Forex Trade Strategies

Forex Prices - Factors That Determine Price Movement

noreply@blogger.com (Mukesh SInghal) — Wed, 02 Dec 2009 18:37:00 +0000

If you want to be successful at forex trading then you need to know how and why prices move - many traders think this is obvious but its not and that's why 95% of traders lose. Here we will look at the factors that move currency markets and how you can profit.

First let's start with a simple equation:

Supply and Demand Fundamentals + Investor Perception = Price

While the above equation is simple enough, it's deceptive and most traders fail to understand its significance, when they learn forex trading.

Fundamentals

These are the supply and demand facts and they help move price but the person studying these facts has a problem - while the facts are there for all to see, we all see them differently and draw our own conclusions about what they mean.

Our actions combined with millions of other traders, creates the price.

The facts are there for all traders to see but we all draw different conclusions that's why the facts alone are not enough to help you trade.

It's a fact that markets collapse when they are most bullish and rally when they are at their most bearish - this is investor psychology at work.

Investor Perception

Of the facts creates the price and we are not creatures of logic, we are creatures of emotion and these are reflected in the price.

It's a fact that greed and fear dominate investors and these emotions cause price spikes away from fair value. These price spikes never last long and are easy to see on any forex chart and they never last long and return to fair value.

So what do you need to understand in terms of the above, in terms of your forex education? Here are the salient points:

- Never predict price movement as humans behaviour cannot be predicted
- Trading fundamentals by themselves is hard as its only half the equation
- Trading is a game of odds and you need to get the odds in your favour to win

Now you know the above how do you get a forex trading strategy for currency trading success?

The simplest way is to base your forex trading strategy on forex technical analysis.

Not only does it take into account the fundamentals it also takes into account how investors perceive them.

Technical analysis simply assumes that all fundamentals will be quickly be reflected in price action and in today's world of instant communications and online trading, this is truer than ever before.

Technical analysis more importantly, takes into account how investors perceive the fundamentals. While prices do not move to a scientific theory, human nature is constant and this is reflected in repetitive price patterns on any forex chart.

While charting is not a science, certain formations that present themselves do offer trades where you can put the odds in your favour, with a robust currency trading system.

You won't win every trade - but if you trade the odds, you will win more than you lose and pile up huge long term profits.

Most novice traders when they try and learn currency exchange don't understand the way prices really move and think they can predict, trade news stories and use scientific theories and they lose. To win at forex trading the best way to trade is to trade the reality of forex prices changes - without predicting, focus on the odds and assume any trade can go wrong.

The equation for forex price movement is essentially simple but deceptive.

Now you know how and why forex prices really move, you can build a forex trading system to help you enjoy currency trading success.

The Best Analytical FOREX Tools Available

noreply@blogger.com (Mukesh SInghal) — Tue, 17 Nov 2009 16:57:00 +0000

Elliot Wave – This analytical FOREX tool is considered by most experienced traders to be the purest form of technical analysis, since Elliott Wave analysis measures investor psychology. The Wave shows how the psychology of traders, en masse, moves from pessimism to optimism on a stock. This shift occurs in a specific and measurable. Detecting where a stock is in the pattern can help a trader estimate the future movements of the market.

K.B. Advisory Ltd. – This analytical FOREX tool offers you daily technical analysis and trading recommendations that are based on sophisticated trading strategies developed by Keith Black. It boasts a successful three-year track record.

TRL (Technical Research Limited) – TRL is a Specialist Foreign Exchange Forecasting Service that can help you with forecasting and trading analysis in the global foreign exchange markets. Technical Research Limited is rated the No. 1 FX Advisory Service by customers in 39 different countries around the world.

PronetAnalytics - This analytical FOREX tool is very powerful, and offers real-time analysis for market professionals who are looking for inexpensive real-time data and exchange feeds with standard and simple graphical trading support.

IFR (International Financing Review) – IFR Forex Watch has real-time technical analysis of the FX spot and options markets. It connects you with analysts in London, New York, Boston, San Francisco, Singapore and Sydney. IFR specializes in sifting through the vast array of information that clutters up current market participants, and boiling it down to its bare essentials.

GMR (Global Market Research) – Global Market Research provides price forecasting and performance-based Trade Strategies for the FX market. You can check out their daily newsletter, their FX Technicals and intraday updates and analysis through the Web. Or you can have them E-mailed to you.

CHQREK.com – This is a resource created by a market professional that has been trading and writing about markets for nearly 20 years. With this analytical FOREX tool, you can capitalize on of his experience and his analysis, especially technical analysis, and get a real trader's take on current market action.
4CASTWEB – 4CAST sends out key market information and analysis to market participants worldwide, including central banks. It also has an on-line service that gives you fundamental, political, strategic and technical analysis 24 hours a day

ForexTRM – ForexTRM is a forex charting service that pairs 18 world and regional currencies and tracks them every day. This means ForexTRM lets you to trade any one of the 18 currencies against any of the other 17. It uses trademarked Sigma Bands and Hurst Cycle Analysis to correctly identify overbought/sold FOREX markets, where trading risk is at its lowest point in time, and which currency pairs are ready to trade. There is also an ALERTS Newsletter that you can get free of charge.

FOREX Trading Tools You Need

noreply@blogger.com (Mukesh SInghal) — Tue, 17 Nov 2009 16:56:00 +0000

Whether you choose to use fundamental analysis, or technical analysis, you will need a way to access and interpret information about the market. The Internet is filled with websites that offer you unique insight into the FOREX market, and it’s often difficult to know which ones to consider. Here is a roundup of some the more useful FOREX trading tools available. Of course, these offerings are always changing, so nothing is guaranteed until you try a FOREX trading tool and find that it gives you the information you require.

The first program we’ll consider is a FOREX trading tool known as the Advanz Auto4X Trading Platform. This is an automatic execution tool that will help you keep track of multiple trades, and automates your trading processes by taking Trade Station strategy signals, incorporating your trading strategy, and sending the results to Capital’s trading platform. Advanz Auto4X can handle a variety of trading strategies on various time frames. This FOREx trading tool can also handle any of the FOREX crosses that are made available for trading.

However, the majority of FOREX trading tools available to the individual trader are analytical tools, not automatic execution tools. Here are a selection of some that I have found useful.

Minimize FOREX Losses

noreply@blogger.com (Mukesh SInghal) — Tue, 17 Nov 2009 16:55:00 +0000

When you’ve figured out how to let your profits run, you need to start on the other end of the equation, and minimize FOREX losses. This can be just as difficult to do as letting your profits run, even though it seems just as logical. Minimizing FOREX losses preserves your capital.

If you’re not careful, the market will send you a few trades with the potential to create large losses, just like it sends you trades with the potential for large profits. But you really don’t want the losses. Before you enter a trade you should know exactly how much you are willing to lose on it. This is called your maximum loss.

The maximum loss is the greatest amount of capital that you are comfortable losing on any one trade. Your maximum loss should be set as a small percentage of your capital, so that a string of losses won’t stop you from trading. To use an example: If a trader had a trading float of $2000, and began trading with $200 a trade, it would be reasonable for them to experience three losses in a row. This would reduce their trading capital to $1400. Let’s say they then decide they have a better chance of winning because of the three losses and increased their next position to $400.

If a trader did bet $400 dollars on the next trade because they thought they were going to win, their capital could be reduced by half. The chances of making money now are practically nil because they would need to make 100% on the next trade just to break even. If you decide on your maximum loss, and then stick to it, you won’t ever find yourself in this position. Unlike the 95% of traders out there who lose money because they haven’t determined their maximum loss or set their exit prices.

You should set an exit price that will tell you that your trade is a losing one before the loss gets too big. Chose your stops carefully to minimize FOREx losses, but be aware that you can never be 100% certain that you won’t loss everything traded. This is because of gaps at the open, or limit moves in futures, and the simple fact that you can never predict a market’s movements completely. But by simply having the rules and sticking to them you will save yourself from the nasty trades that just keep on going against your position until you have lost more than you can make back with several winning trades.

It seems obvious that if you have a position that has reached you exit price, you should follow the prompts of your trading system and exit the position. Yet many traders hold on to these positions, hoping that it will turn around and make them a profit. They just don’t want to admit they made a mistake. But a trade that is a loss is hardly likely to turn around and become a winner.

Why would you want to risk any more money on a losing when you could simply close it out, accept the loss and move on? Successful traders take small losses, and let their profits run. Learning to minimize FOREX losses conserves their capital, and it also frees the capital from being held losing trades, allowing it to be put to work making you more profits.

Forex trading examples

noreply@blogger.com (Mukesh SInghal) — Tue, 20 Oct 2009 17:55:00 +0000

Example 3
The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:
He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.
Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.
After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.
Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.
Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.
The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.

Forex trading examples

noreply@blogger.com (Mukesh SInghal) — Tue, 20 Oct 2009 17:54:00 +0000

Example 2:
The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).
The dealer quotes 112.05-10. The investor sells EUR at 112.05.
Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.
He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.
Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.
The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.
This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.

Forex trading examples

noreply@blogger.com (Mukesh SInghal) — Tue, 20 Oct 2009 17:54:00 +0000

Example 1
An investor has a margin deposit with Saxo Bank of USD 100,000.
The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.
The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.
Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.
Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.
Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.
Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.
As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.
This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.

Forex Market Update

noreply@blogger.com (Mukesh SInghal) — Tue, 20 Oct 2009 17:50:00 +0000

Tuesday, Oct 20, 2009, 13:23 GMT
By John Hardy Consultant/FX Strategist Saxo Bank

Bank of Canada promises to keep rates low for now. US housing data very weak - PPI much lower than expected.
Euro officials ready to go to China to complain about the yuan. Brazil creates tax to slow currency appreciation.

MAJOR HEADLINES – PREVIOUS SESSION

US Oct. NAHB Housing Market Index out at 18 vs. 20 expected and 19 in Sep.
Germany Sep. Producer Prices fell -7.6% YoY vs. -7.1% expected an -6.9% in Aug.
EuroZone Aug. Construction Output fell -11.3% YoY vs. -9.8% in Jul.
Canada Aug. Wholesale Sales out at -1.4% MoM vs. -0.4% expected
Canada Sep. Leading Indicators out at 1.1% vs. 0.8% expected
US Sep. PPI out at -0.6% MoM and -0.1% ex Food and Energy, vs. 0.0%/+0.1% expected, respectively
US Sep. Housing Starts out at 590k vs. 610k expected and 587k in Aug.
US Sep. Building Permits out at 573k vs. 595k expected and 580k in Aug.
Bank of Canada keeps rates steady at 0.25% as expected

THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
UK Bank of England's King to Speak (1915)
US Fed's Yellen to talk with reporters (1930)
US Weekly API Crude Oil and Product Inventories (2030)
US Weekly ABC Consumer Confidence (2100)

Market Comments:
The greenback touched a new low in the Asia session and into early European trading after stronger than expected corporate earnings from Apple boosted equity futures after the New York close yesterday. But the big round number at 1.5000 in EURUSD seemed to have the market shying away from pushing the USD further into its hole at least briefly. In Asia, the RBA minutes supported the hawkish RBA theme (the RBA said it was "possibly imprudent" to keep rates at such low levels and simply commented on the reasons for the Aussie's strength without expressing any concern) and pulled AUDUSD above 0.9300 briefly before the pair eased back in European trading. Trichet was out trying to talk up the greenback once again with the usual comments about his interest in the US purported strong dollar policy. Other European officials were far more stark in their comments today, with one French official calling the strong Euro a "disaster". The unfairly strong Euro has become so pressing an issue that Trichet, Luxembourgs Juncker, and European Union Monetary Affairs Commissioner are planning a trip to China before the New Year. The intent is clear, though Juncker declined to "preannounce a message".
NY Fed practices its exit strategiesYesterday, the New York Fed issued a statement about the Fed's test driving of the "reverse repo" exit strategy aimed eventually at soaking up liquidity from its massive easing and quantitative easing programs of the last year if a withdrawal of monetary accommodation becomes necessary. The statement was apparently aimed at stamping out speculation that the Fed is gearing up for an imminent end to its accommodative stance. The statement underlined that reverse repos are a normal part of the Fed's activities, including "triparty" settlements:
"This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening. We have recently begun testing this capability with all involved parties and systems, and it is likely that the Federal Reserve will engage in additional tests in the future. No actual operations have been conducted as part of these tests. Recent Federal Reserve communications have also raised the possibility of expanding the set of counterparties he Desk might employ for conducting reverse repos beyond the Primary Dealers.....no decisions have been made regarding the types of firms that may be included."
Brazil to tax inflowsBrazil has taken an interesting step in attempting to slow the pace of capital inflows and stem the appreciation of its currency by reintroducing a special capital inflow tax that it has used in the past. The 2.0% tax on all inflows is higher than the previous 1.5% tax and does not apply to equity transactions. Still, the move is strong enough that it is likely to disrupt the strength of the trend. This move came after yesterday's story about Asian exporters looking to stem speculation in their currencies. Clearly, the development in currency markets are increasingly garnering a stronger and stronger official response from around the world and could slow the progress of recent USD weakening trend, all other factors being equal.
US Data, the USD and the JPYThe US data was a good test of the market's current themes: very ugly housing data puts a damper on risk, which is USD positive, while the very low PPI data suggests the Fed can continue to keep an accommodative stance as long as it wants to - a USD negative. Which side wins? The answer - as always of late - will be provided in the short term by the move in risk appetite. The housing starts data and yesterday's NAHB survey suggest that homebuilding is still barely moving and traffic of interested buyers is falling again now that it is too late to close a deal on a house purchase for first time buyers ahead of the expiration of the tax credit. Regardless of the effect on risk, the strong move higher in bonds today in the wake of the weak US data is likely to boost the JPY and see a reasonable correction in the overbought JPY crosses. USDJPY was down flirting with the 90.00 level after breaking through 90.40 support and could be in for a retest of recent lows if the round figure can't hold.
Bank of Canada GuidanceThe Bank of Canada was out with its interest rate decision just as we are finishing up this piece. The most interesting headlines are that the bank continues to expect to hold the rate at 0.25% through June of next year, that the strong CAD will more than offset growth factors, that it sees the Canadian economy at capacity in Q3 of 2011 (such confidence in a forecast!), that it still has policy flexibility despite low rates, and that risks to the economy are roughly balanced. This is relatively dovish relative to expectations due to the promise to keep rates low through June.
The rest of today...With GBP trading at interesting levels of late, watch out for the speech from the BoE's King later today. Also watch out for the US oil inventory data today and tomorrow. With oil up tickling the 80-dollar per barrel level, energy markets could suddenly become a drag on risk if they continue to rally as strongly as they have in the last few weeks.
Chart: GBPUSDA lot of focus on GBPUSD today with its move through the trendline resistance. The big support at 0.9080 is also in play today in EURGBP. Mervyn King's appearance could either confirm or spoil the technical break later in the day. From a fundamental perspective, it's tough to see what the driver should be for a further appreciation in GBPUSD.

More analysis: Saxo Bank Market News & Analysis

Risk Warnings:
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclaimer.

How to Trade Forex

noreply@blogger.com (Mukesh SInghal) — Tue, 20 Oct 2009 17:48:00 +0000

Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the Forex markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank online trading system, SaxoTrader.
The benchmark of its service is efficient execution, concise analysis and expertise – all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets – gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.
The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.
Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and real-time account overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements.

Forex Analysis Software - What to Look For

noreply@blogger.com (Mukesh SInghal) — Thu, 20 Aug 2009 08:32:00 +0000

Forex offers many support services for its traders, including Forex signal trading. Either Forex brokers or independent analysts monitor and analyze the market. Signal trading includes identifying trends. They identify these trends in the Forex market by using many varied and subtle indicators. These indicators are used in Forex signal trading to help indicate to traders a good time to buy or sell, though these Forex brokers and analysts do charge a fee for their services. But having the option of using signal trading can make the difference between no profits and huge ones.

A lot of times in Forex signal trade they only monitor the most popular currencies. These include pairs such as EUR/USD, USD/JPY, GBP/USD and USD/CHF. Though if you are interested you may find Forex signal services for the less common currencies and pairs. These however may charge a higher fee for their services.

There are some individual services included in Forex signal trading that are generally offered. A lot of basic subscriptions to these services will email alerts for the best times to buy and sell. A little bit higher level of subscription though will alert you about these via cell phone or pager. Some levels of subscription for Forex signal trade will provide the subscriber with live charts, in order for the trader to make their own decisions if they so choose to do so. Usually the minimum subscription fee is one hundred dollars a month, with charges only going up from there.

There is however a warning about signal trade being used alone, without any other indicators, especially if you are only looking at indicators over a short period of time. This approach has been shown not to be the best one in making good profits. Instead when using this service you should use it in combination with other indicators. Even as an extra indicator to verify or compare against other indicators, Forex signal trade can work well in these situations. Of course you should also ask for a history of their data. This can help indicate their successes and any failures they may have had in predicting good buy and sell times, showing you which service is the best option for you. Or even if this service would be a good choice for you at all.

Of course a lot of the reasons that people choose to use a signal trading service or not is because it saves them the trouble of having to analyze trends on their own. Once again, you shouldn’t use these services on their own, without other indicators. You should also make sure you tread very carefully until you are sure you can trust the company you are working with sufficiently. In the meantime, use other indicators, trust yourself and listen to the grapevine. Whether using the Forex market or another one, using any signal trade company or the Forex signal trading company in particular, in the end it is up to you how and when you decide to use them.

How To Develop A Forex Trading Strategy

If you’re like most people with an entrepreneurial bent to some degree, then you’ve most likely heard about Forex trading at some point in the past.

Forex Autopilot Review

If you are one of the people who are currently in the foreign exchange business and is considering on getting Forex Autopilot software, you should start by reading a Forex Autopilot Review.

How To Find Good Forex Reviews

Following the advent of well known and lucrative forex business in the recent past, many entrepreneurs have entered the fray with their lot, looking to capitalize on the situation.

Making Money With Forex Software

Forex market has been growing in popularity over time. Many people who have tried a hand in the business and succeeded can attest that it is a good venture to invest time and money in.

Author: Mike Singh

Check out http://www.forex-made-ez.com/ for more articles on forex directory and forex currency trading system

Article Source: http://EzineArticles.com/?expert=Mike_Singh

GBPJPY Daily Breakout Strategy

noreply@blogger.com (Mukesh SInghal) — Thu, 20 Aug 2009 08:28:00 +0000

This is a daily breakout system. it is supposed to give you an average of 50 pips daily. ( a note: do not believe in those averages, pip win/loss ratio is much more important than daily pips, because there can be some good days and there can be some bad days).

System Setup:
Currency Traded: GBPJPY
Necessity: High and Low of the previous day
Entry: +/- 23 pips from the High/Low of the previous day
Exit: +/- 90 pips from the High/Low (including entry pips)
Stop Loss: 67 pips
Risk Reward Ratio: 1:1

Time to set trade: at the beginning of the Asian Session: around 12:30 am EST

I recommend using FXDD to try this out, as their candle closes when we enter new entry buy or sell stops.

For setup example, take on consideration on this data (previous day).

High of Friday, 29 Sept: 200.35
Low of Friday, 29 Sept: 197.60

Buy Stop: 200.58
TP: 201.25
SL: 199.91

Sell Stop: 197.37
TP: 196.47
SL: 198.04

How Forex Trading Works..

noreply@blogger.com (Mukesh SInghal) — Thu, 20 Aug 2009 08:21:00 +0000

Currency trading is mainly about buy and sell activities. Currencies are traded on a price interest point (normally called pip) system. Every currency pair has their own pip value. The objective of a trader is to hold as many profitable pips as possible. Some pip values are fixed, but some can fluctuate depends on the currency gain or loses strength. Normally I trade by using margin trading, where small deposit is required to control much larger amount in the market. Here I will use 1 percent margin deposit so that $1000 control $100,000 of trade currency. $100,000 is the notional amount. Let me shows some major currency pair with the currency exchange rate and the pip values.

Currency	Currency exchange rate	Pip Value
(GBP/USD)	1.7204	$10.00 per pip (fixed)
(EUR/USD)	1.1789	$10.00 per pip (fixed)
(USD/CAD)	1.1642	$8.59 per pip (fluctuating)
(USD/JPY)	117.82	$8.49 per pip (fluctuating)

For GBP/USD, 1 pip movement can be from 1.7203 to 1.7204. That means from 1.7102 to 1.7202, it should be 100 pip movement. Lets look for another example, USD/JPY, 1 pip movement is from 117.82 to 117.83 and 100 pips movement is from 117.83 to 118.83.

Foreign Exchange Calculation

Below will show you how to calculate pip values.

Formula is (1 pip value/currency exchange rate) x (Notional Amount)

For GBP/USD, 1 pip value is 0.0001. Assume currency exchange rate is 1.7204. Notional Amount is GBP 100,000.

Therefore, (0.0001/1.7204) x GBP 100,000 = GBP 0.58

If we want to convert back to USD, then GBP 0.58 x 1.7204 and we will get $1

For EUR/JPY, 1 pip value is 0.01 . Assume currency exchange rate is 138.96. Notional Amount is EUR100,000 . EUR/USD=1.1789

Therefore, (0.01/138.96)x EUR 100,000 = EUR 7.20

If we want to convert back to USD, then EUR 7.20 x 1.1789= USD8.49

Make Profit in Forex Trading

Foreign exchange trading is mainly about buy and sell activities. The theory is slightly similar with share market. To make the profit, there is the only way which is buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. Is it very easy? It is actually not that difficult. What we need to do is to analyze the forex in a correct way and do the good trade. Together with good money management and proper guideline, I can say that success will be eventually more on your side.

Sometimes, trader involves in foreign exchange not because of make profit but just do not want to lose money. Let me take an example, A US Construction Company want to build a subway in India and it is going to take about 7 years with $50 million construction cost. The first thing this company will do is to hedge the dollar value of the project. By buying or selling US dollar against the future market value, no matter how big the amplitude of the fluctuation, the company will not lose any money.

What is Forex Mini, Micro and Standard Account?

noreply@blogger.com (Mukesh SInghal) — Wed, 15 Jul 2009 10:31:00 +0000

In Forex market a trader can open account based on different leverage. There are three types of accounts:
1. Standard
2. Mini
3. Micro

The table below summarized all the key differences:

As you can see form the table that the lower leverage accounts usually requires more money to open an account. So if you are new to trading and want to invest only a small amount then perhaps a Micro or Mini account is the way to go. However if you are planning to make a living out of it or planning to trade full-time then Standard account is the preferred choice.

You can read more on What is Leverage and find out Whether Higher Leverage Helps?

Stop Letting A Winner Turn Into a Loser

noreply@blogger.com (Mukesh SInghal) — Wed, 15 Jul 2009 10:25:00 +0000

We all have had trades which started off profitable only to end up in loss. This not only hurts financially but also emotionally. In this article we will explore the psychology behind it and how to overcome it.
We all know that fear and greed is what drives most of the new trader’s decisions. Though a very simple concept to understand, it is very to hard to put into practice. The primary reason why new traders let their winning trade become a loser is due to lack of trading plan. Before placing any trade we should know when to take profits and set the stop loss. We will cover ways of setting profit targets and stop loss in another article.
Setting profit taking point is only the first step. It happens so often then before the trade can reach the profit target it reverses back to go all the way to Stop Loss. At that time we curse the market and feel cheated. This has quite serious implications on mind of a trader. Next time as soon the trade turns profitable the trader is inclined to take profit prematurely so as to not get cheated by market again.
Now we covered the psychological point of how it works, lets look into how we can avoid falling in this trap. First divide the profit target into three parts. These three parts don’t have to be of equal size. They can very based on support / resistance or any other criteria. When placing trades always trade in lots divisible by 3. Close first third when trade reaches third of your profit target. Do NOT move the Stop Loss to starting point yet. Once the trade reaches second profit target close the second third and move the Stop Loss to starting point. The last third is now a free ride.
Trading this way not only reduces your risk but also locks in profit as you move along. However always keep in mind not to trade more than 2-3% of account equity in one trade. You can read more about Money Management Here.

HOW TO BECOME A FOREX TRADER

noreply@blogger.com (Mukesh SInghal) — Wed, 15 Jul 2009 10:16:00 +0000

The path to success in forex trading is based on one central idea: consistency. The first thing most people who consider forex think about is money. How much money they can make. This leads to a desire for quick profits. That leads to almost certain failure. There is another way to think about how to become a forex trader. An alternative mind-set is to think of yourself as becoming a ‘pip’ manufacturer. Here is what I mean.

Like any manufacturing firm, being a pip manufacturer means you produce every month a certain output of pips. A small factory would produce perhaps a smaller output of 300 pips. A larger factory could produce 500 and more pips. But its not the amount of pips that is important. It is the consistency of the production. Think of being so confident in your production of pips that you can bet that it will be 96% of the time within a 30 pip range. So someone producing 300 pips on the average would be really producing 96% of the time between 270 and 330 pips. This ability to be confident about your production is profoundly important. It is the first major goal of any training.

How does one achieve the goal of consistent trading? In theSecrets of Forex coaching it works by a continuing coaching process. We begin by looking at live charts together on the desktop, one-on-one. As coach I will demonstrate an important technique a trader should know. The student will then put on about 20 trades. We track the results. 20 trades is enough to identify weaknesses and errors of strategy or tactics. The second step is a review of the trades and in a follow-on tutorial we focus on correcting the weaknesses. This process is iterative and keeps going on.

The result is that the person training to become a trader has identified the sources of mistakes he has made, and can demonstrate progress in correcting the mistakes. Along the way new strategies and tactics are taught.

Becoming a forex trader is a process. It is not taking a lot of material and reading it. It is not sitting in a class and then forgetting what one has learned. In small frequent steps- everyone can learn to become a forex trader!

source: Secretofforextrader.com

Forex Trading Secrets - Q&A

noreply@blogger.com (Mukesh SInghal) — Wed, 15 Jul 2009 10:16:00 +0000

1) Can the US Dollar Actually Go Up during this crises and soon?

A: Yes indeed! The fact that traders should realize is that this is a global crises. Its a contraction of confidence around the world. Just look at the GBP and the EUR and how its behaving. Britain and the Eurozone have their own problems as well! The DXY ( US Dollar Index is actually right in the middle at .78 2 points off its Sept 15th low and 2 points off the 9/11 high of .80. Thats telling you something.

2. What other signs are there that are dollar positive?

A: Well, its the fact that its bad everywhere. A: New Zealand is in a recession. Australia is slowed down. Asian markets are down fearing global slowdown. So its a set up soon for a rebound.

3. With all of this dollar turbulence is there a way to trade the currencies that we should know?

A: Actually, its a great time to look at Crosspairs. Look at the EURGBP in particular.With both the EUROZONE AND THE POUND STERLING facing major pressures, one of the best trading currencies is the EURGBP cross pair. It is in a great sideways range and bounce trades off Resistance and Support is now a high probability trade.

4. What is the best pair to trade in response to FEAR in the US markets.

A: I have stated that the USDJPY is behaving incredibly in sync with the S&P. Also look at the GBPJPY pair.

More secrets of forex trading...

Four Advantages of Futures Spread Trading

noreply@blogger.com (Mukesh SInghal) — Wed, 15 Jul 2009 09:52:00 +0000

Advantage 1: Easy to trade

Do you see how nicely this spread starts trending in mid February? Whether you are a beginner or an experienced trader, whether you use chart formations or indicators, the existence of a trend is obvious. Spreads tend to trend much more dramatically than outright futures contracts. They trend without the interference and noise caused by computerized trading, scalpers, and market movers.

Advantage 2: Low Margin requirements

Many spreads have reduced margin requirements, which means that you can afford to put on more positions. While the margin on an outright futures position in corn is $540, a spread trade in corn requires only $135 -- 25% as much. That's a great advantage for traders with a small account. With a $10,000 trading account risking 8% of your account, you can enter 6 corn spreads, instead of only 1-2 outright corn futures trade. How's that for leverage?

Advantage 3: Higher return on margin

Each point in the spread carries the same value ($50) as each point in the outright futures ($50). That means that on a 3 point favorable move in corn futures or a 3 point favorable move in the spread, you would earn $150. However, the difference in return on margin is extraordinary:
Corn futures - $150/$540 = 27.8% return
Corn spread - $150/$135 = 111% return
And keep in mind that you can trade 6 times as many spread contracts as you can outright futures contracts. In our example you would achieve a 24 times higher return on you margin.

Advantage 4: Low time requirements

You don't have to watch a spread all day long. You do not need real-time data. The most effective way to trade spreads is using end-of-day data. Therefore, spread trading is the best way to trade if you do not want to watch or cannot watch your computer all day long (i.e. because you have a daytime job). And you can save all the money you would have had to spend for real-time data systems (up to $600 per month).
So where is the catch?
If futures spread trading is so fantastic, why does it seems that hardly anybody trades spreads? Well, it is not true that hardly anybody trades spreads: the professional traders do, every day. But either by accident or design, the whole truth of spread trading has been hidden from the public over the years.
The purpose of this website is to inform you about futures spread trading. In the following we will answer the four frequently asked questions:

What is a spread?
Why trade spreads?
What can you expect when trading spreads

Forex Trading For Beginners - 10 Essential Tips For Forex Trading Success

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 11:21:00 +0000

If you are new to Forex trading you understand need to understand that 95% of trades lose. If you want to win you can but you need to follow these essential trading tips. Here are your ten tips and there in no particular order of importance, there all important!1. Don't Use a cheap Forex Robot or Expert Advisor If you think you are going to get rich by paying out two hundred dollars or less for a cheap software package think again you won't, all these systems lose money. If Forex trading were as simple as paying a few hundred dollars for a lifelong income, 95% of traders wouldn't lose money. 2. Accept Responsibility Leading on from the above point, it should be pretty obvious that you need to accept responsibility for your actions, learn skills and get a decent Forex education. 3. Work Smart Not Hard You don't need to Work hard just get the right Forex information and that should only take you a couple of weeks at most and your all set. 4. Keep Your Strategy Simple Simple trading strategies work best as they are more robust than complex ones, with fewer elements to break, so keep your system simple. 5. Use Technical analysis This is simply the most time efficient way to trade and all you need to do is learn the right chart formations, to spot profitable chart set ups and that's a learned skill. 6. Be PatientDon't trade to often, once or twice a month is enough to make big gains and is the best way to trade, as you will be focusing on the high odds trades which offer the biggest profits.7. Use tight Money Management You are going to get losses, so make sure you keep them small and always place a stop before you start to trade, so you are not tempted to run losses and hope they turn around - most times they don't!8. Use Sensible Leverage You can get 200: 1 leverage with any Forex broker online but this is far too much and you will eventually destroy your account. 10- 20:1 is plenty for most traders. 9. Learn Discipline You will here this word a lot and it's the key to Forex trading success. You must follow your system with discipline and keep your losses small. If you can't follow your system with discipline you don't have one!10. Be RealisticDon't be afraid to make mistakes or take losses, all traders do and you will too. Forget perfection and focus on making money; if you can make 50 - 100% in your first year of trading you are up there with the best and can be very proud of yourself. These are 10 very simple tips for novice Forex traders and if you follow them you could be on the road to Forex trading success and a great second or even life changing income.

Forex Trading Indicators and the Ever Changing Market Conditions

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 11:15:00 +0000

Once you enter the Forex trading world you will immediately notice the need of using technical analysis in order to find trends when looking at the forex charts and also the importance of being aware of when they first develop so you can ride the trend until it ends. The foreign exchange market is a very strong trending market, lots of ups and downs in short periods of time, and it's, therefore, a place where technical analysis can be very effective.

But you should always remember that the indicators are only giving you a high probability behavior the markets may show when you are trading, but will never tell you the behavior of the currency prices with total certainty.

If you want to become a profitable forex trader you will need to use as many technical indicators as you can, or create a personalized trading strategy based on a combination of these indicators, to recognize with the best accuracy possible the trend. In other words, a professional forex trader will try to identify the major trend, the intermediate trend, and the short-term trend and then construct his trades in that direction based on how long their rules allow him to hold a position.

The forex markets are always changing, that's why you should always have an open criterion when using your technical indicators. Markets will be changing and different combinations of indicators may be required with time in order to have the most accurate, highest probability, prediction of future currency price behaviors.

If the action of the market shows your judgment to be correct, then you must consider staying with the market' and look for the maximum profit on each trade, according to your risk-to-reward/equity management rules. If you happen to be in a bad day and the market goes against you, the smart trader will take profits and get out of that trade. In a narrow market, when prices are not going anywhere, but move within a narrow range, there is no sense in trying to anticipate when the next big movement is going to be.

So, you must always be alert and open to use as many and as different indicators in order to stay tuned with the market and become a profitable trader at the end of the day.

Forex Trading Indicators and the Ever Changing Market Conditions

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 11:15:00 +0000

Online Forex Trading - These Two Simple Equations Can Lead You to Huge Gains

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 11:14:00 +0000

Enclosed you will find two equations which most traders don't understand and that's why most traders lose however if you understand them and incorporate them in your Forex trading strategy you could be on the road to huge gains... Let's first of all start with the equation which relates to how and why markets really move and it's this: Supply and Demand Fundamentals + Human Perception of them = Price Simple? Yes it is but most traders fail to see its signifcance which is: It's not the facts that are important, its how humans perceive them that is; always remember humans are creatures of emotion and don't conform to some scientific theory which means all the commonly perceived views below about trading Forex are wrong: - You can predict market movements in advance- You can trade breaking news and the facts - Markets move to some mathematical theory - You can make money from short term moves i.e. scalping or day trading. Its clear that markets move to probabilities not certainties. So using complex theories or mathematical theories is doomed to failure; its also impossible to work out what millions upon millions of traders will do within a day, as all short term moves are random and breaking news stories and facts cannot be traded, as the facts by themselves not important, its how there perceived that determines what happens next. So how do you trade online Forex markets and win? In an odds based market, simple systems works best and you should simply trade the reality of price change on a Forex Chart. Most traders make Forex trading more complicated than it really is. Having a successful trading system though is not enough next, you now need to understand another simple equation to succeed. A Simple Robust Forex Trading System + Disciplined Execution = Forex ProfitsThe key to winning long term at Forex is disciplined execution of a system. If you can't execute your trading system signals with discipline, you have no system and don't be deceived, trading with discipline is very hard. The reason discipline is so hard is you are going to have losing periods ( all traders have them) and you are going to have to keep going while the market takes your money and wrong foots you and makes you feel a fool. When this is happening, you need to keep your losses small and stay on course until you hit a home run and this is hard. Most traders think they will never lose and believe the rubbish that vendors of "sure fire" systems tell them which is - losing periods don't occur or are very short. When they hit a period of losses, they simply cannot cope with them and throw in the towel. if you understand that you have to lose to win and can trade with discipline, you can enjoy currency trading success. Most traders don't really understand how markets really move and lack the mindset to win. Above we have shown you what it takes to win at online Forex trading and the rest is now up to you - good luck!

Expert View

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 10:43:00 +0000

Receive our daily expert view on the global market from the Strategy Team of Saxo Bank.

Get an exclusive inside report on the market movements of the day delivered directly to your inbox every morning from Monday to Friday.
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Forex and the Risk Element

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 10:34:00 +0000

Time and time again I hear the statement that trading on a margin account is a risky business. In fact the NFA and CFTC require that all brokers and agents inform the public of the risks of trading on the foreign exchange.So how much risk is actually involved in trading Forex? Is it any riskier than engaging in any other kind of business?Let us first look at the hypothetical case of John and Mary. Each of them opened a forex trading account and funded it with $50,000. Both of them operated on a margin set at 100:1John traded very conservatively using one regular lot per trade and applying reasonable money management principals. Unfortunately, John was a poor decision maker and did little to improve his trading skills. Over a period of time, John lost his entire investment.By Martin BottomleyMary had no intention of being shackled by the constraints of money management and traded to the maximum of her account margin, each trade carrying the maximum lot size permitted. After a few spectacular gains, Mary's luck ran out and her account was wiped out. Despite being in profit to the tune of $2,500,000 she had lost it all and her original investment was gone too.So who took the most risk?If you answered Mary - you are wrong!Mary is a multi-millionaire. She has several mansions two yachts and a private jet. Her main income is from oil and her company owns some of the largest oil reserves in the world. The possibility of losing $50,000 for Mary is a very small risk. It is similar for her to that of anyone purchasing a lottery ticket - nice if it gives you a few million dollars, but no big deal if it doesn't.John on the other hand was in a very different situation. John had taken a mortgage on his house to fund his trading account. He had no savings and had even given up his job to start full time trading.As you can see from the two tales above, risk is about more than what percentage of your account you put at risk.In our next example, Mike and Sarah both open mini accounts with $5,000. Both are using a margin of 100:1. Neither Mike nor Sarah are independently wealthy but each can easily afford to lose their $5000 without it adversely affecting their lives.Both start trading and due to lack of experience do not fare very well. After a short time Mike stops live trading and starts to practice in a demo account. Mike seeks help and knowledge and then practices in his demo account to hone those new found skills.When Mike starts to trade his live account again he uses very strict money management and a well developed trading system. Mike has not yet made a fortune, but he is starting to recover some of the investment that he lost.Sarah continued to trade without any help. She is still managing to stay afloat.So who was at the most risk in this example? I would suggest that it was Sarah. Her luck is still holding but if your trading style is built upon luck. You are at great risk.Trading the forex market requires that you develop a style of risk management. It is necessary to understand the true risk of each trade as it applies to both the market in general and to you in particular.If you always trade with money that you can afford to lose, your total risk is reduced. If you learn how to trade effectively, then your risk is further reduced and likewise if you adopt a strict regime of money management your risk is again reduced.Trading will always carry a level of risk. If you intend to adopt trading as a career or investment vehicle, it is up to you to do everything in your power to learn how to properly assess and manage the risk.

How is Forex traded?

noreply@blogger.com (Mukesh SInghal) — Sat, 06 Jun 2009 09:51:00 +0000

The mechanics of a trade are virtually identical to those in other markets. The only difference is that you're buying one currency and selling another at the same time. That's why currencies are quoted in pairs, like EUR/USD or USD/JPY. The exchange rate represents the purchase price between the two currencies.

Example: the EUR/USD rate represents the number of USD one EUR can buy.
If you think the Euro will increase in value against the US Dollar, you buy Euros with US Dollars. If the exchange rate rises, you sell the Euros back, and you cash in your profit. Please keep in mind that forex trading involves a high risk of loss.

Important: be aware of the risks

noreply@blogger.com (Mukesh SInghal) — Fri, 15 May 2009 15:51:00 +0000

Finally, it cannot be stressed enough that trading foreign exchange on margin carries a high level of risk, and may not be suitable for everyone. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial investment, which means that you should not invest money that you cannot afford to lose. If you have any doubts, we recommend that you seek advice from an independent financial advisor.