U.S. Dollar Can't Find Traction

This is no surprise when I say the US dollar is in a long term downtrend, but last month I noticed some strength in the dollar’s technicals which had me thinking that we might be in for a rally in this currency, but the recent action on the RSI monthly/wkly has me thinking otherwise. The inability of this currency on the monthly chart below (click to enlarge) to break above the 60 range is troublesome. Add in the fact that this relative strength index is making lower lows and is now below the 50 range, the bears really are making a strong case that this is a doomed currency.

The weekly chart below (click to enlarge) looks as if it’s heading back down to it’s lower trendline. One area I’ll be watching is whether the RSI goes below the 30 line this time, where it hasn’t been since ’08. If the dollar can’t find buyers that prevent it from going below the 30 line, we may turn up and try to rally to the upper trendline, but for now this is a market to be on the sidelines as I don’t see an edge.

It’s hard to believe when I started coming to Canada that $1.00 US dollar was worth nearly $1.50 Canadian loonies. I remember how cheap it was to go shopping or grab dinner…those days are long gone with the 2 currencies at par and the miserable HST Tax that British Columbia so wrongly enacted on it’s people, tacking on 13%. I have to laugh when economist say that inflation is tame.

Source: www.markets.financial markets.com

Euro Strong Despite Rising Credit Risk Levels in Eurozone

If you watch world equity markets, volatility, interest rates, consumer confidence and currencies, you would be led to believe that the eurozone crisis is behind us. In reality, the eurozone still has a strong contingency of countries with credit default spread levels that are only held by what we consider "junk" bonds. A spread of 639 bps for Ireland implies a 5-year default probability of 43%!

Credit spreads of 600 are unsustainable for continuous government funding. We witnessed a small decline in credit risk levels in the beginning of 2011, but now they appear to be creeping back up to their highest historic levels.
With the eurozone in such distress, we might expect that the Eurodollar would be taking a beating... in fact we see quite the opposite:

Despite lofty levels in eurozone default probabilities, the euro is up 15% from the June lows.

My question to all investors is why the euro deserves respect in today's markets? You might suggest that the euro is the best alternative to the dollar, but I would contend that the eurozone's financial issues and political gridlock trump any hints of credit risk in US sovereign debt. Nothing has been solved in the eurozone and the credit spreads suggest that we have yet to mitigate the problem.

As an investment strategy you might consider shorting the euro versus the currency of your choice. If you are concerned that the euro will continue to rally, then you can play the outlier bet by selling out of the money call options on the CurrencyShares Euro Trust (FXE).

How to Read Currency Quotes

How to Read Currency Quotes

Exchange Traded and Over the Counter Markets

When trading stocks or futures you normally do so via a centralized exchange such as the New York Stock Exchange or the Chicago Mercantile Exchange. In addition to providing a centralized place where all trades are conducted, exchanges such as these also play the key role of acting as the counterparty to all trades. What this means is that while you may be buying for example 100 shares of Google stock at the same time someone else is selling those shares, you do not buy those shares directly from the seller but instead from the exchange.

The fact that the exchange stands on the other side of all trades in exchange traded markets is one of their key advantages as this removes counterparty risk, or the chance that the person who you are trading with will default on their obligations relating to the trade.

A second key advantage of exchange traded markets is that as all trades flow through one central place, the price that is quoted for a particular instrument is always the same regardless of the size or sophistication of the person or entity making the trade. This in theory should create a more level playing field which can be an advantage to the smaller and less sophisticated trader.

Lastly, because all firms that offer exchange traded products must be members and register with the exchange, there is greater regulatory oversight which can make exchange traded markets a much safer place for individuals to trade.

The downside that is often cited about exchange traded markets is cost. As the firms who offer exchange traded products must meet high regulatory requirements to do so, this makes it more costly for them to offer these products, a cost that is inevitably passed along to the end user. Secondly, as all trades in exchange traded products must flow through the exchange this gives these for profit entities immense power when setting things such as exchange fees which can also increase transaction costs for the end user.

Unlike the stock market and the futures market which trade on centralized exchanges, the spot forex market and many debt markets trade in what’s known as the over the counter market. What this means is that there is no centralized place where trades are made, instead the market is made up of all the participants in the market trading among themselves.

The biggest advantage to over the counter markets is that because there is no centralized exchange and little regulation, you have heavy competition between different providers to attract the most traders and trading volume to their firm. This being the case transaction costs are normally lower in over the counter markets when compared to similar products that trade on an exchange.

As there is no centralized exchange the firms that make prices in the instrument that is trading over the counter can make whatever price they want, and the quality of execution varies from firm to firm for the same instrument. While this is less of a problem in liquid markets such as FX where there are multiple price reference sources, it can be a problem in less highly traded instruments.

While the lack of regulation can be seen as an advantage in the above sense it can also be seen as a disadvantage, as the low barriers to entry and lack of heavy oversight also make it easier for firms offering trading to operate in a dishonest or fraudulent way.

Lastly, as there is no centralized exchange the firm that you trade with when you trade in an over the counter market like forex is the counterparty to your trade, so if something happens to that firm you are in danger of loosing not only the trades you have with that firm but also your account balance.

It is for these reasons that there is so much focus among forex traders as to which firm to trade with, with special attention being paid to the financial stability of the firm and the execution that they provide.

As we proceed through this forex trading course we will continue to gain a better understanding of the structure of the market and traders should be well prepared after going through those lessons to make an informed decision for themselves on this issue.

That’s our lesson for today, in our next lesson we are going to look at the structure of the forex market so we can gain a better understanding of who actually controls the market, so we hope to see you then.

Source: http://www.aboutcurrency.com/

Overview of the Forex market 2011

Overview of the Forex market 2011

What You Need To Know About Forex Trading

There are many interesting things that can be pointed out about the foreign exchange market, however there are a few major things that really separate this market from the equities and futures markets.

24 Hour Liquidity

Probably the biggest advantages that traders of the forex market will cite is that the market is by far the largest market in the world, and that main currencies can be traded actively 24 hours a day. The huge amount of volume traded in the world’s main currencies each day, dwarfs the volume traded in the equities and the futures markets many times over. This combined with the 24 hour trading day gives traders the ability to determine their own trading hours instead of having to trade within set hours as they would have to when trading stocks and/or futures. More importantly than this however is that as the market is more liquid than the futures and equities markets, price slippage (the difference between where you click to enter or exit a trade and where you actually get in or out) in the forex market is normally much smaller than in the stock and futures market.

The disadvantage here is that real market junkies sometimes cannot pull themselves away from the screen while the market is trading and need the finite trading hours of futures and/or stocks to force them to step away from the market. As my background is in forex I have seen many stock and futures traders burn out when trying to trade forex for this reason.

Leverage

There is more leverage provided to traders by most forex trading firms than any other market in the world. Many firms offer you up to 200 to 1 leverage which if fully used would essentially take a .5% move in the market and turn it into a 100% gain or loss on the value of the account.

As the most highly traded currencies rarely move more than a couple of percent in a day, this allows traders to tailor the forex market to their needs, making it a conservative instrument when traded without leverage or the crack cocaine of financial instruments when making full use of the leverage available.

While the availability of leverage is normally seen as an advantage in the above sense, it is also one of the places where forex gets its bad name. Many times new traders are lured to the market after seeing the ability to amplify their returns by making use of all that leverage. What these traders do not fully understand however is that leverage is a double edged sword causing greater losses just as quickly as it can cause greater profits. As a result of this lack of understanding and jackpot mentality, many beginning forex traders loose their money very quickly as a result.

Only Macro Events Affect the Forex Market

Unlike stocks where individual company events have a huge affect on price movements the most highly traded currencies are only affected by macro events like the capital flows between countries, and changes in government or central bank policies. This is often pointed to as an advantage by Forex Traders who feel that this brings less uncertainty to their trades than stock trades which can be thrown way off track if a surprise happens such as a CEO quitting or something similar in the micro picture.

This combined with the fact that there is so much liquidity in the market also makes it a much harder market for someone to come in and manipulate the price to their advantage and to the detriment of others.

The disadvantage here is that this also means less opportunities to gain an informational edge and to profit from that edge as well.

No Upward Bias

Over the long term the US stock market has always gone up giving stocks in the US an upward bias when trading. As currencies are traded in pairs when the value of one currency is falling this automatically means that the value of another currency is rising. This is an advantage from the standpoint of there is equal opportunity for profit from both long and short trades. This is a disadvantage from the standpoint of not having that upward bias working for you when you are in a long trade.

The last characteristic that we will cover is how the fact that the forex market is an over the counter market affects us as traders. As this is a fairly in depth topic we are going to devote a full lesson to it which will be our next topic of discussion so we hope to see you then.
Source: http://www.aboutcurrency.com/

Forex News Trading Strategies

In this lesson, I will talk about the different ways how you can trade forex during key economic news events.

Most common used news strategies:



•Trading the Numbers
•Straddle the News
•Hedging the News

Trading the Numbers

Traders want to take advantage of the discrepancy between the forecasted and the actual key economic number when trading the numbers. As mentioned before, you need a very fast news data feed such as Reuters or Bloomberg because you want to get in the trade before the spike begins.

Steps to trade the numbers:

1. Purchase a fast news datafeed at Reuters or Bloomberg
2. Track the news consensus and determine the significance of the economic news report being released, if it is not important, do not trade it.
You will be able to find all important data on a good data calendar
3. For each important news release you need to know how large a discrepancy has to be in order for you to act on the trade.
4. Finally, watch the news release using your fast datafeed and trade the numbers.

Example:

UK CPI News Release

"There are three different numbers. There is the month over month CPI, there is the year over year CPI, and there is the core CPI. The most important number that most traders and economists will be focusing on is the CPI headline year over year number, which is expected at around 2.8%, same as it was last month.

If for some reason the number comes out at 3.1% or higher, it would set a new high in many years, and a possibility of a rate hike out of UK will probably be considered imminent, so GBP/USD may possibly go up by 80 pips or more in the first hour of the report.

If the CPI reads at 2.4% or lower, it would be a huge drop, and most would probably assume that the Bank of England will have to think twice before hiking the rate anytime soon, so GBP/USD may possibly go down by 80 pips or more in the first hour."

Possible scenarios:

If the consensus and the actual number is inline with the market expectations, you would not trade.
If the actual number is at 3.1% or higher, you would go long.
If the actual number is at 2.4% or lower, you would go short.

Below picture shows what happened that day. The number came out much better than expected and the GBP/USD spiked up.


GBP/USD CPI news release spike

Things to consider when interested in "Trading the Numbers":

1. You have only 0.5 - 2 seconds in which to act before the spike begins. Not fast enough? No money for you.
2. You really need to know how to read and interpret the numbers. Wrong interpretation will cost you money!
3. A fast news service is very expensive and is not recommended when you trade a small account because it's very unlikely to cover your data feed expenses.

Straddle the News

This strategy is very simple and consists of 2 limit orders, one to buy a few pips above the range high and one to sell a few pips below the range low, then wait for the price to breakout triggering one of your orders. Your stop loss order should be placed a few pips below the range low when buying, conversely, a stop loss order should be placed a few pips above the range high when selling.

An example: (See picture below):
Range high: 1.9938
Range low: 1.9919

Place an order to buy at 1.9941 with a stop loss order at 1.9917. Take profit at 1.9991.
Place an order to sell at 1.9916 with a stop loss order at 1.9940. Take profit at 1.9866.

That's it!


GBP/USD CPI news straddle strategy

Things to consider when interested in "Straddle the News" forex strategy:

1. False breakouts or whipsaws can occur, especially when the release came close or in line with market expectations and traders fade the breakout (i.e place trades in the direction opposite to the initial price movement). Worst case scenario, both stop losses get hit. Although the strategy relies on "true" breakouts it can still work during a false breakout if you take the profits quickly and don't get greedy plus you put very tight stops below or above the range to minimize the risk.

2. During key news releases, spreads can widen up and both buy and sell orders can be triggered at the same time. You will end up losing.

3. Slippage - During major fundamental announcements, both stop loss and limit orders may not be guaranteed to be filled at your price. 'Slippage' is the cost involved when currency traders enter the market at a price worse than the level they wanted to get into.

For example, a trader wants to sell GBP/USD at 1.9000 but the order is executed at 1.8999 rate. That 1 pip difference is slippage cost.

Hedging the News

What is hedging? Hedging enables a currency trader to simultaneously hold Buy and Sell positions in the same currency pair at the same time in one trading account.

Hedging News Strategy:

1. To hedge, go both long and short at market price 30 min before the news release.
2. Add a protective stop loss order to both long and short positions 30 seconds before the news release.
3. Add a limit order to both long and short positions 30 seconds before the news release.

Now wait...

Possible scenarios after the news release :

Whipsaw or false breakout - both stop losses can get hit.
No movement - nothing will happen to your open positions.
Price breaks out - one of your stop loss orders will get hit and hopefully, you will reach your target level on the remaining open position.

Source: http://www.aboutcurrency.com/

What is FOREX ?? (Foreign Exchange)?

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.

MG Financial, now operating in over 100 countries, serves all manner of clients, comprising speculators and strategic traders. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, MG's DealStation™ allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.

Source: http://www.mgforex.com/

The Fed remains worried about growth

The Federal Reserve released its first policy statement of the new year, and observers learned a few things. First, the Federal Open Market Committee remains wary about the weakness of the American economy:

Information received since the Federal Open Market Committee met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions. Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, while investment in nonresidential structures is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.
I think the economic data that was coming in through December moved expectations from too pessimistic to perhaps a little too optimistic. Recent datapoints have been a little off—jobless claims have yet to hit the sub-400,000 level touched in late December, durable goods orders have softened a bit, and home prices are disappointing (though the housing figures should be treated with caution). The underlying trend in the numbers is clearly toward an accelerating recovery, but even a 4% real growth rate in 2011, which is possible, implies a long period of economic slack ahead.

Secondly, the shift in the make-up of the FOMC has not meaningfully altered the commitment to current policy, at least not yet. With the new year, perpetual dissenter Thomas Hoenig lost his voting status, but demand-side sceptics like Narayana Kocherlakota and Richard Fisher gained a vote. But the Fed's policy has not changed—the plan to purchase $600 billion in additional assets remains on track and the language on extended low rates is still in place—and indeed, the statement was supported unanimously for the first time in ages.

What remains uncertain is how this policy path will develop as the year proceeds. If commodity prices rise into the summer, will the consensus on the FOMC stand? It would be surprising if such a rise led to a big increase in core inflation given the huge slack in the labour market, but it's difficult to hold back rate increases when headline inflation jumpts to near 3%. If the unemployment rate does begin to drop meaningfully, will disputes arise over just where the new natural rate lies?

For now, the Fed's path remains easy. With unemployment too high and inflation too low, the central bank should adopt an aggressively expansionary approach. But can Ben Bernanke keep the hawks in line as recovery continues? We'll have to see.

Forex trading recommendations for 2011

Brad Bechtel, a managing director at Connecticut- based Faros Trading, gave IBTimes his forex trading recommendations for 2011.

He recommends shorting the U.S. dollar or euro versus the Canadian dollar or Australian dollar.

Below are the reasons behind his recommendations and broad general trends he sees.

‘Debt-Monetization’

“Japan, U.K., the European Central Bank (ECB), and the U.S. are engaged in significant amounts of -- call it what you want -- quantitative easing, monetization of debt, printing money, however people want to refer to it -- that is going to devalue their currencies,” said Bechtel.

He said out of these four currencies, it is difficult to forecast which one will devalue the fastest. Therefore, he recommends shorting it against the Australian dollar or the Canadian dollar.

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The central banks of Australia and Canada are engaged in monetizing their government debt. Moreover, their currencies are backed by commodities like oil and gold.

While Australia and Canada do face pressures on the housing front, these are secondary compared to the currency-devaluating policies of the U.S. and Europe, said Bechtel.

Furthermore, because the Australian dollar and the Canadian dollar have higher interest rates than the U.S. dollar and euro, they will pay investors the interest rate differential.

Pressures Against U.S. Dollar

Bechtel thinks emerging markets' central banks will diversify their foreign exchange reserves out of the dollar and into currencies like the pound sterling, the euro, and the yen.

This will be positive for these currencies and negative for the dollar.

The main driver of this, according to Faros, is China allowing its currency to appreciate more rapidly in response to domestic inflationary pressures.

As China does this, other exporting emerging markets countries will in turn allow their currencies to appreciate. One, they will be able to do so without losing competitiveness to China. Two, they will need to do so in response to their own domestic inflationary pressures.

As all these currencies are allowed to appreciate against the dollar, their country’s demand for the dollar will diminish.

Carry Trades

Carry trades are popular strategies used by institutional traders. This strategy involves borrowing (going long on) low-yielding currencies, typically the Japanese yen or the Swiss franc, and lending (going short on) high-yielding currencies like the Australian dollar.

Now, because the interest rate on the U.S. dollar is so low, investors executing the carry trade are shifting from the yen and Swiss franc as funding (borrowing) currencies and using the dollar instead.

As traders unwind their yen/franc denominated ‘legacy carry trades’ by buying back the yen and franc, these currencies will experience intermittent rallies. Meanwhile, as they put on new carry trades using the dollar as the funding currency, the dollar may experience intermittent bouts of weakness.

Source: http://www.ibtimes.com/

A Powerful Forex Trading Tool: Pivot Pint

Pivot Point Analysis is a robust and time tested method of market analysis. This strategy works in all markets that have an established range. The range is the high and low of a given time period and it accurately depicts the market participants exuberant bullishness and pessimistic bearishness for a given trading session.

The importance of these high and low formed in a trading session cannot be under emphasized. High is the reference point that shows buying out of greed while low is a reference point that shows selling out of fear. Fear and greed are the two emotions that rule any market.

Pivot Points Analysis depends on a number of mathematical formulas that are not very complex but that use these three important reference points the High (H), Low (L) and the Close (C).

Since there is no formal open and close in the forex market, we can take the NY Bank Settlement at 5:00 PM EST as the close of the daily trading session and 5:05 PM EST as the next day’s trading session open. It is rare to find the daily trading session go beyond the R2 and S2 levels.

R3 is the extreme resistance level that is usually caused by the news driven price shock and most of the time does not come into play. R2 is the level where the price action mostly experiences significant resistance. However, in case of a bearish market, price action will most often fail to break the resistance level R1.

Similarly in a bullish market S1 is important while in a bearish market S2 is important. S3 rarely comes into play and is only effective in an extremely bearish market caused by a news driven event.

Now, you might be feeling analysis paralysis due to information overload caused by too many levels used in pivot point analysis. Here is how you are going to filter these numbers. Pivot Point can be used as the actual trading number in determining the high or low of a given time period. Read the next article on how to filter these numbers.

Source: http://www.financialnewsline.com/

Where Should I Invest My Money?

Every retail investor wants to put his hard earned money to work to maximum potential. Investing in debt instruments, like fixed deposits or NSCs is what everyone knows about. But the problem is, no debt instruments can give you rock star returns. Inflation, aka “Rising costs” eat up most of the interest benefits that you get from these investments. Typically, interest rates on FDs, NSCs and other schemes are 6 to 8% and same is the rate of inflation.

So, if you want to have non linear returns from your money, shares aka stocks is the only long term way that has delivered returns to WISE investors over the years. The term wise is very important here, as the difference between returns received by the best and the worst investors are as different as the sky and the earth. Here are some points to ponder:

Even if you invest in an index, you generally get better returns than debt over a long term. E.g. BSE Sensex has grown about 15-16% per year over last 10-12 years. There have been some years when it has grown negatively, but that’s why it is recommended to invest in equity for long term, for most people, who can’t give much time to making investment decisions. The difference between a 16% per year return and 7% per year return is quite significant. 10,000 Rs. become nearly 2 lakhs over 20 years with 16% returns, whereas with 7% returns, they only turn into 3.8 lakhs in 20 years.

Also don’t forget the dividend yield that you get. It is a nice bonus that you can use to reinvest your money.

Of course, what matters is “Choice”. If you could pick an Infosys or a Bharti Airtel 10-15 years ago, you would be filthy rich even by investing smaller amounts in these scrips.

4. Picking losers – There is of course a risk factor to equity. For example, if you had bought DLF in early 2008, it was trading at around 1000 Rs. and now it languishes at around 300 Rs now, after 2.5 years. So your sum of 100,000 would have become a measly 30,000 Rs! In the same period, a 7% FD would give you a relatively healthy total return of around 1,18,000 Rs.

For most people, mutual funds are a safer route. They generally can’t give you muti-bagger returns, but can outperform the basic index (Sensex or Nifty) over the long term. But, even in MFs, there are winners and losers.

The truth is, whatever the marketers may tell you, that a lot of people make wrong decisions in markets, and lose money. Only a handful of companies become “blue chips” over the long term, and the choice of what you buy matters a lot.

If you like doing your own research, you should stick to some basic principles, like thoroughly reading annual reports of companies before investing. At least thoroughly read some brokerage reports before making the decision.

Mutual funds is a relatively safer avenue, but it doesn’t mean you can put your money in any fund or scheme that “the sales guy” recommends. You need to research the funds by looking at NAV charts, the exit loads, and most importantly, what kind of fund it is. It also depends upon your risk appetite.
Source: http://www.financialnewsline.com/

Penny Stocks: The 3 Best Things To Look For In A Penny Stock

When traders work to be a winner at trading penny stocks, there has to be a great deal of consistency with your tactics and the behavior of the market. A specific plan of entry and exit is necessary on every trade. Without one, you are going to crash and burn and will most likely never make a real income on penny stocks. No one asks for failure, so why do so many traders fail? From my research, here are the 3 top features to find in a good penny stock that help make your trade succeed.

When you get started, the foremost trade indication is that the company has a competition advantage versus other companies. This requires having built new deals with larger companies or a fresh source of territory to build and do business in. A prime factor to find is a contract with a well known business when getting ready to pull the trigger.

Also, be sure to have a look at the earnings report of a penny stock you are looking to trade. This means searching through for a upwards trend in profits. It’s absolutely necessary to see a rising earnings pattern without a rise in penny stock value. The odds are, this will lead to a spike in price in the near future.

Finally, get a micro cap stock with a technical analysis that reads positive. If you are unfamiliar with technical analysis, most patterns are simple to get the hang of, so look for a common one like the double bottom or the ascending triangle. One or the other can be an indicator of things to come and will create a much greater chance the trade will be successful.

Pound for pound, penny stock trading is a test of knowledge and patience. After all, if not for the challenge, no one would fail! Yet fortunately, by taking the correct path and trading on a proven system, you can make much better profits. Make sure you are always finding the right penny stocks to watch and you can make quite a killing with penny stocks!

Tired of getting in on the wrong trades? Visit my site to find which penny stocks to watch to make the most money trading stocks! You’ll learn about tons of secrets and help you make a fortune with penny stock trading in order to at long last see some regular profits coming in off of penny stock trades.

source: http://www.financialnewsline.com/

Strengths Of Fx Dealing

Fx Trading has numerous benefits as compared to share or fairness trading. Due on the current uncertainty of the commodity market, quite a few inventory or fairness traders are now thinking to commerce the Forex trading market. Their principal question and concerned was why commerce the Currency trading market? What are the benefits of the Forex industry as compared towards the investment market place? In this article, I will go via some of the rewards of Foreign exchange Trading.

24 Hour Global Industry – The Foreign exchange market place is truly a 24 Hour International Market opens from Monday to Friday. The Forex market place starts each buying day from Sydney, Tokyo, London, and finally to New York. No matter regardless of whether it is inside the day or night, you can find generally market participants actively trading the Currency trading market. Currency trading traders can respond incredibly rapidly to any forex fluctuations or breaking news immediately unlike the share and future market. The ECN’s (Electronic Communication Networks) in inventory and long term current market are relatively new products derived as an after hours extension on the regular trading hours. Several of these ECN’s have ill liquidity and there’s no guarantee that a trade will be executed, or at a honest price. Commonly, commodity or future current market traders would need to wait until the true marketplace opens the next morning so that you can execute a trade at honest value.

Liquidity – The Forex market is the largest and most liquid market place from the world. According to a survey conducted by the Bank for International Settlements (BIS) in April 2007, average every day dealing volume for the Forex industry reached an all-time record high of US$3.2 Trillion. A 71% raise from US$1.9 Trillion that was traded in April 2004. This enhance is due mainly towards the participation of retail traders utilizing broker’s electronic buying and selling platform. This tremendous turnover is far more than all the world’s share markets combined on any given day. With a everyday buying and selling volume larger than all inventory current market combined, this will ensure price stability. With such liquidity, Foreign exchange Trader can open or close a position devoid of substantially difficulty and most importantly, will receive a honest industry price.

Opportunity to Make Funds in Each Direction – There is no such thing as “bull” or “bear” current market in Forex. In Forex trading, it really is of no concern no matter whether the economic system is booming or in a recession. For inventory dealing, profits are typically made when the economy is booming. But we all know that the economic cycle is cyclical – all things that go up must come down. This isn’t the case in Foreign exchange market. Regardless of how significant economies are performing, currency exchange rates are generally fluctuating, and this in turn will provide buying opportunity for traders to acquire profit.

Simplicity – There are not quite a few key currency pairs traded on the Currency trading market. Therefore, traders may perhaps have a greater feel of value movement patterns and behavior. Where as inside inventory market, there’s literally thousands of stock to monitor and it just isn’t simple to follow so a lot of of them.

Modest Investing Capital with Excessive Revenue Probable – Nowadays, the minimum total required to open a trading account is less than $300. As a result of competition, some brokers may well even accept considerably lesser amount. In Foreign exchange market, this modest buying amount could potentially earn hundreds of dollars per week. In investment industry, this may possibly not be possible. Of course each market place have probable to lose as properly, but from the Fx current market, traders can make great cash with substantially lesser dealing capital.

Substantial Leverage of 100:one – one hundred:one leverage is commonly accessible from on-line Forex brokers. This is substantially exceeds the common 2:one margin offered by equity brokers, and 15:1 from the futures market. Some brokers even offer higher leverage of 100:1. Even so, it can be vital to remember that although this kind of leverage allows traders to maximize their profit potential, the potential for loss is equally great. Leverage is really a double-edged sword and necessitates the use of right income management. Without having right risk management, this large degree of leverage cans also lead to big losses along with gains.

Demo Account – Forex Buying and selling has a unique feature called “Demo Account” or simulate account. This “Demo Account” permits the trader to commerce utilizing real-time cost on the broker’s buying and selling platform with the exact interface and function as a actual account. With this simulated account, Forex trading trader could acquire genuine marketplace experience in buying and selling without having risking any capital.

Source: http://www.financialnewsline.com/

Best Forex Trading Strategies: Forex Day Trading Strategy Secrets

Most forex traders are searching for the best Forex day trading strategy secrets and the best systems for growing forex trading profits, the information below ought to assist you on both areas. FOREX trading is nothing more than direct access trading of different sorts of foreign currencies. During the past, foreign exchange trading was largely limited to giant banks and institutional traders Latest technological improvements have made it thus that small traders may even exploit the many benefits of FOREX trading by by means of the variety of online trading platforms to help your Forex day trading strategy.

The Market Background

FOREX markets have distinctive features that offer unparalleled capacity for rewarding trading in any market or any step of the commercial enterprise cycle. For starters, FOREX trading boasts a 24-hour market, giving traders the opportunity to reap the benefits of advantageous market conditions anytime. Secondly, the FOREX market is the greatest liquid market within the world. FOREX traders may enter or exit the market whenever they need, during nearly any market condition. There even exist nominal execution barriers or risk and no daily trading restrictions.

Forex Day Trading: The Flaws

For all the benefits of the FOREX market, 1 glaring weak point emerges. The FOREX market is seen as unregulated though the operations of major dealers, for example commercial banks in money centers, are regulated under the banking legislation. The daily functions of retail FOREX brokerages aren’t regulated by any laws or rules particular to the FOREX market. Lots of of these sorts of establishments within the United States, do not even report back to the I.R.S. To make the most of the explosive promise of successful FOREX trading, people ought to keep to these guidelines for a superior Forex day trading strategy.

1.Determine the quality of the broker institution you opt for. In contrast to equity brokers, FOREX brokers are usually connected to large banks or lending institutions due to the huge quantities of capital that’s required. FOREX brokers should be registered with the Futures Commission Merchant (FCM) in addition to regulated by the Commodity Future Trading Commission (CFTC)

2. Make a Request of a free trial. Before you commit to any broker, be certain to ask for free trials so that you can test their alternative trading platforms. Brokers generally provide technical as well as elementary commentaries, economic calendars and different analysis as a means of helping you. Basically, a top quality broker can provide all that one needs to be successful.

3.Monitor two monetary conferences to supply knowledge into the upcoming FOREX market. Two important conferences FOREX traders ought to watch for are the federal Open Market Committee and the Humphrey Hawkins Hearings. By reading the reports and studying the commentary, FOREX basic analysts can get a greater comprehension of any and all long-term market trends it also permits short-term traders to be able to profit from extraordinary happenings.

Forex Day Trading Strategy: Summation

There is no doubt there is substantial amounts of money to be made within the forex marketplace with the right number of know-how and the proper system in place. I hope the information above has supplied you some insight into a successful Forex day trading strategy.

Source: http://www.financialnewsline.com/

China's Currency: The rise of the redback

IN 1965 Valéry Giscard d’Estaing, then France’s finance minister, complained that America, as the issuer of the world’s reserve currency, enjoyed “an exorbitant privilege”. China’s president, Hu Jintao, does not have quite the same way with words. But on the eve of his visit to America this week he told two of the country’s newspapers that the international currency system was a “product of the past”. Something can be a product of the past without being a thing of the past. But his implication was clear: the dollar’s role reflects America’s historical clout, not its present stature.

Mr Hu is right that America’s currency punches above its economy’s diminished weight in the world. America’s share of global output (20%), trade (only 11%) and even financial assets (about 30%) is shrinking, as emerging economies flourish. But many of those economies, such as South Korea, still sell their exports for dollars; many, including China, still peg their currencies to the greenback, however loosely; and about 60% of the world’s foreign-exchange reserves remain in dollars.

This allows America to borrow cheaply from the rest of the world. Its government has been able to overspend, secure in the knowledge that its IOUs will be bought by foreign central banks, which are not too fussy about price. America would show more self-discipline, many Chinese believe, if the dollar had a little bit more competition.

Related items
China's currency: Stranger than fiction
Jan 20th 2011
The rise and fall of the dollar: Go with the flows
Jan 20th 2011Could the yuan become a rival? China’s economy will probably surpass America’s in outright size within 20 years. It is already a bigger exporter. It is prodding firms to settle trade and even acquire foreign companies in its own currency. That is adding to a pool of “redbacks” outside its borders. These offshore yuan are, in turn, being tapped by borrowers, issuing “dim sum” bonds in Hong Kong.

But as the dollar’s history shows, economic clout is not enough without financial sophistication. If foreigners are to store their wealth in yuan, they will need financial instruments that are safe, stable and easily sold. Dim sum makes for a tasty appetiser. But the main feast of China’s financial assets is onshore and off-limits, thanks to its strict capital controls. The government remains deeply reluctant to let foreigners hold, buy and sell these assets, except under tight limits. Indeed, it is barely ready to give its own people financial freedom: interest on bank deposits is capped; shares are largely owned by state entities; and bonds are chiefly held by the banks—which are, in turn, mostly owned by the state.

Over time China will relax its financial grip. But even if it could usurp the dollar’s role as the world’s currency, it will not replicate the American set-up. The United States takes advantage of the dollar’s position to borrow cheaply from the rest of the world, selling its assets in return for goods. China is a mirror image of this. It runs a trade surplus, selling goods in return for financial claims on foreigners. Its firms, households and government save more than they can invest at home.

A different kind of perk

Rather than seeking to borrow in its own currency, China may harbour the opposite ambition: to lend in its own currency. The exorbitant privilege it may covet is a lower foreign-exchange risk on its savings. On top of the trillions China has lent to America’s treasury, it also holds stakes in Australian mines, African farms and Swedish car companies. But because none of these assets is in yuan, China suffers a capital loss whenever its currency strengthens. It would no doubt like to share some of this risk with the rest of the world. The model is not America, but Germany, an international creditor which holds 70% of its foreign assets in euros.

There is a catch, though. No one will want to borrow in a currency that is only ever going to strengthen, increasing the value of their debts. So if China wants to “yuanify” some of its claims on the rest of the world, it will need a currency that can go down as well as up. To make people believe the yuan can fall tomorrow, China will have to loosen its currency’s peg and let it rise faster today. China is different from America: it is a rising economic power and a thrifty one. But one rule still holds: China will have to open its financial system to the world if the yuan is to be the dominant currency.

Forex Trading Daily Outlook For 27 January 2011

Forex trading outlook for january 27th 2011

Forex and Dow Jones recommended levels

EUR/USD
Today’s support: - 1.3613, 1. 3570 and 1.3546 (main), where correction is possible. Break would give 1.3518, where correction also may be. Then follows 1.3500. Break of the latter would result in 1.3486. If a strong impulse, we would see 1.3447. Continuation will give 1.3412. Today’s resistance: - 1.3726 (main). Break would give 1.37445, where a correction is possible. Then goes 1.3758. Break of the latter would lead to 1.3776. If a strong impulse, we’d see 1.3788. Continuation will give 1.3815.
USD/JPY Today’s support: - 81.87 (main). Break would bring 81.68, where correction is possible. Then 81.46, where a correction may also happen. Break of the latter will give 81.22. If a strong impulse, we would see 81.00. Continuation would give 82.41, 82.78, 83.16 and 83.39 (main), where a correction may happen. Break would bring 83.58, where also a correction may be. Then 83.70 If a strong impulse, we would see 83.82. Continuation will give 84.02.
DOW JONES INDEX

Today’s support: - 11920.40, 11881.36 and 11868.73 (main), where a delay and correction may happen. Break of the latter will give 11832.11, where correction also can be. Then follows 11790.00. Be there a strong impulse, we shall see 11767.50. Continuation will bring 11730.72. Today’s resistance: - 12026.28 and 12045.67 (main), where a delay and correction may happen. Break would bring 12069.30, where a correction may happen. Then follows 12098.42, where a delay and correction could also be. Be there a strong impulse, we’d see 12121.80. Continuation would bring   12147.38.

how to start forex trading

 

Tips On How to Start Forex Trading

1. You can make money with Forex Trading if you are fully equipped with the knowledge and skills required in Forex trading.

2. You can make money with Forex Trading if you are committed to online currency trading since online currency trading is considered the future of Forex trading

3. Before you start in Forex trading, it is necessary for you to set up your account with a Forex broker. Choose from the best of the available Forex brokers online. Research on those who require fees which fit your budget and most especially those who are very experienced and skillful in Forex trading

Source: http://www.start-forex-trading.blogspot.com/

Exploiting Currency Options Expiries for Forex Trading

Options are contracts that give the buyer the right to buy or sell an asset at a pre-specified time and price. In return, the seller receives a fee for writing the contract which is termed a premium. A put option is one in which the terms of the contract grant the right to sell the underlying, and a call option is one where the right to buy is granted. Since we will only explore the exploitation of options market data for the benefit of the spot trader, there’s no need to examine the details of this trade. Here we invite the trader to regard the currency options market as a closed box, and to concern himself merely with the aspects that we will utilize to predict the movements of spot.

The strategies we will discuss are simple and easy to use, and depend on the exploitation of implied volatility for long term trades and expiration data for short term use. To utilize these methods we only need to understand a few simple concepts.

•Strike price: This is the price at which the option will grant a payout, in other words, it will register a profit for the option buyer, depending on the kind of option contract.
•Expiry date: This is the date at which the contract is settled, and payments are made. This is perhaps the most important data for trading spot forex.
•Option size: The payout that the option contract stipulates.
Data on open currency options contracts that are close to expiry is regularly provided by IFR and the information can be acquired by registering with brokers that offer the service. Most major forex brokers will offer at least one financial news provider on their platform or website, and the news flow provided by open interest on CBOE options is also available from COT reports which the trader can use to form an opinion on trader positioning, and therefore the potential impact of the option on the market. How to use currency option expiration data to trade the spot market?

One of the easiest and most successful ways of trading the spot currency market is through the use of option expiry data. Options contracts are typically for sums of anywhere between 100 million to 500 million USD, and values beyond the range are not uncommon. Since these are relatively large sums to be concentrated in a few minutes before the expiration, the traders of these options will do all that they can, within reasonable limits, to move the quote to the strike price of the option, provided that the quote is within about 20-30 pips of the strike price at the time of expiry.

One important point that the forex trader can keep in mind is the distinction between the European style, and American style options. Since European style options can only be exercised at their expiration date, they are likely to be defended more vigorously if the quotes happen to be close to the strike price. In addition, at the beginning the trader is advised to utilize non-exotic expiries (so called, vanilla put or call options) for the strategy, as he betters his skills by examining contract types and similar details provided by the news providers. As usual, there is no need to trade every option expiry that is reported. One can simply begin with smaller sums to test his knowledge, and then increase the size and scope of his trades as he gains experience.

The ideal conditions for this method are:

1.Option expiry is at 10 am EST.
2.Option size is greater than 500 million USD.
3.The quote is at the strike price before the news release at 8:30 am EST
4.The news release is not a major event, such as a Fed decision.
But even without the realization of these conditions sizable profits can be made with this method in a calm and unexcited market. But these overall conditions, along with the significance of the news release, are the main determinants of the market’s mood which will in turn influence our stop-loss and the profit potential.

What happens during an option expiry?

If the price quote is close to the strike price of the option, option traders and other market participants will attempt to steer the quote in direction they desire.

A strong sign that the option traders will defend their position is the early gravitation of the price quote to the strike price. In an example scenario, if there’s a European EUR/USD vanilla put or call option with a strike at 1.2540, and the quote is at 1.2570 at 7:30 am, the quote will be steered to sit on the option strike value at about the news release at 8:30 am. After that, as the price reacts to the news, the quote may move away from the strike price in an unwanted. To successfully profit from this pattern the trader would need to join the option traders as they try to move the quote back to the strike value, and since a lot of people play this game the odds of success are quiet high.

As long as option expiries are proclaimed by news providers, and as long as large expiries tempt option traders to risk relatively small sums to ensure that they receive their payouts, this method will keep paying dividends. An important point that we should keep in mind is the momentum created by option expiries. As option traders buy or sell, their actions will be joined by all sorts of other traders and snowballing effect creates its own power as a mini-bubble is generated. Needless to day, right after the option expiry occurs, the strike price will be just another number on the charts, and will lose all its significance.
Source: http://www.forextrading.com/

Forex, Fed Paper: Power of Technical Analysis in Forex is Declining

Being a practitioner of fundamental analysis, you could say that I’m always on the lookout for hard evidence that fundamental analysis is superior to technical analysis. Thus, I was delighted to discover a working paper (“Technical Analysis in the Foreign Exchange Market“) by the St. Louis Branch of the Federal Reserve Bank, released just this month. Alas, the paper barely touched upon fundamental analysis, but its conclusions on technical analysis in the currency markets were startling. In short, the effectiveness of technical analysis in the currency markets has declined steadily since the 1970s, such that only the most sophisticated/complicated strategies are currently profitable.
Rather than conduct original research, the report’s authors – Christopher J. Neely, an assistant vice president and economist at the Federal Reserve Bank of St. Louis, and Paul A. Weller, the John F. Murray Professor of Finance at the University of Iowa – performed a meta analysis of the existing research. They cited a litany of studies, covered a variety of topics, sometimes with contradictory conclusions. In order to ensure comprehensiveness, they looked at the profitability of numerous types of technical analysis indicators, across numerous currency pairs, over time, in different types of trading environments, and adjusted for risk.
All of the earlier studies, dating back to the 1960s, established the profitability of technical analysis, even when it was simplistic. Since then, however, most studies have shown steadily declining effectiveness: “TTRs [Technical Trading Rules] ere able to earn genuine risk-adjusted excess returns in foreign exchange markets at least from the mid-1970s until about 1990…and that rule profitability has been declining since the late 1980s.” The same trend has unfolded in the last decade, as traders have relied increasingly on computerized trading strategies: “Kozhan and Salmon (2010), using high frequency data, find that trading rules derived from a genetic algorithm were profitable in 2003 but that this was no longer true in 2008.”
Given that the two authors also concede that the financial markets are undoubtedly inefficient and that currency markets in particular are filled with observable trends, how should we understand this decline in the effectiveness of technical analysis? In one word, the answer is competition. “Profit opportunities will generally exist in financial markets but…learning and competition will gradually erode ["arbitrage away"] these opportunities as they become known.” In addition, there has been a “dramatic rise in the volume of algorithmic trading,” which has given rise to a so-called financial arms race to develop ever-more sophisticated trading strategies.
Indeed, the research shows that “more complex strategies will persist longer than simple ones. And as some strategies decline as they become less profitable, there will be a tendency for other strategies to appear in response to the changing market environment.” In addition, technical analysis that is used to trade exotic (i.e. less liquid) currencies is more likely to be profitable than major currencies, especially the US Dollar.
The report opens the door to further research, by indicating that “Technical trading can be consistently profitable in certain circumstances.” As if it wasn’t already clear, though, the vast majority of technical traders (perhaps all traders for that matter) are destined to be outmaneuvered and will ultimately lose money trading forex. Another way of looking at this, however, is that the the savviest traders – those that can spot complex trends and execute trading strategies quickly – still have a chance at earning consistent profits.
Source: http://www.forexblog.org/

Currency Games for Trading

There is a “game” being played in the market place involving the Euro zone countries and it goes something like this: A debt-troubled nation is due to issue debt sometime during the week so the rumors start that the country may need to access the emergency facility so that yields will be pushed higher thereby increasing the rate of return to potential investors. It is then up to Germany to decide if they want to try to defend those nations or allow the ruse to spiral out of control.

Well if you are a country that has an extremely low corporate tax rate and “steals” businesses from Germany, then chances are you will fall by the wayside. Sorry, Ireland. If on the other hand, you are the smallest of three countries looking to peddle debt in the same week, then you will get a helping hand. So Portugal survives another day, as a counter-rumor is floated that the EU is thinking of expanding the emergency facility. As a result the Euro is higher this morning, despite the obvious risk.

Some other items of note this morning are that China has a trade balance that came in much lower than expected. As is always the case with the Chinese, this come ahead of an important meeting with the West and will surely be used as the reason why China can’t do anything about its currency peg to the Dollar. The game just continues.

Meanwhile, housing prices in the UK are falling as the austerity measures kick in ahead of this Thursday’s BOE rate decision. I’m expecting no further change in policy, but be on the lookout for a potential policy statement (different than the official release of the meeting minutes) to see if they may need to be more accommodative to offset fiscal austerity.

In the forex market:

Aussie (AUD): The Aussie is lower to start the morning despite higher commodities prices as global stocks are lower after news out of China and the EU. Retail sales figures came in as expected.

Kiwi (NZD): The Kiwi is mostly higher after reporting trade balance figures that came in better than expected. Aussie and Loonie weakness are helping to encourage money flows to NZ. (Click chart to enlarge)



Loonie (CAD): The Loonie is lower as building permits figures came in way worse than expected, posting a decline of 11.2% vs. an expectation of a gain of 1.5%. An oil leak in the Alaskan pipeline has halted supply so this could affect prices going forward. Oil is trading higher this morning.

Euro (EUR): The Euro is higher despite all of the chatter surrounding Portugal, as French Industrial and Manufacturing Production figures came in much better than expected. Talk of expanding the EFSF has prevented the Euro from decline, and Portugal, Spain, and Italy are due to auction some 33 billion euro in debt this week.

Pound (GBP): The Pound is mixed this morning as house prices declined more than expected, showing a decrease of 1.4% vs. an expected .4% decrease. This Thursday will be the BOE rate decision but don’t expect any change to policy.

Dollar (USD): The Dollar is mostly higher as the market determines the real risk in Portugal. With no economic data on tap for the US today, keep your ears open for Fedspeak—that is our Central bankers attempting to allay the markets—ahead of Friday’s busy calendar.

Yen (JPY): The Yen is showing some strength today as risk themes and a potential Chinese slowdown have increased demand for the safe haven status of the Yen. (Click chart to enlarge)



With all of the different games that go on in the market, one must have a clear understanding of how these games work in order to profit from them. While there is still considerable risk in the global economy, the constant media obsession helps speed up the game. If sovereigns or investors are slow to react, then the results could be disastrous.

Meanwhile, it is no secret that austerity measures are taking place in some regions around the globe, so it is extremely naïve to think that there won’t be some type of slowdown. Yet the market insists that someone has to pick up the slack, and Central bankers around the world believe that they can manage the ebb and flow of the global economy.

So the game continues, yet there are rule-changers, cheaters, liars, speculators, and those just happy to be at the table. How this group is going to figure out how to place nice is beyond me.

In the meantime, I will continue to take advantage of this motley bunch and the global inefficiencies that they create!

Source: http://www.forextradingblog.com/