If you want a simple forex trading system that makes money then we are going to give you one that you can get off the net for free. Best of all its easy to understand easy to apply and makes big profits so let’s look at it.
This system works on the following basis it buys “high and sells higher” while most traders look to “buy low and sell high”
Lets look at the theory and then how you can execute your trading signals.
1. The Logic & the Theory OF the System
Why buy low sell high doesn’t work
Its an accepted market wisdom and it doesn’t work. If you try and buy the low of a market you are guessing or hoping and the market will kill you.
However if you look for important breaks of resistance and an acceleration in price momentum, odds are the trend will continue and you can follow it for huge profits.
So why doesn’t every trader do this?
Because they want to buy the pullback and think they have missed a bit of the move (this is true but you needn’t worry about that if the price trend continues) they then wait, prices don’t pull back and they miss the move.
Its hard mentally to miss the start of the move, but if you grit your teeth and enter you will see a lot more profits come your way and be in on all the big moves.
Furthermore most of the big currency trends of the year start from new market highs NOT market lows.
So that’s the theory, this forex trading system is based upon.
Now lets see how to construct a system to trade breakouts.
You need to look for important resistance levels and this is normally a level that has been tested 4 times or more and repelled – in at least two separate time frames.
When this level is broken the odds favour the trend to continue your aim is to look at your forex charts and separate out the ones that are likely to continue.
You don’t need to guess or predict you look for confirmation.
2. Confirming Entry
What confirmation do you need?
You need to have confirmation that price momentum is accelerating and need some indicators to help you do this.
There are many momentum indicators but the best two are the stochastic and Relative Strength Index (RSI) and they discussed in our other articles.
Use these and make sure they BOTH confirm accelerating price momentum then enter your trade.
They will take a bit of practice but its well worth the effort and you will soon see how effective this combo is in confirming trade entry and exit levels.
3. Stop Loss Protection
Is simply below the breakout point once the level of resistance is broken it will then act as support.
Other Important Points of This Forex Strategy
Only trade breaks of resistance that are considered valid by the market - we have said four tests in two different time frames – but keep in mind, the more tests and the more time frames the better.
So you need to be patient – you can make 100% gains with this forex trading system trading just a few times a year.
If you like the action of forex trading this system is not for you – if you like profits it will give you them.
Also don’t trail the stop up to quickly LEAVE it as breakouts very often get re tested so you don’t want to be clipped out by volatility
That Seems Simple!
It’s a very simple system and that’s why it works.
Simple systems work best as they have few elements to break, also using breakouts is great because most traders can’t buy breaks as they want to buy low and sell high – don’t let that worry you though 95% of forex traders lose!
You can learn this system in under a week easily and test it.
Try trading this forex trading system for yourself in a free demo account and see the profit potential for yourself and target those triple annual digit gains you have always wanted!
I have given it to you free all you have to do is look it up on the net see the logic and try it and you will be surprised at how effective it is.
By Monica Hendrix
Friday, August 17, 2007
Learn Forex Trading, Forex Strategies, Forex Software, Forex Investment
What is FOREX (Foreign Exchange)?
Forex (Foreign Exchange) simply means the buying of one currency and selling another at the same time. In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs Euro/Dollar, Dollar/Yen, etc. In excess of 85 percent of all daily transactions involve trading of the major currencies.
Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. The following notation is used for these currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. You may consider them as "blue chips" of the FOREX market. No dividends are paid on currencies. The investment profits come from well known "buy low - sell high".
If you think one currency will appreciate against another, you may exchange that second currency for the first one and stay in it. In case everything goes as planned, some time later you may make the opposite deal - exchange this first currency back for that other - and collect profits.
Transactions on the FOREX market are fulfilled by dealers at major banks or FOREX brokerage companies. FOREX is the world wide market, so when you are sleeping in the North America some dealers in Europe are trading currencies with their Japanese counterparties. Therefore the FOREX market is active 24 hours a day and dealers at major institutions are working in three shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.
Price movements on the FOREX market are very smooth and without gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is about $1.2 trillion, so investor can enter and exit position without problems. The fact is that the FOREX market never stops, even on the day of September-11, 2001 you could obtain two-side quotes on currencies.
The currency foreign exchange (http://www.123forex.blogspot.com) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or "FOREX" or "FX" market for short. It is the biggest and most liquid market in the world, and it is traded mainly through the 24 hour-a-day inter-bank currency market - the primary market for currencies. The forex market is a cash (or "spot") inter-bank market. By comparison, the currency futures market is only one per cent as big.
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange. Forex literally follows the sun around the world. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
In the past, the forex inter-bank market was not available to small speculators due to the large minimum transaction sizes and often-stringent financial requirements. Banks, major currency dealers and the occasional huge speculator used to be the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.
Today, foreign exchange market maker brokers such as FX Solutions are able to break down the larger sized inter-bank units, and offer small traders the opportunity to buy or sell any number of these smaller units (lots).
These brokers give virtually any size trader, including individual speculators or smaller companies, the option to trade the same rates and price movements as the large players who once dominated the market. Market makers quote buying and selling rates for currencies, and they profit on the difference between their buying and selling rates
Why Trading FOREX?
The cash/spot FOREX markets possess certain unique attributes that offer unmatched potential for profitable trading in any market condition or any stage of the business cycle:
A 24-hour market: A trader may take advantage of all profitable market conditions at any time; no waiting for the 'opening bell'.
Highest liquidity: The FOREX market with an average trading volume of over $1.5 trillion per day is the most liquid market in the world. That means that a trader can enter or exit the market at will in almost any market condition minimal execution barriers or risk and no daily trading limit.
High leverage: A leverage ratio of up to 400 is typical compared to a leverage ratio of 2 (50% margin requirement) in equity markets. Of course, this makes trading in the cash/spot forex market a double-edged sword the high leverage makes the risk of the down side loss much greater in the same way that it makes the profit potential on the upside much more attractive.
Low transaction cost: The retail transaction cost (the bid/ask spread) is typically less than 0.1% (10 pips or points) under normal market conditions. At larger dealers, the spread could be less than 5 pips, and may widen considerably in fast moving markets.
Always a bull market: A trade in the FOREX market involves selling or buying one currency against another. Thus, a bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies and a trader profits by selling the currency against other currencies. In either case, there is always a bull market trading opportunity for a trader.
Inter-bank market: The backbone of the FOREX market consists of a global network of dealers (mainly major commercial banks) that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The FOREX market operates in a manner similar to the way the NASDAQ market in the United States operates, and thus it is also referred to as an 'over the counter' or OTC market.
No one can corner the market: The FOREX market is so vast and has so many participants that no single entity, even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks are becoming increasingly ineffectual and short-lived, and thus central banks are becoming less and less inclined to intervene to manipulate market prices.
Unregulated: The FOREX market is generally regarded as an unregulated market although the operations of major dealers, such as commercial banks in money centers, are regulated under the banking laws. The conduct and operation of retail FOREX brokerages are not regulated under any laws or regulations specific to the FOREX market, and in fact many of such establishments in the United States do not even report to the Internal Revenue Service (IRS). The currency futures and options that are traded on exchanges such as Chicago Mercantile Exchange (CME) are regulated in the way other exchange-traded derivatives are regulated.
Jhon Ericson
Forex (Foreign Exchange) simply means the buying of one currency and selling another at the same time. In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs Euro/Dollar, Dollar/Yen, etc. In excess of 85 percent of all daily transactions involve trading of the major currencies.
Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. The following notation is used for these currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. You may consider them as "blue chips" of the FOREX market. No dividends are paid on currencies. The investment profits come from well known "buy low - sell high".
If you think one currency will appreciate against another, you may exchange that second currency for the first one and stay in it. In case everything goes as planned, some time later you may make the opposite deal - exchange this first currency back for that other - and collect profits.
Transactions on the FOREX market are fulfilled by dealers at major banks or FOREX brokerage companies. FOREX is the world wide market, so when you are sleeping in the North America some dealers in Europe are trading currencies with their Japanese counterparties. Therefore the FOREX market is active 24 hours a day and dealers at major institutions are working in three shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.
Price movements on the FOREX market are very smooth and without gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is about $1.2 trillion, so investor can enter and exit position without problems. The fact is that the FOREX market never stops, even on the day of September-11, 2001 you could obtain two-side quotes on currencies.
The currency foreign exchange (http://www.123forex.blogspot.com) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or "FOREX" or "FX" market for short. It is the biggest and most liquid market in the world, and it is traded mainly through the 24 hour-a-day inter-bank currency market - the primary market for currencies. The forex market is a cash (or "spot") inter-bank market. By comparison, the currency futures market is only one per cent as big.
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange. Forex literally follows the sun around the world. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
In the past, the forex inter-bank market was not available to small speculators due to the large minimum transaction sizes and often-stringent financial requirements. Banks, major currency dealers and the occasional huge speculator used to be the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.
Today, foreign exchange market maker brokers such as FX Solutions are able to break down the larger sized inter-bank units, and offer small traders the opportunity to buy or sell any number of these smaller units (lots).
These brokers give virtually any size trader, including individual speculators or smaller companies, the option to trade the same rates and price movements as the large players who once dominated the market. Market makers quote buying and selling rates for currencies, and they profit on the difference between their buying and selling rates
Why Trading FOREX?
The cash/spot FOREX markets possess certain unique attributes that offer unmatched potential for profitable trading in any market condition or any stage of the business cycle:
A 24-hour market: A trader may take advantage of all profitable market conditions at any time; no waiting for the 'opening bell'.
Highest liquidity: The FOREX market with an average trading volume of over $1.5 trillion per day is the most liquid market in the world. That means that a trader can enter or exit the market at will in almost any market condition minimal execution barriers or risk and no daily trading limit.
High leverage: A leverage ratio of up to 400 is typical compared to a leverage ratio of 2 (50% margin requirement) in equity markets. Of course, this makes trading in the cash/spot forex market a double-edged sword the high leverage makes the risk of the down side loss much greater in the same way that it makes the profit potential on the upside much more attractive.
Low transaction cost: The retail transaction cost (the bid/ask spread) is typically less than 0.1% (10 pips or points) under normal market conditions. At larger dealers, the spread could be less than 5 pips, and may widen considerably in fast moving markets.
Always a bull market: A trade in the FOREX market involves selling or buying one currency against another. Thus, a bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies. If the outlook is positive, we have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies and a trader profits by selling the currency against other currencies. In either case, there is always a bull market trading opportunity for a trader.
Inter-bank market: The backbone of the FOREX market consists of a global network of dealers (mainly major commercial banks) that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges to serve as a central location to facilitate transactions the way the New York Stock Exchange serves the equity markets. The FOREX market operates in a manner similar to the way the NASDAQ market in the United States operates, and thus it is also referred to as an 'over the counter' or OTC market.
No one can corner the market: The FOREX market is so vast and has so many participants that no single entity, even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks are becoming increasingly ineffectual and short-lived, and thus central banks are becoming less and less inclined to intervene to manipulate market prices.
Unregulated: The FOREX market is generally regarded as an unregulated market although the operations of major dealers, such as commercial banks in money centers, are regulated under the banking laws. The conduct and operation of retail FOREX brokerages are not regulated under any laws or regulations specific to the FOREX market, and in fact many of such establishments in the United States do not even report to the Internal Revenue Service (IRS). The currency futures and options that are traded on exchanges such as Chicago Mercantile Exchange (CME) are regulated in the way other exchange-traded derivatives are regulated.
Jhon Ericson
Forex Trading - Mindset of The Millionaire Forex Pro's
Forex trading can be learned by anyone yet few succeed so what separates winners from losers? While a method is important, so to is the right mindset and here we will look at 3 character traits all the top traders have.
1. Success Comes From Within
Top traders do their homework and devise a trading logic and forex trading strategy they know backwards in terms of how and why it works and why it will be successful.
Contrast this with the amount of losing traders who buy an e-book from a vendor and then blame them, when the few hundred bucks they spent, didn’t make them rich! – what did they expect?
Other traders blame anyone they can - from the market, to their broker and squeal like babies when they lose – They are forgetting that they are responsible for their destiny, no one else.
Winners accept this and rely on themselves and so must you.
2. Confidence
If you have done your homework you will have confidence in your forex trading strategy and confidence is essential, as you have to follow your method through losing periods and know in your own mind, that you can emerge from periods of losses and emerge a winner longer term.
All successful forex pro’s have this trait and you need it to, as it leads onto a trait that is absolutely vital to forex trading success:
3. Discipline
This trait is needed to execute a method rigidly and not deviate from it.
Keep in mind if you can’t follow your method with discipline, you don’t have one in the first place.
If you think it is easy, think again – it’s tough even for seasoned pros.
Many traders have great methods but fail due to lack of discipline.
Confronting the Beast
Trading forex is hard as only you can be wrong (it’s always right) it will make you look stupid (it does this to all traders) and it moves where and when it wants and there is nothing you can do about it!
However you can win you just need to obey its rules.
You are like a ships captain on the ocean. You need to obey its law and understand everything about it to travel on it safely.
For this you need to have knowledge, confidence in your ability and the discipline, to plot the right course – If you can do this - just like the ocean has unlimited riches so does the forex market.
If you respect it and confront it with the right mindset you can win if you don’t you will drown – it’s as simple as that.
By Kelly Price
1. Success Comes From Within
Top traders do their homework and devise a trading logic and forex trading strategy they know backwards in terms of how and why it works and why it will be successful.
Contrast this with the amount of losing traders who buy an e-book from a vendor and then blame them, when the few hundred bucks they spent, didn’t make them rich! – what did they expect?
Other traders blame anyone they can - from the market, to their broker and squeal like babies when they lose – They are forgetting that they are responsible for their destiny, no one else.
Winners accept this and rely on themselves and so must you.
2. Confidence
If you have done your homework you will have confidence in your forex trading strategy and confidence is essential, as you have to follow your method through losing periods and know in your own mind, that you can emerge from periods of losses and emerge a winner longer term.
All successful forex pro’s have this trait and you need it to, as it leads onto a trait that is absolutely vital to forex trading success:
3. Discipline
This trait is needed to execute a method rigidly and not deviate from it.
Keep in mind if you can’t follow your method with discipline, you don’t have one in the first place.
If you think it is easy, think again – it’s tough even for seasoned pros.
Many traders have great methods but fail due to lack of discipline.
Confronting the Beast
Trading forex is hard as only you can be wrong (it’s always right) it will make you look stupid (it does this to all traders) and it moves where and when it wants and there is nothing you can do about it!
However you can win you just need to obey its rules.
You are like a ships captain on the ocean. You need to obey its law and understand everything about it to travel on it safely.
For this you need to have knowledge, confidence in your ability and the discipline, to plot the right course – If you can do this - just like the ocean has unlimited riches so does the forex market.
If you respect it and confront it with the right mindset you can win if you don’t you will drown – it’s as simple as that.
By Kelly Price
Forex Education – 4 Accepted Investment Wisdoms That Will Lose You Money
If you think about it around 95% of traders lose all their equity and lose money and only around 5% make big gains.
The losing majority follow 4 accepted wisdoms in their forex education and if you fall into the same trap you will lose to, so let’s look at them.
1. An expert knows best
This is partly true, but the experts in forex trading who make the big gains certainly won’t tell you how they do it – there to busy making money, to bother selling their secrets.
The ”experts” that sell currency e-books for $100 or so, are certainly experts, but at marketing.
Doesn’t’ that copy look appealing?
Follow them and make money automatically, every month and all backed up by a simulated hypothetical track record done knowing the closing prices.
Reality is:
Most of them are junk and you can get better information for free on the net.
To make money you need to do it yourself and forget about anyone else helping you learn forex trading information that will make you a fortune.
2. You can predict market behavior
Another accepted wisdom that is dead wrong is – you can predict the market with scientific theory as prices move to a natural law.
Let’s hear it for investment theories such as Elliot Wave.
Elliot wave says markets move to scientific patterns but of course can’t tell you what they are!
If any theory could of course predict market behavior in advance there would be no market as we would all know the price.
3. More is better
Lots of clever people trade currencies and they have complicated forex trading strategies, using neural networks, artificial intelligence and chaos theory, bad news is they don’t work.
There is no correlation between how hard you work at forex trading and how much money you make, just as there is no correlation between how complicated a system is and how much money it makes.
Currency trading success is all about learning the right information ( and this means working smart rather than hard) and simple systems beat complicated systems, as they are more robust.
So all those people who tell you that you have to work hard and be clever are wrong – you need to work smart and keep it simple.
4. Above all else protect a profit
Forex trading is risky and if you don’t take meaningful risks you wont make a lot of money.
Most traders however try and protect profits and limit losses so much they are guaranteed to lose.
Here is what they do:
1. Diversify – Another word for this is dilute profits
2. Day trade – the best way to lose money – it doesn’t work
3. Trail stops quickly to lock in profit – translated as get minor profit when you could have made a large one.
4. Risk 2% per trade – Well if you don’t risk a lot you won’t make much either!
All the above are accepted wisdoms of online currency trading and all will prevent you from making forex profits.
If you understand the above and try a different type of forex education - that teaches you how to learn forex trading a different way, which is not accepted by the majority and you could join the elite 5% who make big gains trading Forex markets.
By Kelly Price
The losing majority follow 4 accepted wisdoms in their forex education and if you fall into the same trap you will lose to, so let’s look at them.
1. An expert knows best
This is partly true, but the experts in forex trading who make the big gains certainly won’t tell you how they do it – there to busy making money, to bother selling their secrets.
The ”experts” that sell currency e-books for $100 or so, are certainly experts, but at marketing.
Doesn’t’ that copy look appealing?
Follow them and make money automatically, every month and all backed up by a simulated hypothetical track record done knowing the closing prices.
Reality is:
Most of them are junk and you can get better information for free on the net.
To make money you need to do it yourself and forget about anyone else helping you learn forex trading information that will make you a fortune.
2. You can predict market behavior
Another accepted wisdom that is dead wrong is – you can predict the market with scientific theory as prices move to a natural law.
Let’s hear it for investment theories such as Elliot Wave.
Elliot wave says markets move to scientific patterns but of course can’t tell you what they are!
If any theory could of course predict market behavior in advance there would be no market as we would all know the price.
3. More is better
Lots of clever people trade currencies and they have complicated forex trading strategies, using neural networks, artificial intelligence and chaos theory, bad news is they don’t work.
There is no correlation between how hard you work at forex trading and how much money you make, just as there is no correlation between how complicated a system is and how much money it makes.
Currency trading success is all about learning the right information ( and this means working smart rather than hard) and simple systems beat complicated systems, as they are more robust.
So all those people who tell you that you have to work hard and be clever are wrong – you need to work smart and keep it simple.
4. Above all else protect a profit
Forex trading is risky and if you don’t take meaningful risks you wont make a lot of money.
Most traders however try and protect profits and limit losses so much they are guaranteed to lose.
Here is what they do:
1. Diversify – Another word for this is dilute profits
2. Day trade – the best way to lose money – it doesn’t work
3. Trail stops quickly to lock in profit – translated as get minor profit when you could have made a large one.
4. Risk 2% per trade – Well if you don’t risk a lot you won’t make much either!
All the above are accepted wisdoms of online currency trading and all will prevent you from making forex profits.
If you understand the above and try a different type of forex education - that teaches you how to learn forex trading a different way, which is not accepted by the majority and you could join the elite 5% who make big gains trading Forex markets.
By Kelly Price
FOREX Investment Strategies That Work
Are you an investor looking to make some money in a new way? Have you previously been investing in the stock market and are you now thinking of switching to the foreign exchange? There is a big difference between investing in the stock market and investing in foreign exchange. The strategies used are much different and many people are afraid of FOREX. They think it is too risky or too complicated.
But what if there was a method that took a lot of the risk out and made it easier, even if you have never traded before to succeed in the foreign exchange? Wouldn't you want to know these strategies?
We have a FOREX investment strategy that can do just that! The first thing you need to know is that they don’t try to teach you how to trade in foreign currency. Instead you receive proprietary software that is used to teach you how to set up a trading account at the brokerage that you choose. This account then buys and sells all your investments for you.
FOREX is perfect for the careful investor that is interested in earning as much yield as possible along with preserving principle and earnings. The investment strategies used by FOREX include achieving this balance. They do it by using two different currency pairs that move in complete opposite directions for trading. This is a great strategy because when one pair is going down and experiencing loses the other pair is normally going up because they are opposites.
There is data that can be supplied that supports this strategy. For instance, if you were to view a chart of the past year, you would see that when comparing the two currency pairs it is almost like looking in a mirror. This proves that the strategy used works. This is why the FOREX investments strategies work so well; when you trade two pairs that move in opposite directions you dramatically reduce your risks. Any loses that you receive from one is partially offset by what you are gaining from the other pair. There is no type of stock market option that can offer you this type of strategy.
The FOREX investment strategies really do work and they are so simple to learn because you are not trying to learn everything there is about investing. Therefore, it only takes an hour or two to learn how to set up the accounts and then a few minutes throughout the week to monitor the account. With this amount of little effort it is possible for you receive more of an increase in a month than many mutual funds and banks do in a whole year.
When I first started researching the Forex I learned that it would take months to learn and studying charts and graphs and a lot of money to get started. Something that a full time job would not allow me to do.
Then a good friend of mine introduced me to a forex investment strategy. He told me how easy it was to learn and how it required no formal training and that I could be up and running in less than 3 hours. He also told me that he was earning monthly what banks and mutual funds were earning yearly.
You can only imagine my skepticism. So I started doing some research on the company and the proprietary software they were using. I took a leap of faith and opened up a demo account, and to my surprise everything that they claimed was true. I can honestly say that I'm earning more a month than my mutual funds and my bank are earning a year. This company does truly care about people and that is rare in this industry. I opened up my Live account on April 10, 2007 and I'm doing very well.
By Mark Molina
But what if there was a method that took a lot of the risk out and made it easier, even if you have never traded before to succeed in the foreign exchange? Wouldn't you want to know these strategies?
We have a FOREX investment strategy that can do just that! The first thing you need to know is that they don’t try to teach you how to trade in foreign currency. Instead you receive proprietary software that is used to teach you how to set up a trading account at the brokerage that you choose. This account then buys and sells all your investments for you.
FOREX is perfect for the careful investor that is interested in earning as much yield as possible along with preserving principle and earnings. The investment strategies used by FOREX include achieving this balance. They do it by using two different currency pairs that move in complete opposite directions for trading. This is a great strategy because when one pair is going down and experiencing loses the other pair is normally going up because they are opposites.
There is data that can be supplied that supports this strategy. For instance, if you were to view a chart of the past year, you would see that when comparing the two currency pairs it is almost like looking in a mirror. This proves that the strategy used works. This is why the FOREX investments strategies work so well; when you trade two pairs that move in opposite directions you dramatically reduce your risks. Any loses that you receive from one is partially offset by what you are gaining from the other pair. There is no type of stock market option that can offer you this type of strategy.
The FOREX investment strategies really do work and they are so simple to learn because you are not trying to learn everything there is about investing. Therefore, it only takes an hour or two to learn how to set up the accounts and then a few minutes throughout the week to monitor the account. With this amount of little effort it is possible for you receive more of an increase in a month than many mutual funds and banks do in a whole year.
When I first started researching the Forex I learned that it would take months to learn and studying charts and graphs and a lot of money to get started. Something that a full time job would not allow me to do.
Then a good friend of mine introduced me to a forex investment strategy. He told me how easy it was to learn and how it required no formal training and that I could be up and running in less than 3 hours. He also told me that he was earning monthly what banks and mutual funds were earning yearly.
You can only imagine my skepticism. So I started doing some research on the company and the proprietary software they were using. I took a leap of faith and opened up a demo account, and to my surprise everything that they claimed was true. I can honestly say that I'm earning more a month than my mutual funds and my bank are earning a year. This company does truly care about people and that is rare in this industry. I opened up my Live account on April 10, 2007 and I'm doing very well.
By Mark Molina
Forex Investment - Making The Decision Is The Hardest Part
When investing in the Forex market, making a Forex investment can be the best decision and can definitely earn you the best profits. Because there is very little in the way of barring entrance to the Forex market making a Forex investment is an excellent opportunity. Especially for those individuals who have low investments to start with, this can allow them to gain a large return regardless. Of course it also depends on how well they understand the Forex market in order for them to truly benefit from a Forex investment.
In the past Forex investment was limited to only banks and financial institutions due to large transactions and strict financial requirements. Of course now with online trading widely available making a Forex investment is more readily accessible to individuals as well. This means just about anyone can invest in Forex and actually make money from it.
When making a Forex investment you are allowed to do so either directly or through a Forex broker. Banks and financial institutions now are forced to acknowledge that small and individual investors are involved in the Forex market and therefore have been providing online trading packages to them. A lot of these have high leverage available to clients, which when it involves a Forex investment can lend itself to an environment where high gains are made with comparatively small amounts.
This means that someone who chooses to open a mini account in the Forex market has a great leverage ratio of one hundred to one. This means that a one thousand dollar investment can buy or sell a 'lot' of one hundred thousand dollars in foreign currencies. Most mini accounts can be opened with two hundred and fifty dollars as a minimum Forex investment.
Because of this a huge increase has occurred in the amount of trades currently in the Forex market. This also causes a high liquidity with a daily turnover that has been known to reach two trillion dollars. Yet this has also mad Forex trading a bit more transparent. Making a Forex investment can be done in multiple currencies in multiple markets in real time without any barriers or physical boundaries.
What is very important in making a Forex investment is realizing that the there is an instant nature to the trade and huge amounts being traded every single day. This means that each investor must be very familiar with the way the Forex market works. They also need to have a clear understanding of trading strategy in order to gain the best profits. Those who don't understand this can feel that the Forex market is too risky. So when making a Forex investment, make sure you have someone who thoroughly understands the inner workings and who can handle the risky nature of the Forex market, and you will have a better chance of gaining the best profits.
By Mike Singh
In the past Forex investment was limited to only banks and financial institutions due to large transactions and strict financial requirements. Of course now with online trading widely available making a Forex investment is more readily accessible to individuals as well. This means just about anyone can invest in Forex and actually make money from it.
When making a Forex investment you are allowed to do so either directly or through a Forex broker. Banks and financial institutions now are forced to acknowledge that small and individual investors are involved in the Forex market and therefore have been providing online trading packages to them. A lot of these have high leverage available to clients, which when it involves a Forex investment can lend itself to an environment where high gains are made with comparatively small amounts.
This means that someone who chooses to open a mini account in the Forex market has a great leverage ratio of one hundred to one. This means that a one thousand dollar investment can buy or sell a 'lot' of one hundred thousand dollars in foreign currencies. Most mini accounts can be opened with two hundred and fifty dollars as a minimum Forex investment.
Because of this a huge increase has occurred in the amount of trades currently in the Forex market. This also causes a high liquidity with a daily turnover that has been known to reach two trillion dollars. Yet this has also mad Forex trading a bit more transparent. Making a Forex investment can be done in multiple currencies in multiple markets in real time without any barriers or physical boundaries.
What is very important in making a Forex investment is realizing that the there is an instant nature to the trade and huge amounts being traded every single day. This means that each investor must be very familiar with the way the Forex market works. They also need to have a clear understanding of trading strategy in order to gain the best profits. Those who don't understand this can feel that the Forex market is too risky. So when making a Forex investment, make sure you have someone who thoroughly understands the inner workings and who can handle the risky nature of the Forex market, and you will have a better chance of gaining the best profits.
By Mike Singh
Thursday, May 3, 2007
Stock Trading Tips You Can Use Today
In this issue: • Trading to make money vs. being right
• Stop loss orders: more than just taking a loss
• How to properly use moving averages
• How to choose which stocks to trade
Trading to make money vs. trading to be right.
One of the most common problems new traders’ face is truly understanding the fact that losses are a part of the business. Trades that don’t make money are as inevitable as needing air to breath. Here is the key that new traders fail to grasp:
A losing trade isn’t necessarily a bad trade. Trades entered based on a well thought out and written trading plan are good trades, no matter the outcome. Often we ask traders on our trading floor “Would you make the same trade again?” after they exit a trade that was not profitable. If the answer comes back yes we know the trader is on the right track.
A trader who can answer yes to this question is trading to make money. They understand this is just one trade of maybe hundreds they will make this month. A trader who has attained this important mindset will move effortlessly from one trade to the next. Ask yourself if that is how you react from trade to trade.
The trader who gets frustrated and yells at the screen or pounds a keyboard is trading with his ego. He is trading to prove his brilliant analysis correct. The easiest way to monitor if you are trading to be right: pay attention to how flawlessly you exit a losing trade. If you hesitate at all, you have some mental work to do.
Another important question to ask yourself while in a trade: “If I did not have this position, would I want it?” If the first answer comes back NO, and you don’t get out of the trade, you are trading from your ego.
A trader’s maxim: Assess probabilities, put the trade on, let the trade unfold, do what you planned to do.
Stop loss orders: more than just taking a loss
If I had to put a percentage on the time spent on entry signals vs. time spent on exit techniques, I would say its 90-10 entry signals. Learning how to manage a position properly will ultimately be the reason you take home a check every month. Your ultimate goal is to “make what you should” on your trades. Obviously its not possible to get out at the extreme of a move on a consistent basis, but there are some techniques you should use to maximize profits and minimize losses.
Before we discuss specific stop loss techniques we should cover the proper trader psychology for this topic. • The stop loss must be a dollar amount you accept before you place the trade. This small distinction will be a huge shift in your thinking about a trade. Once you have “accepted” the risk, this will ensure flawless execution. If a trade moves against you, it will be easy to exit because you have already accepted the dollar amount risk and were comfortable with taking the loss on that amount.
Initial Stop Loss: Risk point as defined by your original entry.
Break Even Stop Loss: When a position moves in your favor, you move the stop loss point from the original spot to your break even area.
Trailing Stop Loss (profit taking): Used to protect significant profits on a winning position. Objective is to lock in some profits.
The buy stop limit and sell stop limit, important orders to learn.
• Typically used in place of market orders.
• Intention is to take advantage of liquidity and get price improvement.
• Helps get filled in “fast” market conditions, but cannot get a worse fill (as with a market order) than the limit price entered.
• A buy stop limit is an order to buy placed above the current best offer to sell.
• A sell stop limit is an order to sell below the current bid to buy.
How to properly use moving averages
Let’s keep things simple, we are here to make money. It is very easy to get sucked into the myriad of fancy indicators and over use them. The original use of moving averages by floor traders was not very complex.
There are 20 trading days in an average month. “Is today’s price action above or below the average?” Based on the answer to the question, floor traders would have a bias to the long or short side. It was very simple how it was used; it was not a magic tool.
The last thing you want to be doing when you are trading is thinking too hard, you want to be listening to what the market is telling you. Proper use of moving averages in today’s technologically advanced market is to us them as a filter.
Here is the best and most profitable way of using them:
1. As a trend filter. Use it a method quickly identifying a bias; should I be long or short. Use it to filter out the noise so that you are not placing too much emphasis on every blip and print. We recommend using a 20 period simple moving average
2. Use it to determine strength of trend. If the 20sma is sideways, there is no bias, don’t trade you are guessing. If it has a nice upward or downwards slope, you should be trading aggressively in that direction.
3. Use a second moving average to determine momentum. We teach to use a 5sma to determine the momentum on all time frames we monitor. The method a great tool to help hold good trades. If momentum remains above the trend, stick with the trade until you see exhaustion in the move or when the momentum crosses the trend. There are more techniques we teach in the Equity Trader 101 course but you get the idea. Use moving averages as a filter, not as magic points.
How to choose which stocks to trade
The objective in short term trading is to make a consistent living. Far too many traders decide to trade stocks that are too illiquid or too volatile to manage risk. An illiquid stock is one that does not have sufficient bids and offers to get out of a trade easily where you want to. If you were to place a sell order and it would knock the stock down .10, it is not liquid. The trading of stocks that are volatile sounds exciting, and would appear to provide the most profit potential. On the surface this sounds great, but remember why you decided to become a professional trader, to pay your bills every month, trading maximum volatility everyday is a quick way to the poor house.
Money making stocks should have two characteristics if they are to be a part of your daily business: liquid enough to manage risk and active enough to provide money making opportunities.
We recommend you pick one of two groups of stocks:
1. A basket of non correlated stock that you trade every day
2. A sector or industry that you learn like the back of our hand. You can find a breakdown of sectors and industries here to get ideas.
By Pete Renzulli
• Stop loss orders: more than just taking a loss
• How to properly use moving averages
• How to choose which stocks to trade
Trading to make money vs. trading to be right.
One of the most common problems new traders’ face is truly understanding the fact that losses are a part of the business. Trades that don’t make money are as inevitable as needing air to breath. Here is the key that new traders fail to grasp:
A losing trade isn’t necessarily a bad trade. Trades entered based on a well thought out and written trading plan are good trades, no matter the outcome. Often we ask traders on our trading floor “Would you make the same trade again?” after they exit a trade that was not profitable. If the answer comes back yes we know the trader is on the right track.
A trader who can answer yes to this question is trading to make money. They understand this is just one trade of maybe hundreds they will make this month. A trader who has attained this important mindset will move effortlessly from one trade to the next. Ask yourself if that is how you react from trade to trade.
The trader who gets frustrated and yells at the screen or pounds a keyboard is trading with his ego. He is trading to prove his brilliant analysis correct. The easiest way to monitor if you are trading to be right: pay attention to how flawlessly you exit a losing trade. If you hesitate at all, you have some mental work to do.
Another important question to ask yourself while in a trade: “If I did not have this position, would I want it?” If the first answer comes back NO, and you don’t get out of the trade, you are trading from your ego.
A trader’s maxim: Assess probabilities, put the trade on, let the trade unfold, do what you planned to do.
Stop loss orders: more than just taking a loss
If I had to put a percentage on the time spent on entry signals vs. time spent on exit techniques, I would say its 90-10 entry signals. Learning how to manage a position properly will ultimately be the reason you take home a check every month. Your ultimate goal is to “make what you should” on your trades. Obviously its not possible to get out at the extreme of a move on a consistent basis, but there are some techniques you should use to maximize profits and minimize losses.
Before we discuss specific stop loss techniques we should cover the proper trader psychology for this topic. • The stop loss must be a dollar amount you accept before you place the trade. This small distinction will be a huge shift in your thinking about a trade. Once you have “accepted” the risk, this will ensure flawless execution. If a trade moves against you, it will be easy to exit because you have already accepted the dollar amount risk and were comfortable with taking the loss on that amount.
Initial Stop Loss: Risk point as defined by your original entry.
Break Even Stop Loss: When a position moves in your favor, you move the stop loss point from the original spot to your break even area.
Trailing Stop Loss (profit taking): Used to protect significant profits on a winning position. Objective is to lock in some profits.
The buy stop limit and sell stop limit, important orders to learn.
• Typically used in place of market orders.
• Intention is to take advantage of liquidity and get price improvement.
• Helps get filled in “fast” market conditions, but cannot get a worse fill (as with a market order) than the limit price entered.
• A buy stop limit is an order to buy placed above the current best offer to sell.
• A sell stop limit is an order to sell below the current bid to buy.
How to properly use moving averages
Let’s keep things simple, we are here to make money. It is very easy to get sucked into the myriad of fancy indicators and over use them. The original use of moving averages by floor traders was not very complex.
There are 20 trading days in an average month. “Is today’s price action above or below the average?” Based on the answer to the question, floor traders would have a bias to the long or short side. It was very simple how it was used; it was not a magic tool.
The last thing you want to be doing when you are trading is thinking too hard, you want to be listening to what the market is telling you. Proper use of moving averages in today’s technologically advanced market is to us them as a filter.
Here is the best and most profitable way of using them:
1. As a trend filter. Use it a method quickly identifying a bias; should I be long or short. Use it to filter out the noise so that you are not placing too much emphasis on every blip and print. We recommend using a 20 period simple moving average
2. Use it to determine strength of trend. If the 20sma is sideways, there is no bias, don’t trade you are guessing. If it has a nice upward or downwards slope, you should be trading aggressively in that direction.
3. Use a second moving average to determine momentum. We teach to use a 5sma to determine the momentum on all time frames we monitor. The method a great tool to help hold good trades. If momentum remains above the trend, stick with the trade until you see exhaustion in the move or when the momentum crosses the trend. There are more techniques we teach in the Equity Trader 101 course but you get the idea. Use moving averages as a filter, not as magic points.
How to choose which stocks to trade
The objective in short term trading is to make a consistent living. Far too many traders decide to trade stocks that are too illiquid or too volatile to manage risk. An illiquid stock is one that does not have sufficient bids and offers to get out of a trade easily where you want to. If you were to place a sell order and it would knock the stock down .10, it is not liquid. The trading of stocks that are volatile sounds exciting, and would appear to provide the most profit potential. On the surface this sounds great, but remember why you decided to become a professional trader, to pay your bills every month, trading maximum volatility everyday is a quick way to the poor house.
Money making stocks should have two characteristics if they are to be a part of your daily business: liquid enough to manage risk and active enough to provide money making opportunities.
We recommend you pick one of two groups of stocks:
1. A basket of non correlated stock that you trade every day
2. A sector or industry that you learn like the back of our hand. You can find a breakdown of sectors and industries here to get ideas.
By Pete Renzulli
The "Sail-Boat" Trading Strategy
There are two traps that I have fallen into in the past and refuse to do it again. The first is becoming seduced by a statement such as the following: if you had invested $10,000 in XYZ Company X years ago it would be worth $500,000 today. The second is XYZ Company dominates its industry. There is no reason why it will not continue to dominate, so I am going to buy it and hold it for the long run. Then in X years I can sell it and live happily ever after. I call these traps, because they entice one to adopt a buy and hold or sail boat (if it hits I will be able to sail off into the sunset) mentality. This mentality has cost me more money than I care to admit.
Both scenarios seem logical, but logic and Wall Street don’t always go hand in hand. In the late 90s I had stocks that increased 10, 15, and as much as 20 times. Go back and look at a chart of CMGI (I started purchasing it in 1998). In 2000, I was hoping for a 20% return on my account - this should have been a piece of cake based on the previous couple of years. The plan was to then sell in January 2001. That way I wouldn’t have to worry about taxes until 2002. Well, this wacked-out strategy forced me to work harder on my 9 to 5 as the market imploded in 2000.
The bottom line is that market could care less about my sail-boat strategy. It is going to do what it is going to do and we must react. Whenever, I enter a trade now I have a price in mind where if it is breached I will close the trade. No more of this pie-in-the-sky stuff for me.
About the Author
Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence as a full-time trader on his on account. He has also established a financial education company, The Time & Money Group, to encourage others to pursue financial freedom and is publisher of the company's blog "Breaking the Shackles of the 9 to 5." His mantra is "Why trade time for money ... when you can have both."
By Michael Dawson
Both scenarios seem logical, but logic and Wall Street don’t always go hand in hand. In the late 90s I had stocks that increased 10, 15, and as much as 20 times. Go back and look at a chart of CMGI (I started purchasing it in 1998). In 2000, I was hoping for a 20% return on my account - this should have been a piece of cake based on the previous couple of years. The plan was to then sell in January 2001. That way I wouldn’t have to worry about taxes until 2002. Well, this wacked-out strategy forced me to work harder on my 9 to 5 as the market imploded in 2000.
The bottom line is that market could care less about my sail-boat strategy. It is going to do what it is going to do and we must react. Whenever, I enter a trade now I have a price in mind where if it is breached I will close the trade. No more of this pie-in-the-sky stuff for me.
About the Author
Michael Dawson recently said goodbye to a 20 year career in Engineering, Marketing and Sales to focus on living his dream of financial independence as a full-time trader on his on account. He has also established a financial education company, The Time & Money Group, to encourage others to pursue financial freedom and is publisher of the company's blog "Breaking the Shackles of the 9 to 5." His mantra is "Why trade time for money ... when you can have both."
By Michael Dawson
Global Forex Trading - Lesser Known Facts That Can Lead To Your Personal Wealth
Global forex trading is a lesser known facet of money making or wealth creation among the general population. You will no doubt hear about stock markets and share prices daily and also about oil prices and other commodities, but when it comes to forex trading, there is much less publicity on this compared to stock market trading and futures. However, it is a fact that the global forex trading market actually dwarfs the stock markets and even the commodities market.
At any one time, more than $2 trillion of currencies are transacted every day on the global forex market.
What is helping forex market to reach that distinction of being the largest tradeable market is that forex is tradeable at any time of the day for every day- 24/7 ! Compared to stocks and shares or commodity markets that have specific opening and ending trading times. By necessity, forex markets are available for trading anytime since price of currencies changes and fluctuates everytime. This makes it possible for the trader who has the acumen to profit from these price fluctuations.
Another characteristic of forex trading that can catapult you into wealth is the application of the system of leverage. In wealth creation, leverage accelerates your ability to create wealth from a small amount. Many people are attracted to trading stocks and shares on margin because they can get leverage on a margin account. For example, by margining your stocks and shares, you can get a leverage of 50% to 75% of your stocks so that if you have $100,000 worth of stocks and shares, you may be able to get additional margin to trade worth $50,000 to $75,000. But compared to forex margin accounts where you can get leverage of 20 times to 50 times, which is common and even up to 100% margin in some special cases.
Leverage is a main key to forex trading wealth, and is a powerful tool that can cuts both ways. You will need a good education in forex trading to gain the edge and be profitable consistently. Otherwise this immense leverage can work against you and gets you wiped off and even move into bankruptcy even faster than it can help you become a millionaire.
It is this leverage that draws people to forex trading, giving it a tint of speculative activity. While one cannot deny that there are many speculators in the forex market, there are many traders who are able to extract continuous and consistent profits trading the forex market for a living. This group of people constitute 10% of the forex traders, and the key element with them is their ability to take advantage of the price movements either as day traders, swing traders or position traders.
By Peter Lim
At any one time, more than $2 trillion of currencies are transacted every day on the global forex market.
What is helping forex market to reach that distinction of being the largest tradeable market is that forex is tradeable at any time of the day for every day- 24/7 ! Compared to stocks and shares or commodity markets that have specific opening and ending trading times. By necessity, forex markets are available for trading anytime since price of currencies changes and fluctuates everytime. This makes it possible for the trader who has the acumen to profit from these price fluctuations.
Another characteristic of forex trading that can catapult you into wealth is the application of the system of leverage. In wealth creation, leverage accelerates your ability to create wealth from a small amount. Many people are attracted to trading stocks and shares on margin because they can get leverage on a margin account. For example, by margining your stocks and shares, you can get a leverage of 50% to 75% of your stocks so that if you have $100,000 worth of stocks and shares, you may be able to get additional margin to trade worth $50,000 to $75,000. But compared to forex margin accounts where you can get leverage of 20 times to 50 times, which is common and even up to 100% margin in some special cases.
Leverage is a main key to forex trading wealth, and is a powerful tool that can cuts both ways. You will need a good education in forex trading to gain the edge and be profitable consistently. Otherwise this immense leverage can work against you and gets you wiped off and even move into bankruptcy even faster than it can help you become a millionaire.
It is this leverage that draws people to forex trading, giving it a tint of speculative activity. While one cannot deny that there are many speculators in the forex market, there are many traders who are able to extract continuous and consistent profits trading the forex market for a living. This group of people constitute 10% of the forex traders, and the key element with them is their ability to take advantage of the price movements either as day traders, swing traders or position traders.
By Peter Lim
If You are Serious About Building Wealth, Follow the Behavior of the Ultra-Rich, Not the Rich
The Myths of the Wealthy Spread by the Mass Media
Recently, there was an article on CNNMoney that spoke about the “secrets” of the elite rich in the United States. In turn, several articles were written about this article, including one that stated that the richest of Americans “built their wealth with diversification, wealth preservation and strategic growth.” That is a ridiculous statement in itself because two of those strategies, diversification and preservation don’t help build wealth. Perhaps the richest of Americans use these two strategies to maintain an even keel AFTER they have accumulated great wealth, but certainly they didn’t use them during the accumulation phase. According to this article, a survey of Northern Trust uncovered that the “richest Americans do not heavily rely on high-risk investment vehicles like hedge funds to make money, but are moderate risk takers who put more than half of their asset allocation into U.S. stocks and cash.”
Again, just as former hedge fund manager and multi-millionaire Jim Cramer said that he used certain financial journalists, including ones employed by the Wall Street Journal, as pawns to spread misinformation far and wide to benefit himself, again this is an example of investment institutions using the media as pawns to spread their myths to keep the masses of retail investors ignorant. The CNNMoney article made it appear that the richest of Americans built their wealth by being conservative and slowly growing their money over time. That’s an oxymoron right there. To state that the rich became rich by slowly growing their money over time. Well, if they are slowly growing their money and becoming even richer, then this implies that they were rich to begin with. So how did they accumulate wealth? Surely not by “slowly growing” their money.
Sure, some of the “richest Americans do not heavily rely on high-risk investments” because they ARE ALREADY EXTREMELY RICH. The majority of ultra-rich do NOT build their fortunes by speculating on high-risk investments as is commonly believed. Often they build fortunes utilizing volatile assets and investments but that does not mean they were engaging in risky behavior. Many times, investing in a hedge fund can be much riskier than investing in some of the assets that your investment firm will tell you is “risky”. But investment firms will gladly place a portion of your money in hedge funds because the fees they earn from hedge funds are so high even as they advise you not to put your money in a much less risky investment with much greater earning potential. And this is the secret that investment firms never tell you. Volatile assets that often can be used to build great wealth are NOT RISKY if they are purchased at entry points that are extremely favorable and provide a low-risk point of entry. 99% of investors don’t understand what high-risk investments truly are because they have been misinformed by their advisors and their firms for the past half of a century. Purchasing volatile assets at low risk-high reward entry points greatly mitigates and neutralizes the great majority of risk of volatile assets. If you don’t understand this concept then you need to.
Replace Investment Firm’s Dumb Asset Gathering Sales Strategies with Intelligent Asset Growing Strategies
Many millionaires that are wealthy but that could be extremely wealthy fail to build enormous wealth because investment and financial institutions mislead them about certain asset classes and describe them as complex and risky and are able to convince their clients of this belief because they never properly explain risk-reward scenarios to their clients. However, those investors that are extremely wealthy are the rare breed that understand this concept. If investors had a choice between allocating $1,000,000 in a historically volatile Investment A that has a 78% chance of returning a 250% gain versus an Investment B that has a 95% chance of earning 9%, most investors would choose Investment A. However, because Investment A may exhibit 50% more volatility than Investment B, the great majority of advisors would steer their client away from the former investment into the latter one. In fact, this is exactly what even “prestigious” firms that cater to ultra high net-worth clients do because they allow misinformed, uneducated investors dictate the rules of engagement to them, and they would much rather appease such powerful, important people with slow,minimal gains rather than empower and enlighten them and boost their returns like never before. They would choose to steer them away because they present the investment opportunities incorrectly, merely telling their client that while they could earn 350% from Investment A there was also a very realistic probability that they could lose $300,000, and that shooting for the slow but steady $90,000 a year is much better for them.
If you are thinking to yourself, “That makes absolutely no sense?” Why would firms not earn 20% a year for their clients if they could instead of 8% a year? The answer is because the overwhelming majority of investment firms, no matter how prestigious their brand, are merely highly glorified sales machines. They fail to convince clients to invest in phenomenal investment opportunities that sometimes arise like Investment A because in order for Investment A to be a moderate risk, very high reward investment, it must be entered at a low risk entry point so that the probability of being down $300,000 at any give time would be reduced from perhaps 50% to 20%. And that even if their timing is not optimal, then a firm must educate the client that as long as they don’t panic when they are down, the odds are still extremely high that they will earn a 250% or better gain. However, the greatest factor that determines why firms will not seek this strategy is time. Engaging in much better strategies such as these for their clients would take massive amounts of time in client education and enough time in research that the amount of assets gathered would take a serious hit.
So because it is not in a firm’s interest to engage in activities that maximize portfolio returns (unless it is their own institutional portfolio), instead, we have Chief Investment Officers at top investment firms making statements like, “"Generally they [the richest of Americans] want to see prudently managed growth without a lot of surprises, which is why we emphasize diversification." Again, this is a sales & marketing campaign statement, not an aboveboard statement about how to make money for clients. If clients are uncomfortable with strategies that would actually built great wealth for them instead of producing mediocre or subpar returns, their discomfort only originates from the fact that the largest investment firms have been deceiving their clients, just as Jim Cramer had deceived the thundering sheep herd for years, about the realities of building wealth. This discomfort originates solely from the fact that he or she has been kept in the dark for so long.
Despite What Investment Firms Tell You, Myopia and a Concentration in U.S. Stock Markets Will NOT Optimize Your Portfolio Returns
Thus, we have a misinformation-driven cauldron of bad investment decisions that exist today. In 2007, you’ll still find Chief Investment Officers of very well known firms making ridiculous statement that investors need to invest at least 50% of their stock portfolio in U.S. stocks if they wish to grow their portfolios exponentially. How are they going to grow their portfolios exponentially with more than half of their stocks in a stock market (the U.S.) that has NEVER been the best performing market in the past 25 years (even among developed stock markets)? How will they grow their portfolios exponentially by buying stocks in market that trades in what is quite possibly the worst currency on earth among developed markets (the U.S. dollar)? Yes I know that when the U.S. dollar shows a brief spike in strength as is likely to happen soon (I’m writing this article in April, 2007), that many people will question what I am saying, but this is only again because they are victims to the mass deception mind-games of the investment industry. I suppose if planning to earn better than subpar returns in your stock portfolio is engaging in risky behavior as Chief Investment Officers of various firms claim, then yes, I whole-heartedly endorse engaging in risky behavior.
And because so many people, yes even those considered quite wealthy, fall victim to the preaching of investment industry demagogues, there is a second mistake that many rich investors will soon make. Another survey of wealthy U.S. investors uncovered that a large percentage of investors with investment assets of over a million do not employ any type of investment advisor but plan to do so soon giving the increasingly gloomy nature of the U.S. stock markets. To that, this is what I have to say. Making money in difficult markets is ten times more difficult than making money in bull markets. If investors believe that it will be increasingly more difficult to make money in U.S. stock markets, but yet top investment firms in the U.S. continue to preach that more than half of your portfolio should be in U.S. stocks (mostly to cover their respective firm’s inadequate coverage of emerging markets), how is the hiring one of these men possibly going to improve these investors’ future performance outlook?
But there is an EXTREMELY important distinction to be made here. What I’ve written above applies to the behavior and mindset of some of the richest people in America, but not THE very richest people in America. The very richest people in America, those you might categorize as the world’s ultra-rich, possess a very different mindset and behavior set than those that are just rich. The ultra-rich have positioned their portfolios extremely differently from how the rich people discussed above have positioned their portfolios. The reason why articles regarding their behavior and investment decisions are virtually non-existent is because they don’t grant interviews and they don’t want people to know what they are doing. But I’ve investigated what they are doing, and trust me, it is nothing remotely similar to the behavior of wealthy investors described by Northern Trust and other investment firms.
If you would like to find out why the ultra-rich always manage their own money or are able to find the 1 in a million consultant truly capable of providing them the returns they desire, consult our resource of “101 Reasons Why Managing Your Own Money is the Only Way to Build Wealth.” Even if the ultra-wealthy have someone managing their money for them, the only way they were capable of finding this 1 in a million financial consultant was due to the fact that if they had to, they could manage their own money successfully as well. Only by first fully understanding the most successful investment strategies themselves were they able to identify an advisor capable of employing similar strategies. However, a great majority of ultra-wealthy continue to handle and make their own investment decisions. And that is precisely why they are among the elite.
This article may be freely reprinted on another website as long as it is not modified, changed, or altered in any way and as long as the below author byline is included along with the active hyperlink exactly as is.
J.S. Kim is the Managing Director of SmartKnowledgeU™. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. He is the inventor of the revolutionary MoneyPing™ investment strategies, a novel approach to learn how to build wealth, not just dreams.
By J.S. Kim
Recently, there was an article on CNNMoney that spoke about the “secrets” of the elite rich in the United States. In turn, several articles were written about this article, including one that stated that the richest of Americans “built their wealth with diversification, wealth preservation and strategic growth.” That is a ridiculous statement in itself because two of those strategies, diversification and preservation don’t help build wealth. Perhaps the richest of Americans use these two strategies to maintain an even keel AFTER they have accumulated great wealth, but certainly they didn’t use them during the accumulation phase. According to this article, a survey of Northern Trust uncovered that the “richest Americans do not heavily rely on high-risk investment vehicles like hedge funds to make money, but are moderate risk takers who put more than half of their asset allocation into U.S. stocks and cash.”
Again, just as former hedge fund manager and multi-millionaire Jim Cramer said that he used certain financial journalists, including ones employed by the Wall Street Journal, as pawns to spread misinformation far and wide to benefit himself, again this is an example of investment institutions using the media as pawns to spread their myths to keep the masses of retail investors ignorant. The CNNMoney article made it appear that the richest of Americans built their wealth by being conservative and slowly growing their money over time. That’s an oxymoron right there. To state that the rich became rich by slowly growing their money over time. Well, if they are slowly growing their money and becoming even richer, then this implies that they were rich to begin with. So how did they accumulate wealth? Surely not by “slowly growing” their money.
Sure, some of the “richest Americans do not heavily rely on high-risk investments” because they ARE ALREADY EXTREMELY RICH. The majority of ultra-rich do NOT build their fortunes by speculating on high-risk investments as is commonly believed. Often they build fortunes utilizing volatile assets and investments but that does not mean they were engaging in risky behavior. Many times, investing in a hedge fund can be much riskier than investing in some of the assets that your investment firm will tell you is “risky”. But investment firms will gladly place a portion of your money in hedge funds because the fees they earn from hedge funds are so high even as they advise you not to put your money in a much less risky investment with much greater earning potential. And this is the secret that investment firms never tell you. Volatile assets that often can be used to build great wealth are NOT RISKY if they are purchased at entry points that are extremely favorable and provide a low-risk point of entry. 99% of investors don’t understand what high-risk investments truly are because they have been misinformed by their advisors and their firms for the past half of a century. Purchasing volatile assets at low risk-high reward entry points greatly mitigates and neutralizes the great majority of risk of volatile assets. If you don’t understand this concept then you need to.
Replace Investment Firm’s Dumb Asset Gathering Sales Strategies with Intelligent Asset Growing Strategies
Many millionaires that are wealthy but that could be extremely wealthy fail to build enormous wealth because investment and financial institutions mislead them about certain asset classes and describe them as complex and risky and are able to convince their clients of this belief because they never properly explain risk-reward scenarios to their clients. However, those investors that are extremely wealthy are the rare breed that understand this concept. If investors had a choice between allocating $1,000,000 in a historically volatile Investment A that has a 78% chance of returning a 250% gain versus an Investment B that has a 95% chance of earning 9%, most investors would choose Investment A. However, because Investment A may exhibit 50% more volatility than Investment B, the great majority of advisors would steer their client away from the former investment into the latter one. In fact, this is exactly what even “prestigious” firms that cater to ultra high net-worth clients do because they allow misinformed, uneducated investors dictate the rules of engagement to them, and they would much rather appease such powerful, important people with slow,minimal gains rather than empower and enlighten them and boost their returns like never before. They would choose to steer them away because they present the investment opportunities incorrectly, merely telling their client that while they could earn 350% from Investment A there was also a very realistic probability that they could lose $300,000, and that shooting for the slow but steady $90,000 a year is much better for them.
If you are thinking to yourself, “That makes absolutely no sense?” Why would firms not earn 20% a year for their clients if they could instead of 8% a year? The answer is because the overwhelming majority of investment firms, no matter how prestigious their brand, are merely highly glorified sales machines. They fail to convince clients to invest in phenomenal investment opportunities that sometimes arise like Investment A because in order for Investment A to be a moderate risk, very high reward investment, it must be entered at a low risk entry point so that the probability of being down $300,000 at any give time would be reduced from perhaps 50% to 20%. And that even if their timing is not optimal, then a firm must educate the client that as long as they don’t panic when they are down, the odds are still extremely high that they will earn a 250% or better gain. However, the greatest factor that determines why firms will not seek this strategy is time. Engaging in much better strategies such as these for their clients would take massive amounts of time in client education and enough time in research that the amount of assets gathered would take a serious hit.
So because it is not in a firm’s interest to engage in activities that maximize portfolio returns (unless it is their own institutional portfolio), instead, we have Chief Investment Officers at top investment firms making statements like, “"Generally they [the richest of Americans] want to see prudently managed growth without a lot of surprises, which is why we emphasize diversification." Again, this is a sales & marketing campaign statement, not an aboveboard statement about how to make money for clients. If clients are uncomfortable with strategies that would actually built great wealth for them instead of producing mediocre or subpar returns, their discomfort only originates from the fact that the largest investment firms have been deceiving their clients, just as Jim Cramer had deceived the thundering sheep herd for years, about the realities of building wealth. This discomfort originates solely from the fact that he or she has been kept in the dark for so long.
Despite What Investment Firms Tell You, Myopia and a Concentration in U.S. Stock Markets Will NOT Optimize Your Portfolio Returns
Thus, we have a misinformation-driven cauldron of bad investment decisions that exist today. In 2007, you’ll still find Chief Investment Officers of very well known firms making ridiculous statement that investors need to invest at least 50% of their stock portfolio in U.S. stocks if they wish to grow their portfolios exponentially. How are they going to grow their portfolios exponentially with more than half of their stocks in a stock market (the U.S.) that has NEVER been the best performing market in the past 25 years (even among developed stock markets)? How will they grow their portfolios exponentially by buying stocks in market that trades in what is quite possibly the worst currency on earth among developed markets (the U.S. dollar)? Yes I know that when the U.S. dollar shows a brief spike in strength as is likely to happen soon (I’m writing this article in April, 2007), that many people will question what I am saying, but this is only again because they are victims to the mass deception mind-games of the investment industry. I suppose if planning to earn better than subpar returns in your stock portfolio is engaging in risky behavior as Chief Investment Officers of various firms claim, then yes, I whole-heartedly endorse engaging in risky behavior.
And because so many people, yes even those considered quite wealthy, fall victim to the preaching of investment industry demagogues, there is a second mistake that many rich investors will soon make. Another survey of wealthy U.S. investors uncovered that a large percentage of investors with investment assets of over a million do not employ any type of investment advisor but plan to do so soon giving the increasingly gloomy nature of the U.S. stock markets. To that, this is what I have to say. Making money in difficult markets is ten times more difficult than making money in bull markets. If investors believe that it will be increasingly more difficult to make money in U.S. stock markets, but yet top investment firms in the U.S. continue to preach that more than half of your portfolio should be in U.S. stocks (mostly to cover their respective firm’s inadequate coverage of emerging markets), how is the hiring one of these men possibly going to improve these investors’ future performance outlook?
But there is an EXTREMELY important distinction to be made here. What I’ve written above applies to the behavior and mindset of some of the richest people in America, but not THE very richest people in America. The very richest people in America, those you might categorize as the world’s ultra-rich, possess a very different mindset and behavior set than those that are just rich. The ultra-rich have positioned their portfolios extremely differently from how the rich people discussed above have positioned their portfolios. The reason why articles regarding their behavior and investment decisions are virtually non-existent is because they don’t grant interviews and they don’t want people to know what they are doing. But I’ve investigated what they are doing, and trust me, it is nothing remotely similar to the behavior of wealthy investors described by Northern Trust and other investment firms.
If you would like to find out why the ultra-rich always manage their own money or are able to find the 1 in a million consultant truly capable of providing them the returns they desire, consult our resource of “101 Reasons Why Managing Your Own Money is the Only Way to Build Wealth.” Even if the ultra-wealthy have someone managing their money for them, the only way they were capable of finding this 1 in a million financial consultant was due to the fact that if they had to, they could manage their own money successfully as well. Only by first fully understanding the most successful investment strategies themselves were they able to identify an advisor capable of employing similar strategies. However, a great majority of ultra-wealthy continue to handle and make their own investment decisions. And that is precisely why they are among the elite.
This article may be freely reprinted on another website as long as it is not modified, changed, or altered in any way and as long as the below author byline is included along with the active hyperlink exactly as is.
J.S. Kim is the Managing Director of SmartKnowledgeU™. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. He is the inventor of the revolutionary MoneyPing™ investment strategies, a novel approach to learn how to build wealth, not just dreams.
By J.S. Kim
Day Trading Forex - 4 Reasons For A Stock And Shares Trader To Migrate Over To Day Trading Forex
If I am day trading the stock and futures market, why would I want to move into day trading the forex as another additional trading avenue? Are there any special features of day trading the forex market that appear more appealing to stock traders to attract them to trade the forex as well?
In the pursuit of prosperity, we are always looking for ways to create personal wealth, and day trading forex offers much more opportunities to create wealth than say trading stocks and shares and commodities. Why is this so?
Forex Markets open 24/7
The stock markets and the commodity markets have set times that they are open for trading. In contrast, the forex markets are open 24hours a day, seven days in the week, giving much more trading opportunities to the day trader to trade. At the same time, convenience is a key factor, as anyone can trade at any convenient time with a web based trading platform provided free by his forex broker.
Higher Liquidity
The day trader is always conscious of liquidity. It is liquidity that allows a day trader to move smoothly into a day trade instantaneously at the best identified price without lag which will lead to a poor executed price. When he wants to buy, the day forex trader is able to get into that trade almost instantaneously due to the higher liquidity in the forex market and when a day trader wants to sell, he can get out of the currency at his price without delay. Where the difference in a fraction of a cent is important, this characteristic of very high liquidity makes forex trading very attractive. More so, it has been proven that there are trading systems that allow day traders to trade for only an hour or two, freeing them to do whatever they like for the rest of the day after pocketing profits. These are day traders who professionally trade for a living.
Lower Trading Costs
Forex trading seems like a dream to many day traders because there are no exchange fees, no commissions paid to brokers, and low transaction fees. In contrast, the day traders in stocks and shares and futures market all incur fees and commissions paid to licensed dealers and brokers, all of which will result in less profits.
Ability To Earn From Referrals
The active day trader can enter into arrangements with some forex brokers to earn a referral commission from the trades of people he introduces to the forex broker. Now while this is another separate activity, it cannot be denied that this is an added advantage for a day trader to earn something extra from his efforts in introducing or recommending friends to trade as well.
All these features make day trading the forex an attractive and possible replacement income source for those who work from home trading for a living.
By Peter Lim
In the pursuit of prosperity, we are always looking for ways to create personal wealth, and day trading forex offers much more opportunities to create wealth than say trading stocks and shares and commodities. Why is this so?
Forex Markets open 24/7
The stock markets and the commodity markets have set times that they are open for trading. In contrast, the forex markets are open 24hours a day, seven days in the week, giving much more trading opportunities to the day trader to trade. At the same time, convenience is a key factor, as anyone can trade at any convenient time with a web based trading platform provided free by his forex broker.
Higher Liquidity
The day trader is always conscious of liquidity. It is liquidity that allows a day trader to move smoothly into a day trade instantaneously at the best identified price without lag which will lead to a poor executed price. When he wants to buy, the day forex trader is able to get into that trade almost instantaneously due to the higher liquidity in the forex market and when a day trader wants to sell, he can get out of the currency at his price without delay. Where the difference in a fraction of a cent is important, this characteristic of very high liquidity makes forex trading very attractive. More so, it has been proven that there are trading systems that allow day traders to trade for only an hour or two, freeing them to do whatever they like for the rest of the day after pocketing profits. These are day traders who professionally trade for a living.
Lower Trading Costs
Forex trading seems like a dream to many day traders because there are no exchange fees, no commissions paid to brokers, and low transaction fees. In contrast, the day traders in stocks and shares and futures market all incur fees and commissions paid to licensed dealers and brokers, all of which will result in less profits.
Ability To Earn From Referrals
The active day trader can enter into arrangements with some forex brokers to earn a referral commission from the trades of people he introduces to the forex broker. Now while this is another separate activity, it cannot be denied that this is an added advantage for a day trader to earn something extra from his efforts in introducing or recommending friends to trade as well.
All these features make day trading the forex an attractive and possible replacement income source for those who work from home trading for a living.
By Peter Lim
Tuesday, April 3, 2007
The Seven Most Traded Currencies in FOREX.
Currencies are traded in dollar amounts called “lots”. One lot is equal to $1,000, which controls $100,000 in currency. This is what is known as the "margin". You can control $100,000 worth of currency for only 1,000 dollars. This is what is called “High Leverage”.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Here are some of the common symbols used in the Forex:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Some of the common PAIRS are:
EUR/USD Euro / US Dollar
"Euro"
USD/JPY US Dollar / Japanese Yen
"Dollar Yen"
GBP/USD British Pound / US Dollar
"Cable"
USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"
AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"
USD/CHF US Dollar / Swiss Franc
"Swissy"
EUR/JPY Euro / Japanese Yen
"Euro Yen"
The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.
If this seems confusing then you're in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.
So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.
You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
By Omar Vargas
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Here are some of the common symbols used in the Forex:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound
JPN - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
There are symbols for other currencies as well, but these are the most commonly traded ones.
A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible.
Some of the common PAIRS are:
EUR/USD Euro / US Dollar
"Euro"
USD/JPY US Dollar / Japanese Yen
"Dollar Yen"
GBP/USD British Pound / US Dollar
"Cable"
USD/CAD US Dollar / Canadian Dollar
"Dollar Canada"
AUD/USD Australian Dollar/US Dollar
"Aussie Dollar"
USD/CHF US Dollar / Swiss Franc
"Swissy"
EUR/JPY Euro / Japanese Yen
"Euro Yen"
The listed currency pairs above look like a fraction. The numerator (top of the fraction or "left" of the / however you want to SEE it) is called the base currency. The denominator (bottom of the fraction or "right" of the /however you want to SEE it) is called the counter currency. When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.
If this seems confusing then you're in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for Fundamental Analysis issues.
So why is it important to know about the base/counter currency? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. Some of you reading this, know that short-selling was restricted in the stock market *(Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later). But in the FOREX you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same. This allows you to short-sell with no restrictions.
You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rises. The problem with traditional stock market trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
By Omar Vargas
Factors Influencing a Currency Pair Exchange Rate
Introduction
The exchange rate refers to the value of the US dollar against the values of currencies of other countries. Such a rate helps determine how much we pay for imported goods and services and how much we receive for what we export, among other things. When the value of the US dollar drops, imports become more expensive, and we tend to reduce the volume of our imports. Simultaneously, other countries will pay LESS for some of our products and that will tend to boost export sales. If imports and exports are a substantial part of a country's economy, as is the case with Canada, the exchange rate plays a particularly important role in our economy. The exchange rate between two countries' currencies is particularly important if the two countries are heavily involved in trade.
What factors affect an exchange rate?
A country's exchange rate is typically affected by the supply and demand for that country's currency in international exchange markets. This is typically known as a floating exchange rate. If demand, for say dollars, exceeds supply, then the value of the dollar will go up. If however, the supply of dollars exceeds demand, then its value will go down. A huge amount of money is bought and sold on international exchange markets for many different currencies.
Several factors influence the supply of, and demand for, a given country's currency.
If INTEREST rates are HIGHER in, say, the US than in other countries, then investors WILL choose to invest in the US, increasing demand for the dollar, provided that the expected rate of inflation is not higher in the US than among our trading partners. If INTEREST rates are LOWER in the US than in other countries, investors will choose NOT to invest in the US, decreasing demand for the dollar.
If the US INFLATION rate is HIGHER, investors are LESS likely to prefer the US -even with higher interest rates- because of the expectation that the value of the dollar will be ERODED by inflation. If our INFLATION rate is LOWER, investors are MORE likely to prefer the US, because there will be NO expectation that the value of the dollar will erode.
Trade balance also has an effect on a country's currency. If world prices for what a country exports rise in comparison with the cost of that country's imports, that country will be earning more for its exports than it pays for its imports. The more demand there will be for that country's currency, the better the deal becomes. If investors are confident that the US economy will be strong, they will be MORE likely to buy American assets, pushing UP the dollar's value. If investors are not so confident that the economy will be strong, they will be LESS likely to buy the country's assets, pushing the dollar's value DOWN.
By Joshua Kunken
The exchange rate refers to the value of the US dollar against the values of currencies of other countries. Such a rate helps determine how much we pay for imported goods and services and how much we receive for what we export, among other things. When the value of the US dollar drops, imports become more expensive, and we tend to reduce the volume of our imports. Simultaneously, other countries will pay LESS for some of our products and that will tend to boost export sales. If imports and exports are a substantial part of a country's economy, as is the case with Canada, the exchange rate plays a particularly important role in our economy. The exchange rate between two countries' currencies is particularly important if the two countries are heavily involved in trade.
What factors affect an exchange rate?
A country's exchange rate is typically affected by the supply and demand for that country's currency in international exchange markets. This is typically known as a floating exchange rate. If demand, for say dollars, exceeds supply, then the value of the dollar will go up. If however, the supply of dollars exceeds demand, then its value will go down. A huge amount of money is bought and sold on international exchange markets for many different currencies.
Several factors influence the supply of, and demand for, a given country's currency.
If INTEREST rates are HIGHER in, say, the US than in other countries, then investors WILL choose to invest in the US, increasing demand for the dollar, provided that the expected rate of inflation is not higher in the US than among our trading partners. If INTEREST rates are LOWER in the US than in other countries, investors will choose NOT to invest in the US, decreasing demand for the dollar.
If the US INFLATION rate is HIGHER, investors are LESS likely to prefer the US -even with higher interest rates- because of the expectation that the value of the dollar will be ERODED by inflation. If our INFLATION rate is LOWER, investors are MORE likely to prefer the US, because there will be NO expectation that the value of the dollar will erode.
Trade balance also has an effect on a country's currency. If world prices for what a country exports rise in comparison with the cost of that country's imports, that country will be earning more for its exports than it pays for its imports. The more demand there will be for that country's currency, the better the deal becomes. If investors are confident that the US economy will be strong, they will be MORE likely to buy American assets, pushing UP the dollar's value. If investors are not so confident that the economy will be strong, they will be LESS likely to buy the country's assets, pushing the dollar's value DOWN.
By Joshua Kunken
What are Your Options Regarding Forex Options Brokers?
Forex option brokers can generally be divided into two separate categories: forex brokers who offer online forex option trading platforms and forex brokers who only broker forex option trading via telephone trades placed through a dealing/brokerage desk. A few forex option brokers offer both online forex option trading as well a dealing/brokerage desk for investors who prefer to place orders through a live forex option broker.
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don't want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific's investor's needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won't spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO's"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader's needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms.
By John Nobile
The trading account minimums required by different forex option brokers vary from a few thousand dollars to over fifty thousand dollars. Also, forex option brokers may require investors to trade forex options contracts having minimum notional values (contract sizes) up to $500,000. Last, but not least, certain types of forex option contracts can be entered into and exited at any time while other types of forex option contracts lock you in until expiration or settlement. Depending on the type of forex option contract you enter into, you might get stuck the wrong way with an option contract that you can not trade out of. Before trading, investors should inquire with their forex option brokers about initial trading account minimums, required contract size minimums and contract liquidity.
There are a number of different forex option trading products offered to investors by forex option brokers. We believe it is extremely important for investors to understand the distinctly different risk characteristics of each of the forex option trading products mentioned below that are offered by firms that broker forex options.
Plain Vanilla Forex Options Broker - Plain vanilla options generally refer to standard put and call option contracts traded through an exchange (however, in the case of forex option trading, plain vanilla options would refer to the standard, generic option contracts that are traded through an over-the-counter (OTC) forex dealer or clearinghouse). In simplest terms, vanilla forex options would be defined as the buying or selling of a standard forex call option contract or forex put option contract.
There are only a few forex option broker/dealers who offer plain vanilla forex options online with real-time streaming quotes 24 hours a day. Most forex option brokers and banks only broker forex options via telephone. Vanilla forex options for major currencies have good liquidity and you can easily enter the market long or short, or exit the market any time day or night.
Vanilla forex option contracts can be used in combination with each other and/or with spot forex contracts to form a basic strategy such as writing a covered call, or much more complex forex trading strategies such as butterflies, strangles, ratio spreads, synthetics, etc. Also, plain vanilla options are often the basis of forex option trading strategies known as exotic options.
Exotic Forex Options Broker - First, it is important to note that there a couple of different forex definitions for "exotic" and we don't want anyone getting confused. The first definition of a forex "exotic" refers to any individual currency that is less broadly traded than the major currencies. The second forex definition for "exotic" is the one we refer to on this website - a forex option contract (trading strategy) that is a derivative of a standard vanilla forex option contract.
To understand what makes an exotic forex option "exotic," you must first understand what makes a forex option "non-vanilla." Plain vanilla forex options have a definitive expiration structure, payout structure and payout amount. Exotic forex option contracts may have a change in one or all of the above features of a vanilla forex option. It is important to note that exotic options, since they are often tailored to a specific's investor's needs by an exotic forex options broker, are generally not very liquid, if at all.
Exotic forex options are generally traded by commercial and institutional investors rather than retail forex traders, so we won't spend too much time covering exotic forex options brokers. Examples of exotic forex options would include Asian options (average price options or "APO's"), barrier options (payout depends on whether or not the underlying reaches a certain price level or not), baskets (payout depends on more than one currency or a "basket" of currencies), binary options (the payout is cash-or-nothing if underlying does not reach strike price), lookback options (payout is based on maximum or minimum price reached during life of the contract), compound options (options on options with multiple strikes and exercise dates), spread options, chooser options, packages and so on. Exotic options can be tailored to a specific trader's needs, therefore, exotic options contract types change and evolve over time to suit those ever-changing needs.
Since exotic forex options contracts are usually specifically tailored to an individual investor, most of the exotic options business in transacted over the telephone through forex option brokers. There are, however, a handful of forex option brokers who offer "if touched" forex options or "single payment" forex options contracts online whereby an investor can specify an amount he or she is willing to risk in exchange for a specified payout amount if the underlying price reaches a certain strike price (price level). These transactions offered by legitimate online forex brokers can be considered a type of "exotic" option. However, we have noticed that the premiums charged for these types of contracts can be higher than plain vanilla option contracts with similar strike prices and you can not sell out of the option position once you have purchased this type of option - you can only attempt to offset the position with a separate risk management strategy. As a trade-off for getting to choose the dollar amount you want to risk and the payout you wish to receive, you pay a premium and sacrifice liquidity. We would encourage investors to compare premiums before investing in these kinds of options and also make sure the brokerage firm is reputable.
Again, it is fairly easy and liquid to enter into an exotic forex option contract but it is important to note that depending on the type of exotic option contract, there may be little to no liquidity at all if you wanted to exit the position.
Firms Offering Forex Option "Betting" - A number of new firms have popped up over the last year offering forex "betting." Though some may be legitimate, a number of these firms are either off-shore entities or located in some other remote location. We generally do not consider these to be forex brokerage firms. Many do not appear to be regulated by any government agency and we strongly suggest investors perform due diligence before investing with any forex betting firms. Invest at your own risk with these firms.
By John Nobile
The Forex Trader Does Not Need To Be Right But He Has To Be Objective
One of the hardest lessons for any novice Forex trader to learn is that in the foreign exchange market anything can happen at any time. Because new traders spend a great deal of time learning about the mechanics of the market and focusing their attention on finding a method for predicting movements in the market, it is only natural that they also come to believe that there is a strict set of rules that govern the direction of the market at any given moment in time. Unfortunately, this is not the case and this fact catches many traders out.
Most Forex traders will use a variety of tools to judge when the moment is right to open a position and then later to close out that position, but the majority of traders will also tend to have one tool in particular which is their favorite and which they tend to rely on more than anything else. Having opened a position therefore they will tend to keep their eye on their favorite indicator and base their decisions largely on what this one indicator is telling them.
The problem comes when this indicator is telling them one thing but the other indicators start to tell them something else. They are in an open position and their favorite indicator is telling them to hold that position, but everything else is telling them to close out their position and to get out of the market. In most cases the trader will hold his ground and, more often than not, will find himself in a losing trade.
The problem here is that the trader is not viewing the market objectively but has created an expectation about the market in his own mind and is using his favorite indicator to reinforce this expectation, rather than standing back and viewing the wider picture from the information which he is receiving. In most cases he is also being urged on by the thought that he must be right, and by the profit available from this trade according to his favorite forecasting tool, and is looking at the money rather than at the market.
The foreign exchange market is by its very nature unpredictable and, if this were not the case, the market would soon collapse as we would all be making a profit on every trade we make. There are of course a raft of tools available to help us to predict the course of the market and thankfully most of the time they do a pretty good job, but sometimes even the best of tools in the hands of the most experienced traders are going to come up against an unexpected change in the direction of the market.
Getting it wrong is part and parcel of Forex trading and traders must learn to accept this as a fact of foreign currency trading. More than this however traders must learn to guard against getting themselves into a position of being proved right or wrong and this means accepting that the market has a will of its own and that the only way to trade successfully is to be totally objective about the market and to follow movements in the market rather than try to get the market go where you think it should go.
By Donald Sounders
Most Forex traders will use a variety of tools to judge when the moment is right to open a position and then later to close out that position, but the majority of traders will also tend to have one tool in particular which is their favorite and which they tend to rely on more than anything else. Having opened a position therefore they will tend to keep their eye on their favorite indicator and base their decisions largely on what this one indicator is telling them.
The problem comes when this indicator is telling them one thing but the other indicators start to tell them something else. They are in an open position and their favorite indicator is telling them to hold that position, but everything else is telling them to close out their position and to get out of the market. In most cases the trader will hold his ground and, more often than not, will find himself in a losing trade.
The problem here is that the trader is not viewing the market objectively but has created an expectation about the market in his own mind and is using his favorite indicator to reinforce this expectation, rather than standing back and viewing the wider picture from the information which he is receiving. In most cases he is also being urged on by the thought that he must be right, and by the profit available from this trade according to his favorite forecasting tool, and is looking at the money rather than at the market.
The foreign exchange market is by its very nature unpredictable and, if this were not the case, the market would soon collapse as we would all be making a profit on every trade we make. There are of course a raft of tools available to help us to predict the course of the market and thankfully most of the time they do a pretty good job, but sometimes even the best of tools in the hands of the most experienced traders are going to come up against an unexpected change in the direction of the market.
Getting it wrong is part and parcel of Forex trading and traders must learn to accept this as a fact of foreign currency trading. More than this however traders must learn to guard against getting themselves into a position of being proved right or wrong and this means accepting that the market has a will of its own and that the only way to trade successfully is to be totally objective about the market and to follow movements in the market rather than try to get the market go where you think it should go.
By Donald Sounders
WD Gann - Time and Price Analysis In Forex Trading
One of the earliest masters of time-price analysis in trading was the legendary trader WD Gann.
I started off my trading career in stocks and shares and it was when I discovered the world of trading commodities and futures that I heard of WD Gann.
The most important teaching of WD Gann that I personally learnt came from his famous statement:
"When time and price is squared ( or meet ), change is inevitable"
I have found this to be true in many, many cases...too many to enumerate, and this occurs across all freely traded markets in the world, irregardless of whether it is stocks and shares, forex, commodities and futures or e-currencies.
With time-price analysis, it is possible for you to compute the time day for a possible change in trend, and to forecast the possible price - once both the time and price "meet" accordingly, a turning point is forecasted.
In forex trading, specific variations of time-price analysis is used by many of the forex traders who are making good money in their trades. One specific variation is the use of PRICE-ACTION analysis, where you do not need any indicators, but by studying the price action of the currency pair you are trading, you are able to take IMMEDIATE action on your trade.
How can price action help you?
1. There is no battery of confusing indicators that you need to study to take any trading action- only price is involved- so you can quickly KNOW what trading action to take.
2. Every trading signal is CLEAR, and without doubt- no maybe it will go this way or that way, so there is no wondering whether you should be in the market or not.
3. Can be applied as long as there is a price chart- so no expensive trading software required
4. Can be applied across all time frames - it is easy to maintain price charts across several time frames.
5. Know the exact projected price levels to trade off- so you can very often get very near to the lows and sell very near to the tops, taking the sweetest part of the moves.
In the world of trading, what we need is really clear cut trading signals that can tell us the turning points of the trades...and price action analysis helps us do just that.
So if you are trading forex, knowing when time and price meets for the projected change in trend in accordance to WD Gann teachings will help you in a great way to pinpoint turning points in the forex market. The use of price-action analysis has proven to be useful to many forex traders and it can help you too.
By Peter Lim
I started off my trading career in stocks and shares and it was when I discovered the world of trading commodities and futures that I heard of WD Gann.
The most important teaching of WD Gann that I personally learnt came from his famous statement:
"When time and price is squared ( or meet ), change is inevitable"
I have found this to be true in many, many cases...too many to enumerate, and this occurs across all freely traded markets in the world, irregardless of whether it is stocks and shares, forex, commodities and futures or e-currencies.
With time-price analysis, it is possible for you to compute the time day for a possible change in trend, and to forecast the possible price - once both the time and price "meet" accordingly, a turning point is forecasted.
In forex trading, specific variations of time-price analysis is used by many of the forex traders who are making good money in their trades. One specific variation is the use of PRICE-ACTION analysis, where you do not need any indicators, but by studying the price action of the currency pair you are trading, you are able to take IMMEDIATE action on your trade.
How can price action help you?
1. There is no battery of confusing indicators that you need to study to take any trading action- only price is involved- so you can quickly KNOW what trading action to take.
2. Every trading signal is CLEAR, and without doubt- no maybe it will go this way or that way, so there is no wondering whether you should be in the market or not.
3. Can be applied as long as there is a price chart- so no expensive trading software required
4. Can be applied across all time frames - it is easy to maintain price charts across several time frames.
5. Know the exact projected price levels to trade off- so you can very often get very near to the lows and sell very near to the tops, taking the sweetest part of the moves.
In the world of trading, what we need is really clear cut trading signals that can tell us the turning points of the trades...and price action analysis helps us do just that.
So if you are trading forex, knowing when time and price meets for the projected change in trend in accordance to WD Gann teachings will help you in a great way to pinpoint turning points in the forex market. The use of price-action analysis has proven to be useful to many forex traders and it can help you too.
By Peter Lim
Forex Trading And Its Tactics
Trading the Online Forex market has many advantages over other fiscal markets, among the most significant are: better liquidity, 24hrs online market, superior execution, and many others. Traders and investor see the Forex market as a fresh speculation or expanding chances because of above mentioned benefits. Does this mean that it is quite simple to earn money trading the Forex Market? Not at all…!
The précising the forex market incoming/quitting time all based on technological an analysis that is specific for very short-term life of such forex analyses. It is resolute by days, hours, and some times even by minutes, but not by weeks or months. In all the above cases, the same technological tools are used. Having successful forex trading system carries the following tactics.
Tactics for Price Breaks
There are three different trader’s actions at price breaks:
To take a place in advance, predicting the break;
To open a place when the break is actually in progress;
To wait for the predictable rollback after break
When you work with several lots, you as a trader could open one position at every of the three stages. One could open a small place before the predicted break, and then purchase some more straight away after the break, and then lastly open extra place at an unimportant price fall during correction, which follows the break. If one trades with small place, two questions would have force on one's decisions first of all.
Gaps - Price gaps that are created on bar charts could also be used to select a proper flash to open or close forex trading positions. For example, gaps created during price development frequently become support levels. That is why, at a forex up-trend, it is sensible to open extended positions when prices actually fall to the upper border of the gap or even sometimes a bit below it. A stop order could even be placed below the gap. At a down-trend, an open place needs to be opened when prices arrive at the lower border of the gap or even at bit above it. The defensive stop order is placed above the gap, in this above case.
Averaging - Averaging is a forex trading strategy used when one has made an error or simply made a trade (the first thing that comes to one's mind) and the price has moved beside, and one makes a fresh forex operation of the same kind but at a more money-making price. The most significant drawback of averaging is that one cannot know to what price the market would go beside the trader.
The averaging looks for investing a double amount of money when compared to that invested before. Trading productively is no simple task; it is a procedure and could take years to attain the preferred results. There are a few things though every forex trader needs to take in thought that could go faster the process: having a trading system, using money management, education, being conscious of psychological things, discipline to follow your forex trading system and your forex trading plan, and others.
By Tamil Selvi
The précising the forex market incoming/quitting time all based on technological an analysis that is specific for very short-term life of such forex analyses. It is resolute by days, hours, and some times even by minutes, but not by weeks or months. In all the above cases, the same technological tools are used. Having successful forex trading system carries the following tactics.
Tactics for Price Breaks
There are three different trader’s actions at price breaks:
To take a place in advance, predicting the break;
To open a place when the break is actually in progress;
To wait for the predictable rollback after break
When you work with several lots, you as a trader could open one position at every of the three stages. One could open a small place before the predicted break, and then purchase some more straight away after the break, and then lastly open extra place at an unimportant price fall during correction, which follows the break. If one trades with small place, two questions would have force on one's decisions first of all.
Gaps - Price gaps that are created on bar charts could also be used to select a proper flash to open or close forex trading positions. For example, gaps created during price development frequently become support levels. That is why, at a forex up-trend, it is sensible to open extended positions when prices actually fall to the upper border of the gap or even sometimes a bit below it. A stop order could even be placed below the gap. At a down-trend, an open place needs to be opened when prices arrive at the lower border of the gap or even at bit above it. The defensive stop order is placed above the gap, in this above case.
Averaging - Averaging is a forex trading strategy used when one has made an error or simply made a trade (the first thing that comes to one's mind) and the price has moved beside, and one makes a fresh forex operation of the same kind but at a more money-making price. The most significant drawback of averaging is that one cannot know to what price the market would go beside the trader.
The averaging looks for investing a double amount of money when compared to that invested before. Trading productively is no simple task; it is a procedure and could take years to attain the preferred results. There are a few things though every forex trader needs to take in thought that could go faster the process: having a trading system, using money management, education, being conscious of psychological things, discipline to follow your forex trading system and your forex trading plan, and others.
By Tamil Selvi
Saturday, February 3, 2007
Currency Forex Trading System-Tweaking The Sensitivity Of Moving Averages For Fast Paced Daytrading
For currency forex traders, the use of moving averages is common. For many, moving averages are commonly used as an indicator in part of a trading system.
As we make use of historical data to compute moving averages, they invariably contain a lagging effect.
Hence, with the use of moving averages in forex trading which is fast paced, the question which arises is this: "How effective are moving averages (which forms a lagging indicator) within a technical trading system for forex trading which is fast paced?"
A question as controversial as this would lead to much differences of opinion, each centering on how lagging moving averages are.
Rather than putting emphasis on these differences of opinion, a better solution is to accept that moving averages do play a role in technical analysis and charting, and to consider ways to reduce the lagging effect.
I have, for instance, seen forex traders who trade with nothing else except moving average lines, and yet among them are many profitable traders.
Do they use the standard moving average lines, or rather, how do they use the moving average lines?
In trying to overcome the lagging effect of moving averages, one simple way is to adopt exponential moving average in lieu of the standard moving average line as an indicator. Others , adopt the weighted moving averages, where more weight is given to newer price data.
A brillant solution is to adopt a mathematical approach towards the lagging effect by computing the moving averages as adaptive moving averages. In this particular case, the moving averages are allowed to self adjust to the prices based on a special adaptive computation and thus represents a clearer and truer of current price.
As part of the computation, it is possible to project the adaptive moving average forward by a certain number of bars or days where the moving average would have lagged the market, thus compensating for the lagging effect and even neutralising the lagging effect.
In all these trading systems involving the use of moving averages, applied in conjunction as 3, 4 or even 5 exponential moving averages together as a band to form a rainbow, or as a single adaptive moving average, it is to the best interest of the forex trader to back test the trading systems and to test out the profitability of the trading system using a forex strategy builder or a trade simulator. Then it is possible to know whether the use of these modified moving averages will enhance the robustness of a trading system or otherwise.
One note of caution is in order. In using moving averages, it is dangerous to optimize the moving averages to fit in with the best profitability, as over-optimization will lead to a non-representative trading system. You can get very good trading results and the best profitability from over optimization of the moving averages, but such a trading system involving the over-optimized moving averages is bound to fail, and will lead to disastrous results.
As moving averages are representation of price itself, the next question is - why not use price itself as an indicator rather than a representation of price which induces lag?
Indeed there are many forex traders who avoid the use of moving averages because of their inherent lag. To be able to monitor price itself, they would use price levels, favoring fibonacci levels, price pivots, gann levels and Murrey Maths levels. This has led to the use of a price time action method and a dynamic analysis based on time and price.
So if you are using moving averages in your trading system, be aware of the lagging effect. Check out whether a price time action method can be useful to you if the lagging effect is a concern of priority to you.
By Peter Lim
As we make use of historical data to compute moving averages, they invariably contain a lagging effect.
Hence, with the use of moving averages in forex trading which is fast paced, the question which arises is this: "How effective are moving averages (which forms a lagging indicator) within a technical trading system for forex trading which is fast paced?"
A question as controversial as this would lead to much differences of opinion, each centering on how lagging moving averages are.
Rather than putting emphasis on these differences of opinion, a better solution is to accept that moving averages do play a role in technical analysis and charting, and to consider ways to reduce the lagging effect.
I have, for instance, seen forex traders who trade with nothing else except moving average lines, and yet among them are many profitable traders.
Do they use the standard moving average lines, or rather, how do they use the moving average lines?
In trying to overcome the lagging effect of moving averages, one simple way is to adopt exponential moving average in lieu of the standard moving average line as an indicator. Others , adopt the weighted moving averages, where more weight is given to newer price data.
A brillant solution is to adopt a mathematical approach towards the lagging effect by computing the moving averages as adaptive moving averages. In this particular case, the moving averages are allowed to self adjust to the prices based on a special adaptive computation and thus represents a clearer and truer of current price.
As part of the computation, it is possible to project the adaptive moving average forward by a certain number of bars or days where the moving average would have lagged the market, thus compensating for the lagging effect and even neutralising the lagging effect.
In all these trading systems involving the use of moving averages, applied in conjunction as 3, 4 or even 5 exponential moving averages together as a band to form a rainbow, or as a single adaptive moving average, it is to the best interest of the forex trader to back test the trading systems and to test out the profitability of the trading system using a forex strategy builder or a trade simulator. Then it is possible to know whether the use of these modified moving averages will enhance the robustness of a trading system or otherwise.
One note of caution is in order. In using moving averages, it is dangerous to optimize the moving averages to fit in with the best profitability, as over-optimization will lead to a non-representative trading system. You can get very good trading results and the best profitability from over optimization of the moving averages, but such a trading system involving the over-optimized moving averages is bound to fail, and will lead to disastrous results.
As moving averages are representation of price itself, the next question is - why not use price itself as an indicator rather than a representation of price which induces lag?
Indeed there are many forex traders who avoid the use of moving averages because of their inherent lag. To be able to monitor price itself, they would use price levels, favoring fibonacci levels, price pivots, gann levels and Murrey Maths levels. This has led to the use of a price time action method and a dynamic analysis based on time and price.
So if you are using moving averages in your trading system, be aware of the lagging effect. Check out whether a price time action method can be useful to you if the lagging effect is a concern of priority to you.
By Peter Lim
Currency Forex Trading Systems- The Best Ways To Learn Forex Trading Revealed By 6645 Forex Traders
Potential traders and novices to forex trading are getting somewhat confused on what is the best method to go about learning how to trade forex or currencies. This is rightfully so, because there are a whole lot of training providers, and independent coaches , even brokers and printed literature all vying for the attention of potential students.
Indeed, if you desire to learn how to trade forex successfully, what is the best way to do so?
Trading coaches and trainers sometimes do have their own opinions, but are their opinions on what is their best way to teach others necessarily be in the best interest of their students?
To get a better understanding of what exactly is the best way for a person to learn forex trading, a recent poll was conducted in a major Forex Trading forum, consisting of international forex traders across the globe, with the question:
"What is the best way to learn how to be a successful forex trader"
A significant number of forex traders responded to the question as a total of 6645 responses were received from the membership, providing direct answers to this question. These were responses from actual forex traders who have faced the same question earlier in their trading careers, and who, now having learnt the tricks of the trade, are able to look back with much hindsight and wisdom, and to share their feelings on what exactly would be the best way to learn forex trading successfully.
Topping the list of the main ways was " to attend more seminars, read books and forums, get some experience and make trading decisions yourself". In other words, members were overwhelmingly endorsing a period of self study and education and paper trading and practice as the best way to become a successful forex trader.
A close second approach was to "sit side by side with a Mentor and study his methods and techniques".
Other responses which receive little support included subscribing to a signal alert or to get live deals from a guru and trade according to them; to buy a software package and trade according to the signals therein; to hire a professional forex portfolio manager or to invest in a hedge fund and monitor trades done by the fund manager to learn from him, and several other minor approaches.
On the basis of these responses from experienced forex traders, it is clear that they were subscribing to the concept that in forex trading, it is important to know how forex trading works, why it works, and to do self study on the various aspects, which will include knowing the win/loss ratios, back testing and strategy testing. By a period of self study, a forex trader can find a system that matches closely his trading profile, his personal tolerance for risk and time frame of trading. Those who were supportive of having a mentor would have the benefit of a fast tracking of practical skills and knowledge, from the mentor to the student, and to gain hidden and lesser known information from a reliable source, namely the mentor himself.
So if you are seeking to learn how to trade the forex profitably, consider the fact that 6645 forex traders are broadly supportive of the idea that it is personal discovery and study, and learning with a mentor that counts as the two major top approaches in learning to be a successful forex trader.
By Peter Lim
Indeed, if you desire to learn how to trade forex successfully, what is the best way to do so?
Trading coaches and trainers sometimes do have their own opinions, but are their opinions on what is their best way to teach others necessarily be in the best interest of their students?
To get a better understanding of what exactly is the best way for a person to learn forex trading, a recent poll was conducted in a major Forex Trading forum, consisting of international forex traders across the globe, with the question:
"What is the best way to learn how to be a successful forex trader"
A significant number of forex traders responded to the question as a total of 6645 responses were received from the membership, providing direct answers to this question. These were responses from actual forex traders who have faced the same question earlier in their trading careers, and who, now having learnt the tricks of the trade, are able to look back with much hindsight and wisdom, and to share their feelings on what exactly would be the best way to learn forex trading successfully.
Topping the list of the main ways was " to attend more seminars, read books and forums, get some experience and make trading decisions yourself". In other words, members were overwhelmingly endorsing a period of self study and education and paper trading and practice as the best way to become a successful forex trader.
A close second approach was to "sit side by side with a Mentor and study his methods and techniques".
Other responses which receive little support included subscribing to a signal alert or to get live deals from a guru and trade according to them; to buy a software package and trade according to the signals therein; to hire a professional forex portfolio manager or to invest in a hedge fund and monitor trades done by the fund manager to learn from him, and several other minor approaches.
On the basis of these responses from experienced forex traders, it is clear that they were subscribing to the concept that in forex trading, it is important to know how forex trading works, why it works, and to do self study on the various aspects, which will include knowing the win/loss ratios, back testing and strategy testing. By a period of self study, a forex trader can find a system that matches closely his trading profile, his personal tolerance for risk and time frame of trading. Those who were supportive of having a mentor would have the benefit of a fast tracking of practical skills and knowledge, from the mentor to the student, and to gain hidden and lesser known information from a reliable source, namely the mentor himself.
So if you are seeking to learn how to trade the forex profitably, consider the fact that 6645 forex traders are broadly supportive of the idea that it is personal discovery and study, and learning with a mentor that counts as the two major top approaches in learning to be a successful forex trader.
By Peter Lim
Forex Trading - 6 Simple Tips To Increase Your Profit Potential
Forex trading looks simple but few succeed. A lot of the so called investment wisdom doesn’t work and is given by people who have never traded in their lives.
Here we will give some simple tips that will help you increase your profit potential.
1. Get a simple method you understand
In forex trading many people think that the more complicated a method they use in forex trading the more likely they are to make money.
The fact is however that simple systems work best.
Simple systems are more robust and easier to trade with discipline, as you understand the logic and can therefore follow it with confidence when it has a losing period.
You can build one yourself easily and we have written frequently on this and it’s easy to do.
2. Trade the big trends
Forget day trading (we have written several articles why) it’s guaranteed to lose you money, stick to catching the big long term trends that make the big profits.
3. Work smart not hard
Once you have a system your happy with that’s it. People go on about working hard in forex trading to educate yourself but once you have your system stick with it.
The market doesn’t give you extra dollars for effort, you get your reward for trading correctly.
4. Trade Infrequently
Many traders trade frequently and always like to be in the market and in on the action.
The big moves in FOREX trading, with optimum risk to reward, come just few times a year, so don’t trade for the sake of trading wait for these moves – These are the ones that will make you the big profits and that’s why you’re trading.
5. Money Management
In forex trading most traders can see moves and be right about market direction but they can’t hold a trend.
They get in, get stopped out quickly, then see the market reverse back in the direction of their trade and pile up $10,000 or more and their not in!
The reason for this is traders have not grasped money management. When trading they do the following:
Place stops to close to entry and get taken out by volatility of the market. I have seen traders put stops right at the first support in an up trend and of course they get taken out.
Forex trading is risky, so you need to place your stop far enough away from the market action to allow for volatility.
This is not being rash, but to make money you have to risk it.
Placing stops to close to entry and not taking enough risk dooms most traders to fail - Don’t make the same mistake.
Also when you have a profit don’t move the stop up to quickly, be patient and give the trade room to breathe – The big trends last months or years and to say with them you need to accept short term swings against you.
Its tough watching open profit dip, but keep your eye on the bigger picture and the bigger profits.
6. The key to success
The key to success in forex trading is to do the following:
Apply Simple Method + With Discipline + Calculated Risks = Forex trading success
While it is a simple equation most forex traders don’t do this. There always looking for a short cut or easy way to make money and in forex trading.
So there you have 5 simple tips understand and apply them and rely on yourself and you could make some big profits forex trading.
By Sacha Tarkovsky
Here we will give some simple tips that will help you increase your profit potential.
1. Get a simple method you understand
In forex trading many people think that the more complicated a method they use in forex trading the more likely they are to make money.
The fact is however that simple systems work best.
Simple systems are more robust and easier to trade with discipline, as you understand the logic and can therefore follow it with confidence when it has a losing period.
You can build one yourself easily and we have written frequently on this and it’s easy to do.
2. Trade the big trends
Forget day trading (we have written several articles why) it’s guaranteed to lose you money, stick to catching the big long term trends that make the big profits.
3. Work smart not hard
Once you have a system your happy with that’s it. People go on about working hard in forex trading to educate yourself but once you have your system stick with it.
The market doesn’t give you extra dollars for effort, you get your reward for trading correctly.
4. Trade Infrequently
Many traders trade frequently and always like to be in the market and in on the action.
The big moves in FOREX trading, with optimum risk to reward, come just few times a year, so don’t trade for the sake of trading wait for these moves – These are the ones that will make you the big profits and that’s why you’re trading.
5. Money Management
In forex trading most traders can see moves and be right about market direction but they can’t hold a trend.
They get in, get stopped out quickly, then see the market reverse back in the direction of their trade and pile up $10,000 or more and their not in!
The reason for this is traders have not grasped money management. When trading they do the following:
Place stops to close to entry and get taken out by volatility of the market. I have seen traders put stops right at the first support in an up trend and of course they get taken out.
Forex trading is risky, so you need to place your stop far enough away from the market action to allow for volatility.
This is not being rash, but to make money you have to risk it.
Placing stops to close to entry and not taking enough risk dooms most traders to fail - Don’t make the same mistake.
Also when you have a profit don’t move the stop up to quickly, be patient and give the trade room to breathe – The big trends last months or years and to say with them you need to accept short term swings against you.
Its tough watching open profit dip, but keep your eye on the bigger picture and the bigger profits.
6. The key to success
The key to success in forex trading is to do the following:
Apply Simple Method + With Discipline + Calculated Risks = Forex trading success
While it is a simple equation most forex traders don’t do this. There always looking for a short cut or easy way to make money and in forex trading.
So there you have 5 simple tips understand and apply them and rely on yourself and you could make some big profits forex trading.
By Sacha Tarkovsky
Forex Trading - Factors You Cannot Ignore To Become A Successful Forex Trader
When it comes to forex trading, there is one particular aspect that differentiates it from other types of trading. This aspect is that forex traders are predominantly technical based, depending a lot of fast entry and exit following charts. Forex traders adopt fundamental analysis only to give them a better economic picture and projection of an overall currency trend.
However, there are particular times when the forex trader has to watch out for significant fundamental developments such as economic matters, especially when there are reports and news release pertaining to international interest rates of the major currencies. This is because everything might be quiet before a news release, with prices breaking out only in a strong move upon the release of the news or after an important meeting.
Therefore, in forex trading, in considering the technical setups, the forex trader has to be aware of the dates of the release of major reports, including what the "chairman of the Fed" says. Certain comments may be construed as bullish and may cause forex prices to move strongly and vice versa.
It would be wise for the forex trader to determine a few reliable source of financial news feeds, and to apply the information from the news channels to his trading.
In any profitable trading system, the forex trader must know how to buy and sell the currency pairs, set appropriate stop losses, and set profit limits, and exploit the power of leveraged margin to his trades.
If he fails to follow these important principles, losses can easily follow and losses can exceed whatever profits and can ruin a man.
In a technical trading system, the forex trader will use some indicators to gauge the market direction . He will need to set up his charts with the right combination of indicators, and more importantly how to use them correctly.
To accelerate one's learning, a forex trader may use a trade simulator, called a trade sim for short. A trade sim provides simulation of actual forex price movements so that the forex trader can practise his entry and exit of his trades, and improve upon the timeliness of his trades.
From my own experience, I like to tell traders who are beginners to watch for 3 main technical trading setups which are broadly, to trade with the breakout of a trend, to trade with a strong trend, and lastly to trade the tops and bottoms of the market.
Following a period of consolidation which is represented on the charts as a rectangular pattern, a breakout can result in good gains. To trade with the trend means to make several trades as the prices continue to move up, and to buy on the dips and to sell on the rebound. To trade the tops and bottoms, a forex trader needs to recognise toppish and bottoming chart patterns, including Japanese candlestick charting to catch a glimpse of the future.
The biggest advantage of forex trading is that a lot of money can be made ( or lost) within a very short period of time.
Therefore, it is always best for a less experienced forex trader to get under the tutelage of an experienced professional trader to walk him through the ropes.
Good traders are never born. Traders become good through gaining skills and from learning through experience. Either they pay their dues in the market, gaining experience from disappointing trades that went wrong, or they can have a smoother transition into the lucrative field of forex trading by getting a successful professional trader to mentor them.
Academic and head knowledge is useful,but it is always skills and experience that will determine how successful and profitable a trader is. Get trained, be prepared, be capitalised and you can become a successful forex trader.
By Peter Lim
However, there are particular times when the forex trader has to watch out for significant fundamental developments such as economic matters, especially when there are reports and news release pertaining to international interest rates of the major currencies. This is because everything might be quiet before a news release, with prices breaking out only in a strong move upon the release of the news or after an important meeting.
Therefore, in forex trading, in considering the technical setups, the forex trader has to be aware of the dates of the release of major reports, including what the "chairman of the Fed" says. Certain comments may be construed as bullish and may cause forex prices to move strongly and vice versa.
It would be wise for the forex trader to determine a few reliable source of financial news feeds, and to apply the information from the news channels to his trading.
In any profitable trading system, the forex trader must know how to buy and sell the currency pairs, set appropriate stop losses, and set profit limits, and exploit the power of leveraged margin to his trades.
If he fails to follow these important principles, losses can easily follow and losses can exceed whatever profits and can ruin a man.
In a technical trading system, the forex trader will use some indicators to gauge the market direction . He will need to set up his charts with the right combination of indicators, and more importantly how to use them correctly.
To accelerate one's learning, a forex trader may use a trade simulator, called a trade sim for short. A trade sim provides simulation of actual forex price movements so that the forex trader can practise his entry and exit of his trades, and improve upon the timeliness of his trades.
From my own experience, I like to tell traders who are beginners to watch for 3 main technical trading setups which are broadly, to trade with the breakout of a trend, to trade with a strong trend, and lastly to trade the tops and bottoms of the market.
Following a period of consolidation which is represented on the charts as a rectangular pattern, a breakout can result in good gains. To trade with the trend means to make several trades as the prices continue to move up, and to buy on the dips and to sell on the rebound. To trade the tops and bottoms, a forex trader needs to recognise toppish and bottoming chart patterns, including Japanese candlestick charting to catch a glimpse of the future.
The biggest advantage of forex trading is that a lot of money can be made ( or lost) within a very short period of time.
Therefore, it is always best for a less experienced forex trader to get under the tutelage of an experienced professional trader to walk him through the ropes.
Good traders are never born. Traders become good through gaining skills and from learning through experience. Either they pay their dues in the market, gaining experience from disappointing trades that went wrong, or they can have a smoother transition into the lucrative field of forex trading by getting a successful professional trader to mentor them.
Academic and head knowledge is useful,but it is always skills and experience that will determine how successful and profitable a trader is. Get trained, be prepared, be capitalised and you can become a successful forex trader.
By Peter Lim
3 Reasons Forex Trading is So Popular
First, it may be necessary to explain what forex trading is. Forex trading, also called currency trading, FX trading, Foreign Exchange trading and forex currency trading refers to the largest financial investment market in the world. Forex trading is fully electronic and has an average daily capital turnover amount in the area of $1.5 trillion. This amount of capital changing hands dwarfs the stock and commodity markets. Forex trading is the simultaneous buying of one particular currency and the simultaneous selling of another particular currency. If a forex investor believed that the Euro Currency would weaken versus the US Dollar they would Sell EUR/USD. In forex trading the strongest currency is listed first in the pair. Currently the European Currency (EUR), the Australian Dollar (AUD) and the British Pound (GBP) are the only 3 currencies valued higher than the US Dollar (USD).
The #1 reason forex trading is so popular is the ease and accuracy of trading at the forex traders convenience. Forex trading follows the sun around the world which enables investors to trade on their schedule 24 hours a day from the comfort of their own computer. Most forex trading platforms offer free real time quotes, charts and news to facilitate forex trading efficiency. Many also offer free practice forex trading accounts so investors can learn forex trading without any risk. Visit www.tkfutures.com/forex.htm and open an educational forex trading demo practice account. These typically offer the forex trader $50,000 in virtual equity and 30 days to practice forex trading with.
The #2 reason forex trading is so popular is the inexpensive trading costs. Many forex trading companies charge no commissions. The forex trading company and the introducing broker are compensated by the pip spread. For instance, a EUR/USD pip spread may be 3 pips which are equal to $30. The investor is leveraging $100,000 of EUR/USD with a total transaction cost of $30.
The #3 reason forex trading is so popular is the limited risk of capital loss. Many but not all forex trading platforms do not allow trading once the forex account equity amount falls below the required margin level. The forex trading platforms that offer this service will automatically liquidate the currency positions before the account can go negative. There are no margin calls in forex trading for the investor to worry about. Forex trading does offer extreme leverage of up to 100 times the value of the trading account which can cause significant losses in a short period of time. Visit www.tkfutures.com/forex.htm to learn more.
By MK. Smith
The #1 reason forex trading is so popular is the ease and accuracy of trading at the forex traders convenience. Forex trading follows the sun around the world which enables investors to trade on their schedule 24 hours a day from the comfort of their own computer. Most forex trading platforms offer free real time quotes, charts and news to facilitate forex trading efficiency. Many also offer free practice forex trading accounts so investors can learn forex trading without any risk. Visit www.tkfutures.com/forex.htm and open an educational forex trading demo practice account. These typically offer the forex trader $50,000 in virtual equity and 30 days to practice forex trading with.
The #2 reason forex trading is so popular is the inexpensive trading costs. Many forex trading companies charge no commissions. The forex trading company and the introducing broker are compensated by the pip spread. For instance, a EUR/USD pip spread may be 3 pips which are equal to $30. The investor is leveraging $100,000 of EUR/USD with a total transaction cost of $30.
The #3 reason forex trading is so popular is the limited risk of capital loss. Many but not all forex trading platforms do not allow trading once the forex account equity amount falls below the required margin level. The forex trading platforms that offer this service will automatically liquidate the currency positions before the account can go negative. There are no margin calls in forex trading for the investor to worry about. Forex trading does offer extreme leverage of up to 100 times the value of the trading account which can cause significant losses in a short period of time. Visit www.tkfutures.com/forex.htm to learn more.
By MK. Smith
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