The delusion conceptually propounds that intraweek and intraday FOREX currency quotes movement is governed by either improvement or by deterioration of the states economic situation. But in reality, even in case the actual Forex news is superior to the estimated one, the FOREX quotes up/down movement is of 50/50 probability.

This statement is thoroughly important. Once the job of Forex trader is gambling on FOREX exchange rates differential (FOREX pairs up/down movement), the following is to be realized to obtain faultless profit:

FOREX pairs pricing mechanism (say at point X where you are completing the market analysis)
Factors imparting growth/decline to FOREX rates (up/down from point X).
Thus, having understood the FOREX rates factors effective at the extra-exchange (book-maker) FOREX market and the given currency motive factors, a trader must possess distinct knowledge of whether to buy or to sell the given currency pair.

So, what are these factors?

FOREX student suggest unambiguous interpretation of factors responsible for the price formation and the fluctuations there of:

Forex rate constitutes a demand-supply balance for a given goods (currency).
Any violation of this balance, (for instance, in case where the estimated news is in disagreement with the issued official one), results in the FOREX rates reciprocation in chase of a new demand-supply balance. Poor demand brings about decline in a certain currency rate, with a high demand leading to the growth of the latter. The situation continues as long as the currency buy/sell demand comes to balance at another level or at another point.
Referring to the B. Williams (Trading Chaos 2 Chapter 1 The market is what you are thinking of it):

Each world market is dedicated to distribute or share limited amount of something among those desirous to obtain it most of all. The market affects it by way of finding out and identifying the exact price? Underlying the buyer/sellers power absolute equilibrium point.

The above point is readily established by stock, futures, bonds, FOREX and options markets, be it either via an open auction or by virtue of a computerized facility. Markets spot this point prior to any misbalance being detectable by you or by me or even by traders at the exchange floor.

With this scenario holding true and it really does we are in position to jump at certain simple yet important conclusions as regards the information being circulated through the market and enjoying doubtless acceptance.

Thomas Demark was more laconic in Technical analysis – an emerging science:

Price movement is governed by demand and supply. Should demand exceed supply, theres a price rally and if visa versa, theres a price decline. All economists do share these underlying principles.

Hence, the role of fundamental analysis for FOREX market is readily apparent.

In scholar fiction one will discover roughly the following explanation, persistently wandering from book to book, from site to site and suggesting attaining successful trading at FOREX market by way of scrutinizing the countrys economic fundamental data, viz. by tracking the factors reflective of the countrys economy condition as below:

State economy condition dynamics indicators (GDP, trade & payments balance, current account, industrial production, etc. It is knowledge, that the higher the above indicators the faster the economic and the currency price growth);

Stock indices, via average arithmetic index of the countrys securities market condition and dynamics. E.g.: 0.3% daily DJI growth in the USA means that this certain day the shares of 30 leading US companies, being pictured by DJU, went 0.3% more expensive. By similarity, DAX30 is the major German index, incorporating the price of shares of the countrys 30 leading companies.

The countrys interest rate, since the higher the rate, the greater number of investors is eager to invest into the countrys economy and hence into national currency strength.

Rate of inflation (the higher the rate, the quicker the National Bank will hike the interest rate). With this assumption, the CPI constitutes a key factor.

Money supply growth in domestic market, which fact brings about the inflation, leading to the interest rate hike.

The countrys gold and currency reserve assets.

Variation dynamics correlation of: balances of payment, trade balance, state budget, gross domestic product (GDP), etc.

Trade and industry dynamics (industrial production, industrial orders, DGO, capacity utilization, retail sales, etc.)

Construction statistics (construction spending, new home sales, housing under construction, building permits, etc.)

Labor statistics (unemployment rate, new jobs, etc.)
Society investigations (consumer confidence, consumer sentiment, purchase managers and service managers sentiment, etc.)

To be considered additionally are the countrys political stability and tranquility (clearly, any political, natural and other cataclysms are sure to turn investors nervous making them withdraw the investments from the country, thus weakening its national currency). And with the currency being the national economy derivative, changes in economic data will inevitably result in the above currency rate movement.
Conclusions:

Progress in economy results in the currency exchange rate rally.

Decrease in economic indicators leads to the national currency rate decline.
To sum it up, critical economic and political news (whose calendar is issued in advance and is familiar to any trader) constitute a standing factor giving rise to misbalance and causing the currency rate fluctuations.

In anticipation of important economic and political news FOREX pair crawl to the rates as inspired by the estimates (rumored trade), whereas upon actual news there occurs a pulse motion of FOREX pairs in accordance with the scheme below;

Forex rate grows if actual news are better than the estimated one;
Forex rate declines if actual news are worse than the estimated one.
ARE YOU FAMILIAR WITH THESE ABC BASICS OF STUDYING FOREX?

Do you accept that one can earn money by way of using these basics, known to every trader?

Then why, having absorbed these economic axioms, 90% of Forex traders in the world are losers rather than winners.

Where is the delusion of the above ABC truth, nudging traders towards losses? Let us perform sort of point-by-point analysis.

The currency exchange FOREX market is a book-makers one. It is gambling on rates difference without direct money delivery to the exchange market, except for hedging of traders funds by Forex brokers, via buy-sell difference especially during strong trends). Then, http://www.forexite.com reads: Trading is performed without actual currencies supply, which fact cuts overheads and enables Forexite to go long and short on the currency http://www.forexite.com/forexite_advantages/forex_advantages.html.

Comment: Have you ever met any book-makers;

- whose logics was coincident with that of THEIR clients (traders),

- whose stakes were being made in accordance with THEIR technical analysts forecasts, economic laws and common sense?

And what extent of doubt and skepticism should be attached to THEIR free recommendations, advice, surveys and forecasts, laid out at THEIR sites through THEIR analysts?

As a regular result, over 90% of the world traders are still loosing their deposits at FOREX each time they follow Thomas Demark stereotype that All the economists share these underlying principles.

Comment No.1. In as much as the above underlying principles are 90% contradictory to practice, it gives rise to the following question. Might these underlying principles, shared by all economists including Thomas Demark have possibly turned into dogma, alien to life and practice?

Comment No.2. What should a trader lean on: practice or dogma even if supported by great names, provided that the trader is purported at earning money?

FOREX analysts issuing their daily bulky market reviews are not FOREX traders in the overwhelming majority (see detailed discussion below). And on bringing together pairs 1, 2 and 3 there appears certain regularity.

Please, think over A. Elder words, that: FOREX rates and the fundamental analysis are tied together with a mile-long rope. The fundamental analysis is ultimately decisive. But anything is likely to happen prior to this eventuality. Another, yet no less renowned trader and analyst, Bill Williams underlines the same mental regularity of an experienced professional trader (level 3 of his traders skill rating as per Trading Chaos 2): On attaining level 3 you emerge as a self-provided pro trader. You are always familiar with the markets basic, usually invisible structure. You no longer need to refer to others opinions. You neednt read Wall Street Journal, watch market-oriented TV programs, and subscribe to information bulletins, waste money on information channels.

Comment: Logically, there is a counter-implication, that if You are eager to become a successful trader, You are to restrict the influence of various surveys and recommendations on yourself even in case they originate from the world famous Wall Street Journal, to say nothing of crude gurus in analyst skins who use to know ahead of time where currencies will go.

Forex news is a scheduled issue of fundamental data, which as a rule impairs FOREX rates a sharp pulse of motion. But then, why the currency rates movement vector is only 50% coincident with the ABC truism logics as to where the rate should rush in case of actual news being much better or worse than the estimate. And, please, make an attempt to answer the following question, stirring for every trader: why with the new being worse than expected (say, on US economy), the USD currency would initially fall by 40 pips (news work-off) but in 5 to 10 minutes it would swivel back and would display a 200-point rally, with no account to either the issued news or to common sense.

Below are some examples:

Fig. 1. GBPUSD chart as of April 1, 2005 after the news, positive for the GBP and negative for the US economy.
See Note below

In March the CIPS manufacturing index amounted to 52.0 (with the previous data revised from 51.8 to 51.6). Oil price in NYC has grown by USD 2.40 up to USD57.70 per bbl (new record of the latest 21 years). Non-farm payrolls in the USA was minimum since last July (previous data revised towards lower values). There has been a decline in the Michigan sentiment index to 92.6 (median estimate was 92.9, with 92.9 previously).

All the US indices faced a fall down. DJI at NYSE has fallen by 99.46 pips (-0.95%) towards closing at 10404.30. NASDAQ declined by 14.42 pips (-0.72%) to 1984.81. S&P500 slipped by 7.67 pips (-0.65%) to 1172.92. 30-yr US Bonds yielded 4.729 (0.037 lower as compared to the previous close). By contrary, FTSE100 has grown by 19.60 pips (+0.40%) to 4914.00.

Now, the question is to certified economists: what will happen to the GBPUSD within one day or even several hours upon publication of these data? You are right, USD should not simply fall down, it should collapse. Powerfully, swiftly. Well, well

And this time, the same question to experienced traders. By FOREX news headlines You might have guessed that the events are taking place at the Friday American session. Correct. Initially, anyway, the GBPUSD chart will go up by 100 pips (news wok-off), followed by a pullback. Then Forex chart starts a new rally.

It is now to be tracked whether the GBP will breach the latest rally high or not. If affirmative, it will rush up by approximately 160 pips (Elliott wave 1 was 100 pips, while EW 3 is 60% longer). But if the high is not breached? The GBP currency quote will in no way come to a standstill, moreover on Friday afternoon. Hence, – down, to the starting point! And, if breached, similar situation takes shape but the counting is performed in a down direction (EW1, being the same 100 pips plus 187 pips from 1.8826 to 1.8759 being EW 3).

The FOREX day trading tactics will be given scrutiny in a separate chapter. A still separate chapter will be dedicated to Friday trade at American session due to its inherent specifics and to strong seemingly inappropriate movement. The movement is, of course, appropriate. To say nothing of Friday. But it will be touched upon later.

Now, getting back to the currency chart. As apparent, the GBPUSD pair movement on Friday, April, 01, 2005 is in no way in conjunction with the US economy fundamental data. Each forex trader can provide from tens to hundreds of similar instances, where the news are of a certain vector, whereas, after a fraudulent rush along the news vector, a currency applies reverse thrust.

Thereafter, the next day, in daily currency surveys, certified economists are sure to explain all to us by way of inventing another undisguised nonsense, like: in spite of certain data, traders decided that the currency has already worked-off this side. But! How could this occur on Apr, 01, 2005, provided that the currency has been staying flat in a narrow range in the course of the whole of the European session?

Otherwise, another explanation may emerge, that forex traders were expecting still more inferior news on the US economy But! By how much more inferior, if according to DJ, the US non-farm payrolls MA was equivalent to 180K, with actual being +110K, estimate being +225K and prior being +243K? And in what manner do these economists count up world traders: by capita, by countries or by the funds, lost by those, who continued staying long in a holy belief in renowned academic scholars postulate of FOREX rates being tied up to countries economy statistics.

I wonder if Ill ever chance to witness legal procedures to be instituted against any of those famous scholars, so that no one would dare claim that fundamental data trigger rate spikes.

The same pertains to economists, writing about the way, hundreds of thousands traders throughout the globe have conspired to conclude that it is time to reverse the trends with absolutely no grounds. Is it really feasible?

Such reading-matter is, but hammering a single question into ones head: is it lie or is it stupidity of those cooking daily reports for taking traders for a ride, fooling them up and keeping them from the truth, which might be of great avail to them in daily trading. Traders are not a decisive factor, thus rates movement is in no way dependent on their will. Practically in no way.

Wanna check? Negotiate with tens of traders of the trading floor and arrange for a simultaneous entry long on some exotic FOREX pair. In so doing, try to push up either the NZDHKD, or the NZDCAD, or the HKDCAD. No need? I think so. Youll certainly suffer failure with the above, to say nothing of the EUR, GBP, CHF.

Another example:

Fig.2. GBPUSD movement as of May 13, 2005.

See Note below

This is an M15 chart of the American session, where the USD pair has grown by over 100 pips from 1.8583 to 1.8481 against the news, negative for the US economy:

Most indices have dropped down: DJI at NYSE by 49.36 pips (-0.48%) to close at 10140.12; S&P500 by 5.31 pips (-0.46%) to 1154.05. NASDAQ has grown by 12.92 pips (+0.66%) to1976.80. 30yr US Bonds yielded 4.484 (0.047 drop from previous close)

There is a fall in Michigan sentiment index. In May UMich was 85.3 with med est 90.0 and prior 87.7. So it was worse than the estimate, reaching the low since March, 2003. The index decline was being observed for the fifth month.

The April US export price index was +0.6% with prior of +0.7%.

Below are other similar examples of that same day.

Fig. 3. EURUSD chart as of May 13, 2005.

See Note below

Hundreds of examples may be offered, where the Forex news vector is opposite to that of the currency movement. Practically, actual news may happen to be superior or inferior to the estimate. FOREX quotes up/down movement is also of 50/50 probability irrespective of the above.

Why does it happen and what is the way for a trader to pinpoint entries and exits? This is going to be discussed in ensuing chapters of this book.

Note:

Full text of this article and pictures of examples http://www.masterforex-v.su/

If you wish to be trained on Trading System Masterforex-V – one of new and most effective techniques of trade on Forex in the world visit http://www.masterforex-v.su/

Author: Vyacheslav Vasilevich
Article Source: EzineArticles.com
Provided by: Credit card currency-exchange fees

Currency trading may be one of the most liquid forms of trading, but it is also a volatile market that requires strategy if you wish to make money. The truth is that more people make small profits in this market, while a few are highly successful. The constant change makes this form of trading exciting and with a high profit potential; however, making a fast buck in this market may not be as easy as it used to be.

What is Currency Trading?

In its basic form, currency trading, also known as “forex trading,” is simply that–trading money. It involves trading one currency for another, such as U.S. dollars for the Euro. The exchange rate is known as the foreign-exchange rate, forex rate, or FX rate and is one of the largest markets in the world, trading trillions of U.S. dollars each day. Currency trading gained enormous popularity in the 1990s, and continues today. One reason this type of trading is so popular is that it can be done from a computer, twenty-four hours a day. There are fewer currencies to trade with, which makes learning the practice much easier (as opposed to learning about the many stock options available). The most commonly traded currencies are the U.S. dollar, the Japanese yen, and the British pound.

Currencies are traded in pairs. The trader buys the one that he or she believes will appreciate in value over the other. Currency fluctuates as there is demand for it. Interest rates tend to be an indication of a currency’s demand. The higher a country’s interest rate, the higher demand. However, countries will sometimes try to create demand for a currency by changing interest rates. The well-informed trader needs to conduct research and make educated guesses on a currency’s future.

Currency Trading is Big Business

The currency trading business is big. An estimated two trillion in U.S. dollars is exchanged each day. The forex market is the largest in the world. Because it can be done from home, many people are interested in getting involved, and the payoff can be big. It is also possible to get involved with little investment. Traders simply determine how much they are able and willing to risk, and they can enter the market.

As with other forms of trading, watching the market and making calculated decisions is more likely to result in a profit than making decisions based on emotions, hunches, or preferences. Many courses are available on currency trading. Learning more about the process can help traders make better choices. Choosing a quality course is also a matter that requires a bit of research. However, currency markets fluctuate on both short and long-term timelines, and learning how to best track these changes and the events that affect the markets can help traders, especially those new to the process. The allure of making quick cash is still out there, however, as it is possible to close a contract after a few minutes, hours, days, or weeks.

Is it Nearing its Peak?

The currency trading frenzy, which expanded rapidly during the 1990s, may be reaching a peak. Why? While in some ways currency trading is easy, many people who enter the market do not make money. The idea that you can make quick cash is not as easy as it sounds. Additionally, while traditional stocks are based on a company’s physical assets and product, currency trading is not absolute. Further, governments control, or attempt to control currencies to reach political objectives. Unforeseen events, such as natural disasters, can also alter a currency’s value, making it more difficult to make an educated guess on a currency’s future. Finally, the global marketplace is changing currencies around the world (the Euro is one such example).

This does not mean that a person cannot make money in the currency market. However, as the global marketplace continues to expand and global politics affect currencies, it is much more difficult to determine a currency’s value. Making money in the Foreign Exchange market is possible, but it is not easy. Even economists have a difficult time estimating the future of currencies and purchasing power, so a trader must conduct thorough research, determine trends, and try to make the best guess possible.

Author: Mike Singh
Article Source: EzineArticles.com
Provided by: Programmable pressure cooker

The term autopilot was derived from the word automatic and pilot referring to the significant abilities of Forex Robots when trading currencies. One sure way to improve your forex trading strategies is using any of the best forex robots in town. It could range from Forex Megadroid, FAP Turbo, Ivybot and others.

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