Showing posts with label ForexArticles. Show all posts
Showing posts with label ForexArticles. Show all posts
By: Sara Patterson If you’re new to the Forex world you may be wondering what it is all about and what actions you will need to perform during a typical Forex trading day. You may also be wondering whether Forex trading is a truly worthwhile endeavor or whether it’s worthwhile to pursue more money and entertainment elsewhere. This article will give you some important background information relating to the Forex industry so that you can determine whether to try it out.
The Forex Trading Day
Unlike localized markets in which trading takes place in specific times zones and according to a specific national calendar Forex trading can be done around the clock, which means that you’ll have ample opportunities to trade in your spare time – whenever that is. The Forex trading day is a full twenty-four hours and the Forex week starts from 5:00 pm Sunday EST and finishes 4:00 pm EST on Friday. As such, you will have the opportunity to design a trading strategy that best complies with your lifestyle.
Ready to try it out? Why not open a free demo account to see whether you can enjoy and profit from trading Forex.
http://www.dailyforex.com/forex-articles/2011/03/Is-Forex-Trading-for-You/7425
The Forex Trading Day
Unlike localized markets in which trading takes place in specific times zones and according to a specific national calendar Forex trading can be done around the clock, which means that you’ll have ample opportunities to trade in your spare time – whenever that is. The Forex trading day is a full twenty-four hours and the Forex week starts from 5:00 pm Sunday EST and finishes 4:00 pm EST on Friday. As such, you will have the opportunity to design a trading strategy that best complies with your lifestyle. High Liquidity and Daily Turnover
The Forex market is highly liquid which essentially means that your currency transactions will be supported because there is a large number of other trading participants. The turnover generated each Forex trading day is much larger than those produced by other markets. For example, the stock market has a daily turnover of just $25 million whereas the Forex market conducts about $3 billion in trades daily.The Importance of Transparency
As the Forex market is completely transparent, you will be able to trade on exactly the same level as big institutions, such as hedge funds and banks. Moreover, because Forex is such a gigantic market, nobody can manipulate its figures. Consequently, you can approach each Forex trading day with the confidence that you will not be subjected to any major sudden adjustments.Major Currencies
You must also realize that the major currencies that are exchanged during each Forex trading day account for about 85% of its volume. They are the US dollar, Euro, British Pound, Swiss Franc, Canadian dollar, Australian dollar, Japanese Yen and New Zealand Dollar. Nevertheless, you needn’t live in a country with one of these currencies to have a profitable Forex trading experience. Instead, you’ll just need to learn how to monitor these currencies over the course of your Forex trading day.Relationship with other Markets
Although Forex is independent of all other markets, you will find that it does have relationships with them, which can be an advantage if you’re familiar with other markets. For instance, Forex is strongly correlated to the stock market. For example, if the Dow Jones Index climbs in value, then so will the higher-yielding currencies such as the Euro and the British Pound. In contrast, the currencies exhibiting low yields will fall in value.Fees and Charges
You will not be charged any fees directly by the Forex market. However, you will accrue costs from spreads and rollover fees, etc. For example, you will either earn or be charged a fee for keeping your positions open from one Forex trading day to the next depending on the comparable interest rates of the currencies involved.Ready to try it out? Why not open a free demo account to see whether you can enjoy and profit from trading Forex.
http://www.dailyforex.com/forex-articles/2011/03/Is-Forex-Trading-for-You/7425
By: Christopher Lewis
There are many Forex strategies that sound good on paper, but aren't quite as reliable in practice. While it is possible to make these strategies work, it's often not worth the trouble and risk of loss. Here are three Forex strategies that sound good - but aren't.
One of the most common Forex strategies that sound really good is the moving average crossover strategy. While the strategy certainly can work over time, it is rather counterintuitive when it comes to human psyche. The problem with the moving average crossover system is that they rely on a clear and defined trend. If you've been trading for a while, you know that the market only trends about 20% of the time. Because of this, you have to be able to absorb several losses before you get that one really good trade.
The idea is that one moving average will cross over the other, signaling a change in momentum. Once you take that trade, you do not exit until the moving averages cross back over each other signaling and reverse and the momentum. The problem is that if you are stuck in a sideways move the market, the averages will crisscross quite often leaving you taking one loss after another. On top of that, you have to deal with the human psychological aspect of taking so many losses before finally being rewarded. Very few traders can do this.
Another common Forex strategy that is absolutely toxic is what is known as the "Martingale strategy". While not a trading system in and of itself, the idea of this strategy is to gradually increase your position size under the idea that you will eventually be right. This has been popular lies in places like Las Vegas, and, as they say, things that happen in Vegas should stay in Vegas. The basic premise is that you risk a certain percentage, say 1% of your account on the first trade. The second trade, assuming that you lost on the first trade, will be placed with a 2% risk. This repeats until you eventually win. The biggest problem with this is that you can go on losing streaks. Before you know it, you may have lost half of your account.
Another common Forex strategy that simply isn't a smart one to use is the black box strategy. The black box strategy isn't any one particular strategy at all, rather it is an automated strategy that you pay for and the computer trades for you. While the strategies may mathematically look promising, they cannot react and adjust to so-called "Black Swan events”. What this means is that if the market is presently melting down because of some kind of political event in Asia, the black box system will simply keep trading based upon its mathematical models. One of the largest blowups in history was from a fund called Long-Term Capital Management that practice this exact type of trading. In a nutshell, a bond default in Russia sent the markets into a panic. The LTCM models were not prepared to deal with this type of event, even though they had made astronomical gains before it. The system simply traded itself the way it always did, and loss the firm massive amounts of money and was one of the biggest disasters in the financial world’s history. By the time it was all over, the Federal Reserve Bank of New York had to organize a bailout of $3.625 billion to rescue the find as it was a serious systemic risk to the financial world at large.
As you can see, there are plenty of ways to lose money in Forex trading. The trading business is difficult, and there are no shortcuts, despite what some experts may have you believe. The one thing that these poor Forex strategies all have in common is the attempt to either over-simplify trading or make it completely mechanical. If you're willing to look beyond the easy way out, you'll likely find more realiable Forex strategies that will keep you in the green.
http://www.dailyforex.com/forex-articles/2011/04/Three-Forex-Strategies-That-Sound-Good-–-But-Aren't/7626
There are many Forex strategies that sound good on paper, but aren't quite as reliable in practice. While it is possible to make these strategies work, it's often not worth the trouble and risk of loss. Here are three Forex strategies that sound good - but aren't.
One of the most common Forex strategies that sound really good is the moving average crossover strategy. While the strategy certainly can work over time, it is rather counterintuitive when it comes to human psyche. The problem with the moving average crossover system is that they rely on a clear and defined trend. If you've been trading for a while, you know that the market only trends about 20% of the time. Because of this, you have to be able to absorb several losses before you get that one really good trade.
The idea is that one moving average will cross over the other, signaling a change in momentum. Once you take that trade, you do not exit until the moving averages cross back over each other signaling and reverse and the momentum. The problem is that if you are stuck in a sideways move the market, the averages will crisscross quite often leaving you taking one loss after another. On top of that, you have to deal with the human psychological aspect of taking so many losses before finally being rewarded. Very few traders can do this.
Another common Forex strategy that is absolutely toxic is what is known as the "Martingale strategy". While not a trading system in and of itself, the idea of this strategy is to gradually increase your position size under the idea that you will eventually be right. This has been popular lies in places like Las Vegas, and, as they say, things that happen in Vegas should stay in Vegas. The basic premise is that you risk a certain percentage, say 1% of your account on the first trade. The second trade, assuming that you lost on the first trade, will be placed with a 2% risk. This repeats until you eventually win. The biggest problem with this is that you can go on losing streaks. Before you know it, you may have lost half of your account.
Another common Forex strategy that simply isn't a smart one to use is the black box strategy. The black box strategy isn't any one particular strategy at all, rather it is an automated strategy that you pay for and the computer trades for you. While the strategies may mathematically look promising, they cannot react and adjust to so-called "Black Swan events”. What this means is that if the market is presently melting down because of some kind of political event in Asia, the black box system will simply keep trading based upon its mathematical models. One of the largest blowups in history was from a fund called Long-Term Capital Management that practice this exact type of trading. In a nutshell, a bond default in Russia sent the markets into a panic. The LTCM models were not prepared to deal with this type of event, even though they had made astronomical gains before it. The system simply traded itself the way it always did, and loss the firm massive amounts of money and was one of the biggest disasters in the financial world’s history. By the time it was all over, the Federal Reserve Bank of New York had to organize a bailout of $3.625 billion to rescue the find as it was a serious systemic risk to the financial world at large.
As you can see, there are plenty of ways to lose money in Forex trading. The trading business is difficult, and there are no shortcuts, despite what some experts may have you believe. The one thing that these poor Forex strategies all have in common is the attempt to either over-simplify trading or make it completely mechanical. If you're willing to look beyond the easy way out, you'll likely find more realiable Forex strategies that will keep you in the green.
http://www.dailyforex.com/forex-articles/2011/04/Three-Forex-Strategies-That-Sound-Good-–-But-Aren't/7626
By: Christopher Lewis When looking at the EUR/USD pair, it is quite difficult for analysts to come up with a consensus as to where the pair may be heading. While the multinational European currency has enjoyed resurgence in the first three months of this year, that doesn't necessarily mean that it will in the second three months.
The pair from a technical perspective looks like it is currently stuck towards a massive resistance area. The 1.42500 level slammed this currency pair into a bearish mode when last approached in late October of last year. As we test this area, technically this chart has higher lows as we go along which of course is a very bullish pattern. It appears that the downtrend is about to be tested at the 1.45500 level as a trend line from the very top of the market in 2008 connects to another high in November of 2009 coincide with where the 1.42500 level since right now.
Because of this, the answer to the direction of the pair will probably be answered in the very beginning of the second quarter. It should also be noted that there are plenty of reasons on the fundamental side that could be propelling this pair in one direction or another in March and April.
The Portuguese issue has not gone away, and it appears that a bailout is pretty much imminent. This brings up the question of whether or not some of the other struggling economies will feel the need to pay their debts. Think of it this way: If you are running a country like Spain, why would you bother paying your debt when Portugal doesn't have to? This is the kind of situation that Europeans find themselves in as the debt issues and Portugal, Italy, Ireland, Greece, and Spain are still there even if the regulators have chose to ignore them.
Meanwhile at The Fed, the United States is currently printing as many dollars as it can possibly manage. There is a running joke right now in some trading rooms that says the surest way to make a buck these days? Sell ink. As QE2 winds down in June, the question will be whether or not the Federal Reserve chooses to expand to a third act, or whether or not they will exit the easing process. If they do exit, this will be very supportive for the dollar and propel this pair to the downside.
At this point in time the forecast for QE2 almost has to be a purely technical one, as a lot of these questions are not answered at the moment. It appears that one of the best indicators as to which direction we are going is going to be a weekly close above 1.42500, or a strong weekly close below 1.40000 which would make this pair look weak. It should be noted that the peak and trough analysis does suggest that we are going upwards. However, we have major technical levels to break in the process. Keep an eye on that trend line, and you'll know which direction to go.
http://www.dailyforex.com/forex-articles/2011/03/Q2-Predictions-for-EUR-USD/7577
The pair from a technical perspective looks like it is currently stuck towards a massive resistance area. The 1.42500 level slammed this currency pair into a bearish mode when last approached in late October of last year. As we test this area, technically this chart has higher lows as we go along which of course is a very bullish pattern. It appears that the downtrend is about to be tested at the 1.45500 level as a trend line from the very top of the market in 2008 connects to another high in November of 2009 coincide with where the 1.42500 level since right now.
Because of this, the answer to the direction of the pair will probably be answered in the very beginning of the second quarter. It should also be noted that there are plenty of reasons on the fundamental side that could be propelling this pair in one direction or another in March and April.
The Portuguese issue has not gone away, and it appears that a bailout is pretty much imminent. This brings up the question of whether or not some of the other struggling economies will feel the need to pay their debts. Think of it this way: If you are running a country like Spain, why would you bother paying your debt when Portugal doesn't have to? This is the kind of situation that Europeans find themselves in as the debt issues and Portugal, Italy, Ireland, Greece, and Spain are still there even if the regulators have chose to ignore them.
Meanwhile at The Fed, the United States is currently printing as many dollars as it can possibly manage. There is a running joke right now in some trading rooms that says the surest way to make a buck these days? Sell ink. As QE2 winds down in June, the question will be whether or not the Federal Reserve chooses to expand to a third act, or whether or not they will exit the easing process. If they do exit, this will be very supportive for the dollar and propel this pair to the downside.
At this point in time the forecast for QE2 almost has to be a purely technical one, as a lot of these questions are not answered at the moment. It appears that one of the best indicators as to which direction we are going is going to be a weekly close above 1.42500, or a strong weekly close below 1.40000 which would make this pair look weak. It should be noted that the peak and trough analysis does suggest that we are going upwards. However, we have major technical levels to break in the process. Keep an eye on that trend line, and you'll know which direction to go.
http://www.dailyforex.com/forex-articles/2011/03/Q2-Predictions-for-EUR-USD/7577
By: H. Hamid of SimplyProfit.net
Indicators such as moving averages and stochastics are generally attempting to fit onto a market. They may not necessarily work in all market conditions and they do not have any intrinsic properties that a market has to abide by. However, this is not true of Fibonacci. What I think makes Fibonacci exceptional is that the Fib ratios are inherently part of natural systems, including the markets. Fibonacci ratios do not have biases for certain market conditions or economic cycles. And Fib ratios aren’t trying to fit a certain style or market; rather they are simply a natural part of market movements.
This makes Fibonacci robust, versatile and timeless.
One of my favourite Fibonacci plays is a retracement from the 88.6% level. This level is derived by taking the 61.8% Fib Golden Ratio, square rooting it, and square rooting it again.
A retracement consists of an initial move, a retracement of that first move, and then the subsequent move from the retracement, like so:
Now when I say, “This is an 88.6% Fibonacci retracement”, all that means is that the retracement is 88.6% of the size of the initial move. So if the initial move was 100 pips up, the retracement would be 88.6 pips down. It doesn’t matter if the initial move was up or down.
Here are some examples of the 88.6% Fibonacci retracement.
Firstly, a 5-Minute GBP-USD chart where the initial move was up followed by a downward retracement: Now a weekly USD-CHF chart, where the initial move was down followed by an upward retracement: This is a fantastic example of the accuracy of Fibonacci levels. After the initial move down, the price retraced back up 1,821 pips over 27 weeks, and hit the Fibonacci level within 2 pips! These kinds of setups can allow traders to have single trades that yield over 1,000 pips while still controlling their risk.
And just to showcase the versatility across markets, this is the Daily chart for the NASDAQ stock, Apple (Symbol: AAPL): Here the stock price moved down over $27 in four days, then retraced to within a few cents of the 88.6 level, before moving down again.
When I trade a Fibonacci retracement, I like the price to hit the level and move away within one or two bars of the timeframe I am using, i.e. not hang around the level for several bars. In the three examples above, the price bar hit the 88.6 level once, and once only. Secondly, I like the level to be respected cleanly: the price shouldn’t penetrate the level significantly; rather it should hit the level accurately.
I always trade with a stop, and my profit target is where the retracement started, i.e. the end of the initial move up or down. Often the price will surpass that target but I am happy to take my profit at this point. I will only trade this setup with a good risk/reward ratio, usually 1:2 or greater. If I can’t find a place to keep my stop at a reasonable distance compared to my target, I will pass on the trade.
So what can we learn about Fibonacci?
1. Fibonacci principles are timeless. You won’t find yourself needing to tweak or abandon Fibonacci ideas when markets change.
2. Fibonacci principles can be used from the smallest time frames to the largest.
3. Fibonacci has no biases for certain markets: you can use them on anything that has a chart, from a stock, a currency pair, a metal or even a complex derivative.
http://www.dailyforex.com/forex-articles/2011/03/Fibonacci-The-Leading-Marker/7511
Indicators such as moving averages and stochastics are generally attempting to fit onto a market. They may not necessarily work in all market conditions and they do not have any intrinsic properties that a market has to abide by. However, this is not true of Fibonacci. What I think makes Fibonacci exceptional is that the Fib ratios are inherently part of natural systems, including the markets. Fibonacci ratios do not have biases for certain market conditions or economic cycles. And Fib ratios aren’t trying to fit a certain style or market; rather they are simply a natural part of market movements.
This makes Fibonacci robust, versatile and timeless.
One of my favourite Fibonacci plays is a retracement from the 88.6% level. This level is derived by taking the 61.8% Fib Golden Ratio, square rooting it, and square rooting it again.
A retracement consists of an initial move, a retracement of that first move, and then the subsequent move from the retracement, like so:
Now when I say, “This is an 88.6% Fibonacci retracement”, all that means is that the retracement is 88.6% of the size of the initial move. So if the initial move was 100 pips up, the retracement would be 88.6 pips down. It doesn’t matter if the initial move was up or down.Here are some examples of the 88.6% Fibonacci retracement.
Firstly, a 5-Minute GBP-USD chart where the initial move was up followed by a downward retracement:
Now a weekly USD-CHF chart, where the initial move was down followed by an upward retracement: This is a fantastic example of the accuracy of Fibonacci levels. After the initial move down, the price retraced back up 1,821 pips over 27 weeks, and hit the Fibonacci level within 2 pips! These kinds of setups can allow traders to have single trades that yield over 1,000 pips while still controlling their risk.And just to showcase the versatility across markets, this is the Daily chart for the NASDAQ stock, Apple (Symbol: AAPL):
Here the stock price moved down over $27 in four days, then retraced to within a few cents of the 88.6 level, before moving down again.When I trade a Fibonacci retracement, I like the price to hit the level and move away within one or two bars of the timeframe I am using, i.e. not hang around the level for several bars. In the three examples above, the price bar hit the 88.6 level once, and once only. Secondly, I like the level to be respected cleanly: the price shouldn’t penetrate the level significantly; rather it should hit the level accurately.
I always trade with a stop, and my profit target is where the retracement started, i.e. the end of the initial move up or down. Often the price will surpass that target but I am happy to take my profit at this point. I will only trade this setup with a good risk/reward ratio, usually 1:2 or greater. If I can’t find a place to keep my stop at a reasonable distance compared to my target, I will pass on the trade.
So what can we learn about Fibonacci?
1. Fibonacci principles are timeless. You won’t find yourself needing to tweak or abandon Fibonacci ideas when markets change.
2. Fibonacci principles can be used from the smallest time frames to the largest.
3. Fibonacci has no biases for certain markets: you can use them on anything that has a chart, from a stock, a currency pair, a metal or even a complex derivative.
http://www.dailyforex.com/forex-articles/2011/03/Fibonacci-The-Leading-Marker/7511
By: Christopher Lewis When trading the Forex markets, one of the most important things that you need to know is the direction of the overall trend. While many people will write about the different trends and their time periods, the one that you should be worried about is the overall direction of the currency pair. While you can chart these trends down to 15 minute intervals, it is much simpler to focus on a longer timeframet.
One of the best ways to identify the trend is the simple trend line on the weekly chart. The reason the weekly chart is so significant, is that it takes much more to break a trend line on that time period than the smaller time periods such as the one hour chart. By following the weekly trend line, you can see where the overall direction of the market tends to be going. If you draw a weekly trend line, you will notice that it doesn't get broken very often. In fact, it isn't that rare for these trend lines to last for years on end. As an example, take a look at what the Euro did versus the Dollar from 2002 to 2006. It was a straight shot up, and a simple trend line analysis would have told you that based upon the weekly chart.
Better yet, an excellent way to determine the trend is by a combination of the two tools mentioned above. A lot of traders will only trade in the direction of the market based upon where a specific moving averages. For example, you may pick the 100 day moving average. If price is above that 100 day moving average, you're only looking to buy. If it is below, you're only looking to sell. If you line up trend lines with the moving average, and both tell you to buy a currency pair, it becomes very clear that the trend is moving in a bullish direction. While this doesn't guarantee a 100% success rate, it certainly can keep you pointed in the right direction and allow the markets momentum to carry you forward.
By staying in the same direction of the trend, you allow the other traders in the market to push your trade forward, and help you we more profits. This is perhaps one of the most basic and fundamental ways to make money in the Forex markets. Sadly, far too many traders don't pay attention to the trend. Don't let yourself make this common mistake.
http://www.dailyforex.com/forex-articles/2011/04/Tips-on-Identifying-Forex-Trends/7634
One of the best ways to identify the trend is the simple trend line on the weekly chart. The reason the weekly chart is so significant, is that it takes much more to break a trend line on that time period than the smaller time periods such as the one hour chart. By following the weekly trend line, you can see where the overall direction of the market tends to be going. If you draw a weekly trend line, you will notice that it doesn't get broken very often. In fact, it isn't that rare for these trend lines to last for years on end. As an example, take a look at what the Euro did versus the Dollar from 2002 to 2006. It was a straight shot up, and a simple trend line analysis would have told you that based upon the weekly chart.
Moving Averages
Another common way to identify the trend is to use a moving average. While the exact moving average is debatable, some of the more common ones are the 50, 100, and 200 day moving averages. By plotting these on a daily chart, you can see how over time the trend is slowly moves these moving averages in one direction or another. This shows the long-term effects on the trend due to fundamental announcements, and traders stepping in and out of the markets. It should be noted that the higher the number on the moving average, the longer it takes to move it. On the 200 day moving average as an example, it takes a massive swing and direction to change the slope of that moving average. This can help keep you in a trend for a very long time.Better yet, an excellent way to determine the trend is by a combination of the two tools mentioned above. A lot of traders will only trade in the direction of the market based upon where a specific moving averages. For example, you may pick the 100 day moving average. If price is above that 100 day moving average, you're only looking to buy. If it is below, you're only looking to sell. If you line up trend lines with the moving average, and both tell you to buy a currency pair, it becomes very clear that the trend is moving in a bullish direction. While this doesn't guarantee a 100% success rate, it certainly can keep you pointed in the right direction and allow the markets momentum to carry you forward.
By staying in the same direction of the trend, you allow the other traders in the market to push your trade forward, and help you we more profits. This is perhaps one of the most basic and fundamental ways to make money in the Forex markets. Sadly, far too many traders don't pay attention to the trend. Don't let yourself make this common mistake.
http://www.dailyforex.com/forex-articles/2011/04/Tips-on-Identifying-Forex-Trends/7634
By: Terry Allen The Forex market is a complex mechanism that is based upon various factors that can impact the success or failure of a specific trade. This article will take a look at some of the influences that can affect daily Forex rates. If you’re new to Forex, don’t make another move without understanding these Forex basics. And if you’ve been trading for a while, you may want to remind yourself of what influences are out there in case any of them have fallen off your radar.
Consequently, you may be surprised to find out that the majority of Forex trading is of a speculative nature only. In fact, the currency conversion needs of governments and businesses generate only a small percentage of the overall Forex activity.
The business performance of these organizations can be directly influenced by the oscillating movements of their domestic currency against those of their overseas investment or businesses using the Forex daily rates.
http://www.dailyforex.com/forex-articles/2011/03/Factors-that-Influence-Daily-Forex-Rates/7397
Market Differences
Many traders regard Forex as a large melting pot for current international developments because no other institution responds to them so quickly and appropriately as this market does. In addition, Forex exhibits a number of significant differences from other markets, such as the stock market. For instance, Forex trading is not conducted at a centralized exchange that displays daily Forex rates. Instead, all its transactions are undertaken by using either the OTC (over the counter) via phone, electronic networks or the Interbank Market.Speculation Sector
You will find that there are two main sources that produce the gigantic daily Forex turnover of about $3 trillion. The speculation sector accounts for ninety-five 95% of all Forex transactions, which are conducted for pure profit only. This element, which includes investment funds, large banks, corporations and individuals, generates artificial rate exposure using the Forex daily rates in order to produce profits from the movements of price.Consequently, you may be surprised to find out that the majority of Forex trading is of a speculative nature only. In fact, the currency conversion needs of governments and businesses generate only a small percentage of the overall Forex activity.
Foreign Sector
The foreign sector is responsible for the other 5% and is produced by international businesses selling and purchasing their materials and products overseas as well as converting their currency needs. This section of traders includes companies (exporters and importers), governments and other investors who require foreign currency conversions.The business performance of these organizations can be directly influenced by the oscillating movements of their domestic currency against those of their overseas investment or businesses using the Forex daily rates.
Economic Events
Economic factors include economic conditions and policy making. For instance, a government can directly affect the interest rates displayed by its central bank by introducing new financial policies. Such measures can have serious knock-on effects on its currencies because investors tend to follow those currencies offering the highest yields. If such an announcement is made, then you can observe the effects on the applicable currency by studying the daily Forex rates.Political Influences
If political instability and upheaval occur within a country then such events can have a significant negative influence on its economy and again on its currency. As such developments increase risk aversion, you will almost certainly witness the effected currency decline in value against those of others by examining the daily Forex rates.http://www.dailyforex.com/forex-articles/2011/03/Factors-that-Influence-Daily-Forex-Rates/7397
By: Christopher Lewis When using a Forex signal provider, it is important to keep a few things in mind. The fact is that some signal providers are going to be better than others, and as such, diligence is extremely important. The fact is that nobody is going to care about your money more than you – including whatever signal provider you use.
If you live in the United States, one of the most important things that you can do to ensure you are using a reputable signal provider is to discover whether or not the signals are being sent by a CTA, or Commodity Trading Advisor. These individuals are registered with the CFTC in the US, that receive compensation for giving people advice on options, futures, and Forex, as well as actual trading of managed accounts. As such, they are highly trained and can be relied on as people who have completed various trading courses and examinations. While the amount of signal providers that have these people working for them are small – they are head and shoulders above the rest in terms of training and liability.
The second thing you should look for is actual performance. Many of the Forex signal providers out there are advertising results that are based upon hypothetical results. In other words, they are applying their systems to past markets, and can often be doing what is known as curve-fitting. This is when a system is applied in such a way that gives a better result than would occur in real time.
Watch out for performance claims as well. A fund claiming average gains of a few percent every month might not sound exciting, but it is certainly more believable than one claiming 10% ever month. Common sense should be applied. The scammers are counting on your greed to overtake your logic skills.
Another thing that you may want to pay attention to is where the service is actually located. You want the company to be from a country that has a strong rule of law, and as such can be held liable if something goes horribly wrong. Far too many Forex-related companies are located in countries that have a less-than-stellar reputation for business laws. As a simple test, ask yourself if you would drink the local water. If not, you have to think a country that pull it together well enough to have safe drinking water isn’t going to be concerned with a scammer that is selling bad Forex signals.
Even though most of this may seem like common sense, countless people get scammed every year by services claiming to be Forex signal providers who have never traded Forex in their lives. They are simply salesmen that have figured out a way to make a basic Forex system look exciting.
Ready to find reliable Forex signals? Check out our trading signal reviews and make an informed choice between TradeWindowXP, IntelliForex, and other top signal providers.
http://www.dailyforex.com/forex-articles/2011/03/What-to-Look-For-In-a-Signal-Provider/7498
If you live in the United States, one of the most important things that you can do to ensure you are using a reputable signal provider is to discover whether or not the signals are being sent by a CTA, or Commodity Trading Advisor. These individuals are registered with the CFTC in the US, that receive compensation for giving people advice on options, futures, and Forex, as well as actual trading of managed accounts. As such, they are highly trained and can be relied on as people who have completed various trading courses and examinations. While the amount of signal providers that have these people working for them are small – they are head and shoulders above the rest in terms of training and liability.
The second thing you should look for is actual performance. Many of the Forex signal providers out there are advertising results that are based upon hypothetical results. In other words, they are applying their systems to past markets, and can often be doing what is known as curve-fitting. This is when a system is applied in such a way that gives a better result than would occur in real time.
Watch out for performance claims as well. A fund claiming average gains of a few percent every month might not sound exciting, but it is certainly more believable than one claiming 10% ever month. Common sense should be applied. The scammers are counting on your greed to overtake your logic skills.
Another thing that you may want to pay attention to is where the service is actually located. You want the company to be from a country that has a strong rule of law, and as such can be held liable if something goes horribly wrong. Far too many Forex-related companies are located in countries that have a less-than-stellar reputation for business laws. As a simple test, ask yourself if you would drink the local water. If not, you have to think a country that pull it together well enough to have safe drinking water isn’t going to be concerned with a scammer that is selling bad Forex signals.
Even though most of this may seem like common sense, countless people get scammed every year by services claiming to be Forex signal providers who have never traded Forex in their lives. They are simply salesmen that have figured out a way to make a basic Forex system look exciting.
Ready to find reliable Forex signals? Check out our trading signal reviews and make an informed choice between TradeWindowXP, IntelliForex, and other top signal providers.
http://www.dailyforex.com/forex-articles/2011/03/What-to-Look-For-In-a-Signal-Provider/7498
By: Christopher Lewis Over the last couple of years, there has been a push in the Forex world towards social media. Many traders find themselves attracted to websites such as Currensee and eToro as possible places for trading ideas. Most of these places will give you an opportunity to follow a particular trader, some for free and some for a small cost. The ability to see what other traders are thinking is in theory a huge advantage. But the question remains whether or not these websites can prove to be helpful for the new trader.
In order to fully understand the concept, let's take a look at some of the potential advantages of social Forex trading platforms. It is by breaking down the advantages into small pieces that we will begin to understand the worthiness of these websites.
One of the first things Forex social trading platforms tout is the ability to follow winning traders. The truth of the matter is that winning traders on social platforms tend to be new traders themselves. It is ridiculous to think that somebody who just started trading is somebody you should follow. While it is true they may be on a hot streak and up 317% over the last three weeks, the reality is that sooner or later they are going to start taking losses. A trader like this is undoubtedly leveraging their account way too high. While he gives them great looking gains, the losses when they start taking them are going to be absolutely disastrous. It is because of this that you see a revolving door of "winning traders".
The other big thing that Forex social trading platforms promote is the ability to see what other traders are thinking. While in theory this sounds like a good idea, the reality is that the average trader on these platforms hasn't been trading very long. Because of this, their opinion may or may not be founded on reasonable analysis. Quite often you will see large amounts of these traders buying at the absolute top, or selling at the absolute bottom. You must know that even the most experienced professionals are taking losses, and as such you should be careful following their thought process. So when it comes to the thought process of somebody who's only been trading Forex for three months, the odds of it being a winning thought process diminish greatly.
Many of these social platforms are simply ways to make money for the owners. It might be through advertising, it can also be through referrals to brokers, or possibly even a situation where the broker actually owns the social platform. It is in the broker's best interest to have you trading is much as possible, and with as much leverage as possible in order to separate you from your money as quickly as possible.
*The opinion presented in the article is that of the author alone, and does not represent the opinion of DailyForex.com
http://www.dailyforex.com/forex-articles/2011/03/Forex-Social-Platforms--an-Opposing-View/7445
In order to fully understand the concept, let's take a look at some of the potential advantages of social Forex trading platforms. It is by breaking down the advantages into small pieces that we will begin to understand the worthiness of these websites.
One of the first things Forex social trading platforms tout is the ability to follow winning traders. The truth of the matter is that winning traders on social platforms tend to be new traders themselves. It is ridiculous to think that somebody who just started trading is somebody you should follow. While it is true they may be on a hot streak and up 317% over the last three weeks, the reality is that sooner or later they are going to start taking losses. A trader like this is undoubtedly leveraging their account way too high. While he gives them great looking gains, the losses when they start taking them are going to be absolutely disastrous. It is because of this that you see a revolving door of "winning traders".
The other big thing that Forex social trading platforms promote is the ability to see what other traders are thinking. While in theory this sounds like a good idea, the reality is that the average trader on these platforms hasn't been trading very long. Because of this, their opinion may or may not be founded on reasonable analysis. Quite often you will see large amounts of these traders buying at the absolute top, or selling at the absolute bottom. You must know that even the most experienced professionals are taking losses, and as such you should be careful following their thought process. So when it comes to the thought process of somebody who's only been trading Forex for three months, the odds of it being a winning thought process diminish greatly.
Many of these social platforms are simply ways to make money for the owners. It might be through advertising, it can also be through referrals to brokers, or possibly even a situation where the broker actually owns the social platform. It is in the broker's best interest to have you trading is much as possible, and with as much leverage as possible in order to separate you from your money as quickly as possible.
*The opinion presented in the article is that of the author alone, and does not represent the opinion of DailyForex.com
http://www.dailyforex.com/forex-articles/2011/03/Forex-Social-Platforms--an-Opposing-View/7445
By: Terry Allen
Consider that your scalping Forex strategy produces a 98:2 win-to-loss ratio. Now, although your risk-to-reward ratio will be extremely bad at 100:5, you would still achieve a profit that would be equal to (98*5)-(2*100) equaling 290 pips. However, although this sounds impressive you must also realize that you only need two additional losses to completely reverse this result practically wiping out all your profits in the process.
http://www.dailyforex.com/forex-articles/2011/02/Does-a-Scalping-Forex-Strategy-Work/7352
What is a Scalping Forex Strategy?
A scalping Forex strategy is a trading methodology that utilizes the shortest time frames available (known as a tick) for 1 minute, 3 minute and 5 minute periods. Forex scalpers focus on very small price movements and evade volatility as a primary consideration. They seek trading positions which allow them to perform multiple trades in very short periods of time whilst targeting small profits of 1 to 5 pips each time.Forex Scalping Compared to Traditional Strategies
For example, whereas the primary aim of a more traditional strategy may be to undertake three trades per day with 100 plus pip targets each, a scalping Forex strategy would attempt to fully action hundreds of trades within similar time periods whilst targeting only 5 pips each time. As you can verify, the former strategy could produce a maximum profit in excess of 300 pips compared to that of the scalping Forex strategy which would be in the region of 500 pips.Larger Risks Involved
However, in order to obtain the optimum results for a scalping Forex strategy implies that its users will need to risk more per pip than other strategies so that worthwhile profits can be produced. As such, as this requirement means that operators must risk a good deal more than 2% of their total equity per trade then this action violates the main concepts of most risk and money management strategies.When to Scalp?
A scalping Forex strategy will normally advise that you should attempt to trade Forex during its quitter periods when trading patterns tend to be more predictable and the levels of volatility are much lower. As such, the time period that is normally chosen for this type of trading is between 5.00pm and 9.00am EST during which time major countries, such as the US, UK and the Eurozone, do not normally release important economic data.Important Components to Consider
In order to attain consistent profits, a scalping Forex strategy needs to possess both a high win-to- loss ratio and a well-tested stop-loss strategy. As such, many scalping proponents utilize very small pip profit-targets together with relatively large stops and a high win-to-loss ratio. However, the utilization of such parameters normally means that the applicable scalping Forex strategy will also possess very poor risk-to-reward ratios.Justification for a Scalping Forex Strategy
Is it still worth developing or designing a scalping Forex strategy if it will only eventually possess a very poor risk-to-reward ratio? Yes it is, if you consider the following example. For instance, assume that you have selected a profit-target of 5 pips and a stop-loss of 100 pips per trade.Consider that your scalping Forex strategy produces a 98:2 win-to-loss ratio. Now, although your risk-to-reward ratio will be extremely bad at 100:5, you would still achieve a profit that would be equal to (98*5)-(2*100) equaling 290 pips. However, although this sounds impressive you must also realize that you only need two additional losses to completely reverse this result practically wiping out all your profits in the process.
http://www.dailyforex.com/forex-articles/2011/02/Does-a-Scalping-Forex-Strategy-Work/7352
By: Christopher Lewis When trading the Forex market, there are certain features that you will want to be aware of when it comes to your broker. Below is a short list of some of the most important criteria when choosing a Forex broker:
One of the most popular places to regulate is Cyprus. This is because the Cypriot authority is a little more lax on its Forex trading laws. By regulating there, you can claim that you are “regulated in an EU country”, which is technically true. But having said that, you could claim to be “regulated in North America” by being registered in Mexico. This implies the same stringent protections you get in the US or Canada. Common sense sees the folly in that argument.
By 700-1, this means that you can control $700 for every $1 you deposit. Because of this, it can supercharge your returns, as well as losses. Leverage is something that should be used sparingly.
It should also be noted that the United States regulatory authorities recently cut the amount of leverage that Americans can use down to 50-1 for major pairs, and 20-1 for crosses.
When you are looking to do business with a broker, don’t forget that they are there to serve the customer, and it pays to shop around – just like any other purchase. Forex brokers tend to be very competitive on various features and with a little bit of research you can get a lot more than you realize.
http://www.dailyforex.com/forex-articles/2011/03/5-Critical-Features-for-Any-Forex-Broker/7448
Regulation
While this seems like a no-brainer, many new traders do not know about the various regulatory bodies that are out there. If you are using a Forex broker, it needs to be regulated. Also, you should be aware of where it is regulated. This is one of the things most people overlook. As a general rule, you will want to see a country that is known for being business-friendly (at least in terms of the rule of law) as being the country of registration.One of the most popular places to regulate is Cyprus. This is because the Cypriot authority is a little more lax on its Forex trading laws. By regulating there, you can claim that you are “regulated in an EU country”, which is technically true. But having said that, you could claim to be “regulated in North America” by being registered in Mexico. This implies the same stringent protections you get in the US or Canada. Common sense sees the folly in that argument.
Charting
Believe it or not, not all Forex brokers offer charting. This is becoming less and less of a problem, but there are some that don’t. They generally will offer an ECN, or Electronic Communication Network, and sell an add-on for charting such as NinjaTrader. Provision of proper charting is a sign of a broker's integrity - failure to provide this is a sign that they may be less-than-honest.Pairs
Not all brokers offer the same currency pairs. Some will offer over 100, while others will only offer the 20 most common pairs as an example. One of the pairs that surprises people the most in this regard is CAD/JPY. Since the Canadian dollar and Japanese yen are both major currencies, most traders assume that the cross pair would be offered. All brokers are going to be different, and a diligent review of available trading pairs is essential. The last thing you want to do is turn around and close out an account right away because of an errant mistake.Leverage
Depending on what part of the world you live in, leverage can vary. Leverage gives you the ability to trade large amounts of currency with a small deposit. Some broker out there now offer as much as 700-1 leverage, and depending on your trading style, leverage can be good or bad.By 700-1, this means that you can control $700 for every $1 you deposit. Because of this, it can supercharge your returns, as well as losses. Leverage is something that should be used sparingly.
It should also be noted that the United States regulatory authorities recently cut the amount of leverage that Americans can use down to 50-1 for major pairs, and 20-1 for crosses.
Analysis
When you are learning to trade, it is always helpful to have a technical analyst available to read. Some brokers are very generous with their offerings when it comes to this kind of thing, and many are now employing professional technical analysts that post newsletters every day. This can be very helpful for the new trader.When you are looking to do business with a broker, don’t forget that they are there to serve the customer, and it pays to shop around – just like any other purchase. Forex brokers tend to be very competitive on various features and with a little bit of research you can get a lot more than you realize.
http://www.dailyforex.com/forex-articles/2011/03/5-Critical-Features-for-Any-Forex-Broker/7448
