining Forex, keep in mind that with the possible positive outcomes, and negative ones, there are obstacles that must be faced to become successful.

As a result of many catastrophic events, such as the Great Depression that occurred in the United States, people investing in the Forex organization keep in mind of the dangers, and rewards that may come upon them in a certain point in time. With more work and consideration outputted by a person, or organization in the Forex program will there be more signs of prosperity as a result. In relation to individuals such as Warren Buffet and George Soros, they have become successful through experience, and determination through many programs, and research, for security purposes. Reserving some of the most riches people in the world, to others that are just test driving it to discover its potential for them, Forex is a broad topic that experiences different people everyday. Forex may not help everyone that invests in it, but if enough outputted effort is amplified in attempts to better the economy, it is most definitely something that any person should experience first-hand.

Author: Sean Supplee
Article Source: EzineArticles.com
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