The downgrade of America's AA rating, the deepening debt crisis in Europe and a global deterioration on the economic and financial front, has led major economic and financial experts to look again in their outlook on dollar to euro anticipated rates in 2012. Most of them strongly believe that the governing monetary policy in the Euro Zone which tightened in April will continue in the light till late February, 2012, at least.
This is important whether you're a forex trader or planning a vacation to Europe. Without doubt, dollar is the reserve currency of the world. It took just a financial emergency to show just how significant a reserve currency is. The economic slowdown saw investors panicking and taking their money out of the risky investments and putting them in less risky commodities.
Investors were seen buying the euro. Europe had superior interest rates and a dependable central banking system. The European Central Bank, which is the equivalent of the Federal Reserve, is reluctant to turn to the printing press and inflate the euro. But when a law is no longer goes well with the policy of a government, it can make amendments. This was seen in a very recent example 750-billion euro bail out for Greece, where ECB bought Greek government bonds and printed Euros to foot the bill. However, this will lead to an unavoidable inflation in Euro. The reality is that the bailout has been an utter failure.
One should not make any mistakes here. The uncertainties ware bound to continue and Europe will have to go through more in the coming years. 10% of GDP budget cuts will certify a long and painful recession in Ireland, Portugal, Greece and Italy. This alone could leave negative impact on Euro. Driven by continue concerns in the Eurozone, a soft patch has developed for the euro in recent months.
So, what are dollar to euro anticipated rates in 2012? This is important for any investor and where he should put his money. If we look behind, we will see the Euro peaking in 2008 and then plummeting down massively. But market experts believe it won't be long to see the Euro reaching equivalence with the dollar. With tax raises and budget cuts, it is almost a certainty that the E interest rates would be low in Euro Zone. That clearly means that the U.S. interest rates will catch up with European rates, sooner or later.
However, the inventor would still favor dollar over the euro, as they would get higher returns on their currency deposits. Thanks to the fallout from Europe's debt crisis, your dollar can still be stretched along way, if you go for a vacation there. Short the euro to reap big rewards over the next years if you are in investor.
RBS have warned of further weakening in euro exchange rate in 2012. The euro will reach equality with the dollar, sooner than we think. We are sure you have a fairly good idea now of what are dollar to euro anticipated rates in 2012.
Tuesday, December 27, 2011
Thursday, December 8, 2011
EURUSD will close above yesterday low possibly
Euro Could Recover Against US Dollar
EURUSD – Sharp Euro/US Dollar volatility has made for indecisive forex trading crowd sentiment. Yet we believe that the Euro may have set a significant sentiment extreme and could continue trading higher through the last weeks of 2011.
Our Speculative Sentiment Index (SSI) data shows that the majority of retail traders are now long the Euro against the US Dollar. We most often use the SSI as a contrarian indicator; if most traders are long, we look to go short. Yet the ratio of traders long to short is a meager 1.16 to 1, and we would ideally see a much stronger shift to turn bearish.
FX Options market volatility expectations remain quite low, and risks show that the EURUSD may remain in a broad trading range into year end. Thus we will stay away from chasing Euro weakness, and indeed this lines up with our views on FX Options and futures sentiment.
Monday, December 5, 2011
Weekly Technical Overview, Forex
| FOREX MARKETS AUD Bullish above 1.0330; bearish below 1.0150. The Aussie breached the key 0.9860 level on Monday and duly rallied, reaching a peak of 1.0330 on Wednesday before trading sideways for the rest of the week. The outlook this week is likely to be initially determined by a break of the congestion range that formed between Wednesday and Friday from 1.0330 down to 1.0150. A close below 1.0150 and next support is at the lows of the long bullish bar that formed on Wednesday at 0.9940 followed by the peak of November 24 at 0.9780. |
A resumption of the gains this week will be signalled by a close above Wednesday’s high of 1.0330. Next resistance is then at the high of November 3 at 1.0450 followed by the twice-tested peak of 1.0760 from September 1 and October 27.
In the bigger picture, as long as the Aussie is below its peak of 1.108, it remains in correction mode. That outlook is supported by the fact the daily ranges are still high and major bottoms are usually formed on lower volatility while tops and the early stages of a downtrend are made on high volatility.
Sup: 1.0150 0.9940 0.9780
Res: 1.0330 1.0450 1.0760
EUR
Bearish below 1.3260; bullish above 1.3550.
If you are reading or listening to mainstream financial media you could be forgiven for believing the euro is on the verge of collapse. It is in fact a long way above its all-time lows of under 85 US cents, but it is just above an important support level, a close below which could send it back to its 2010 levels. That level is 1.3140 from October 4.
That level was rejected in the prior week, but the gains were limited to a peak of 1.3550 last week, reached on a bearish candlestick on Friday. The outlook this week depends on a move beyond the range of Friday’s peak and Wednesday’s lows: 1.3550 to 1.3260.
A move below 1.3260 and next support is at the low of November 25 at 1.3210 down to the lows of October 4 at 1.3140. A close below the latter level and the downtrend that started in May this year resumes.
A move above 1.3550 and next resistance is at the well-tested peak of November1 at 1.3870, which is just above the Fibonacci 62% retracement of the losses since late October (1.4250 – 1.3210). Next resistance is at the peak of October 26 at 1.3980.
Sup: 1.3260 1.3210 1.3140
Res: 1.3550 1.3870 1.3980
GBP
Bearish below 1.5470; bullish above 1.5780.
A rally last week failed to spark upwards momentum and after making gains till Wednesday, a large proportion of those gains were forsaken in the last two trading days.
The outlook this week is bearish if sterling moves below Tuesday’s low of 1.5470. In that event, sterling could then retest the October lows of 1.5270. A close below that level and the downtrend that started in April this year resumes. Next support is at the July 2010 lows of 1.4940.
A close above last week’s peak of 1.5780 and sterling could then travel to the peak of November 18 at 1.5890 which also happens to coincide with the Fibonacci 62% retracement of the losses since October 31 (1.6170 – 1.5420). Next resistance is at the high of November 8 at 1.6130.
Sup: 1.5470 1.5270 1.4940
Res: 1.5780 1.5890 1.6130
JPY
Bullish unless below 77.27.
The yen made good gains on Monday last week but then spent the rest of the week consolidating those gains. That has created a small range between highs of 78.28 and lows of 77.27, a break of which should determine this week’s outlook.
A move below Wednesday’s low of 77.27 and next support is at the lows of November 18 at 76.53. A move below this critical level and there is an increased chance that the USD rally since late October is a dead cat bounce with next support at the low of October 30 at 75.31.
A move above last week’s peak of 78.28 and next resistance is at the high of November 1 at 78.99 then the high of October 31 at 79.53.
Sup: 77.27 76.53 75.31
Res: 78.28 78.99 79.53
Sunday, December 4, 2011
NEW YORK (Dow Jones)--The weight of Europe's debt problems hampered the euro Friday, which shed more than a cent intraday as investors became cautious ahead of a critical European Union summit next week. With speculation mounting that the International Monetary Fund may need to commit its resources to contain the euro zone's crisis, the euro rose on early reports that the European Central Bank could lend as much as $270 billion to the fund. The news helped spark a rally that was helped by news that the U.S. unemployment rate fell sharply in November.
But the common currency fell anew as doubts set in about whether even that sum would be sufficient to stem contagion from Europe. Over the last week, borrowing costs of Italy and Spain have fallen, yet hover uncomfortably near levels that economists think are unsustainable.
Meanwhile, skepticism continues to dog Europe's newly-created bailout facility, which analysts say has not attracted nearly enough capital to manage the Continent's growing debt woes by itself. Markets are looking for the ECB adopt a more aggressive stance, yet they appear reluctant to do so unless EU leaders can forge broad-based agreement on new fiscal rules at next week's high-stakes meeting.
Even if the IMF helps Europe, traders wonder "what's the ECB going to come to the party with?" asked Ray Attrill, senior currency analyst at BNP Paribas. "If Europeans deliver on a fiscal compact, then certainly the ECB will be inclined to be supportive of bond markets," he added.
Late Friday, the euro was at $1.3392 from $1.3461 late Thursday, according to EBS via CQG. The dollar was at Y77.94 from Y77.70, while the euro was at Y104.40 from Y104.61. The U.K. pound was at $1.5613 from $1.5687. The dollar was at CHF0.9219 from CHF0.9155.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.636 from about 78.328.
Worries about Europe overwhelmed news that the U.S. economy created 120,000 new jobs last month, with the unemployment rate sliding to 8.6% for the first time since March 2009. The focus on the euro zone's woes gave market chatter about the IMF more significance than it would have had otherwise.
A potential alliance of the IMF and ECB could face some stiff political headwinds. Traders sold the euro on news that Congressional Republicans might block U.S. funds flowing to the IMF that could be used in a euro zone rescue.
Meanwhile, the ECB's policy meeting Thursday could see the central bank lowering borrowing costs in order to spur the 17-nation currency bloc's sluggish growth. Until the debt crisis is resolved, however, analysts remain skeptical that an interest rate cut will cure what ails the Continent.
"The market is falling into this pattern of buying on various levels of optimism, then invariably selling on disappointment," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, who expects the euro to fall as low as $1.3215. "I'm still overall negative on the euro until we get something meaningful to hang our hats on, and the IMF doesn't do it for me yet."
December 02, 2011 17:00 ET (22:00 GMT)
But the common currency fell anew as doubts set in about whether even that sum would be sufficient to stem contagion from Europe. Over the last week, borrowing costs of Italy and Spain have fallen, yet hover uncomfortably near levels that economists think are unsustainable.
Meanwhile, skepticism continues to dog Europe's newly-created bailout facility, which analysts say has not attracted nearly enough capital to manage the Continent's growing debt woes by itself. Markets are looking for the ECB adopt a more aggressive stance, yet they appear reluctant to do so unless EU leaders can forge broad-based agreement on new fiscal rules at next week's high-stakes meeting.
Even if the IMF helps Europe, traders wonder "what's the ECB going to come to the party with?" asked Ray Attrill, senior currency analyst at BNP Paribas. "If Europeans deliver on a fiscal compact, then certainly the ECB will be inclined to be supportive of bond markets," he added.
Late Friday, the euro was at $1.3392 from $1.3461 late Thursday, according to EBS via CQG. The dollar was at Y77.94 from Y77.70, while the euro was at Y104.40 from Y104.61. The U.K. pound was at $1.5613 from $1.5687. The dollar was at CHF0.9219 from CHF0.9155.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 78.636 from about 78.328.
Worries about Europe overwhelmed news that the U.S. economy created 120,000 new jobs last month, with the unemployment rate sliding to 8.6% for the first time since March 2009. The focus on the euro zone's woes gave market chatter about the IMF more significance than it would have had otherwise.
A potential alliance of the IMF and ECB could face some stiff political headwinds. Traders sold the euro on news that Congressional Republicans might block U.S. funds flowing to the IMF that could be used in a euro zone rescue.
Meanwhile, the ECB's policy meeting Thursday could see the central bank lowering borrowing costs in order to spur the 17-nation currency bloc's sluggish growth. Until the debt crisis is resolved, however, analysts remain skeptical that an interest rate cut will cure what ails the Continent.
"The market is falling into this pattern of buying on various levels of optimism, then invariably selling on disappointment," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, who expects the euro to fall as low as $1.3215. "I'm still overall negative on the euro until we get something meaningful to hang our hats on, and the IMF doesn't do it for me yet."
Thursday, December 1, 2011
Forex Trade Setups
Euro gains on action from central banks, 30th November 2011
Trading Setups / Chart in Focus:EURUSD
The EURUSD pushed dramatically higher today as major central banks around the world collaborated to help ease the mounting pressure of the euro-zone debt crisis. This worked to ignite fresh risk appetite and as a result global markets soared.
Forex Commentary:
In the currency markets today, the EURUSD pushed significantly higher as the central banks of the U.S., Euro-zone, Britain, Canada, Japan, and Switzerland, took collaborative action to ease pressure on European banks.
The EURUSD moved to $1.3440 in late-day New York trading, up from $1.3315 on Wednesday.
The U.S. dollar was lower against the other major currencies too. The GBPUSD moved to $1.5690 from $1.5594. The greenback moved to 77.54 yen from 77.91, the Australian dollar, New Zealand dollar, and Canadian dollar also posted significant gains against the U.S. dollar today.
Other Markets:
In the U.S. markets today, stocks rocketed dramatically higher with the Dow posting its best one day gain since March of 2009. The gains came after the U.S. Federal Reserve bank and other central banks extended help to banks affected by the euro-zone debt crisis.
The Dow gained 490.05 points, or 4.2%, the S&P 500 added 51.77 points, or 4.3%, and the Nasdaq rose 104.83 points, or 4.2%.
Upcoming important economic announcements: 12/1/2011
1st-7th: Britain – Halifax HPI m/m
4:30am EST: Britain – Manufacturing PMI
8:30am EST: United States – Unemployment Claims
10:00am EST: United States – ISM Manufacturing PMI
Sunday, November 27, 2011
Daily Forex Trading Commentary AUDUSD in focus
The AUDUSD is moving towards 0.9400 support. it lost modest ground on Friday over Thursday close. We still see weakness as the dominant theme in this market and will watch any rotation into resistance for price action sell signals to re-join the downtrend. We can see support sits near 0.9400 and resistance comes in between the 8 / 21 daily EMA layer.
AUDUSD
So set Sell stop @ 0.96630, take profit @ 0.93898, stop loss @ 0.97842
AUDUSD
Thursday, November 10, 2011
Pending Long EUR/AUD and USD/CAD, Entered Short AUD/USD and EUR/GBP
Still holding short EUR/GBP at the start of the week, while the short-term short AUD/USD is now in the money.
In regards to the EUR/GBP, the first pass resulted in the trade being stopped out at a loss given the dip before the EU summit and the rally thereafter; the trade was initialized on a false break.
However, on a second pass, considering the range held up (as the break above the Range Top was classified as a false break) the trade was reentered given the original targets. The Stop was moved to the Entry level to ensure that losses are capped at Break Even.
With that said, the other trades on the table have not been initialized but remain within their timeframes and within their bearish formations.
ENTERED
Short AUD/USD
- ENTERED: Short at 1.0270 [Trend Line Support)
- Stop MOVED TO ENTRY: 1.0270 [0-pips]
- Target 1 HIT(Reward/Risk Ratio): 1.0220 (50/90, 0.56)
- Target 2:1.0081 (189/90, 2.10)
- Target 3: 1.0000 (270/90, 3.00)
- Timeframe: 3-days
Short EUR/GBP
- ENTERED: Short at 0.8690 [below 20-DMA]
- Stop MOVED TO TARGET 1: 0.8600 [Double/Triple Top] (+90-pips)
- Target 1 HIT (Reward/Risk Ratio): 0.8600 (90/104, 0.87)
- Target 2 HIT: 0.8523 [76.4 Fibo] (167/104, 1.61)
- Target 3: 0.8465 [Range Bottom] (225/104, 2.16)
- Timeframe: 2-weeks
PENDING
Long EUR/AUD
- Entry: Long at 1.3640 [above Moving Average Confluence Zone]
- Stop: 1.3407 [61.8 Fibo] (233-pips)
- Target 1 (Reward/Risk Ratio): 1.3775 [Last Week's High] (135/233, 0.58)
- Target 2: 1.3827 [23.6 Fibo] (187/233, 0.80)
- Target 3: 1.4030 [Range Top] (390/233, 1.67)
- Timeframe: 2-weeks
Long USD/CAD
- Entry: Long at 1.0369 [sub-wave a of wave 4]
- Stop: Stop to 1.0234
- Target 1(Reward/Risk Ratio): 1.0657 [termination of wave 3, weekly high] (288/135, 2.13)
- Target 2: 1.0854 [projected termination of wave 5] (485/135, 3.59)
- Timeframe: 2-weeks
Short AUD/USD
- Entry: Short at 0.9845 [38.2 Fibo]
- Stop: 1.0046 [23.6 Fibo] (201-pips)
- Target 1(Reward/Risk Ratio): 0.9683 [50.0 Fibo] (162/201, 0.81)
- Target 2: 0.9521 [61.8 Fibo] (324/201, 1.61)
- Target 3: 0.9386 [October low] (459/201, 2.28)
- Timeframe: 3-weeks
by DailyFx
In regards to the EUR/GBP, the first pass resulted in the trade being stopped out at a loss given the dip before the EU summit and the rally thereafter; the trade was initialized on a false break.
However, on a second pass, considering the range held up (as the break above the Range Top was classified as a false break) the trade was reentered given the original targets. The Stop was moved to the Entry level to ensure that losses are capped at Break Even.
With that said, the other trades on the table have not been initialized but remain within their timeframes and within their bearish formations.
ENTERED
Short AUD/USD
- ENTERED: Short at 1.0270 [Trend Line Support)
- Stop MOVED TO ENTRY: 1.0270 [0-pips]
- Target 1 HIT(Reward/Risk Ratio): 1.0220 (50/90, 0.56)
- Target 2:1.0081 (189/90, 2.10)
- Target 3: 1.0000 (270/90, 3.00)
- Timeframe: 3-days
Short EUR/GBP
- ENTERED: Short at 0.8690 [below 20-DMA]
- Stop MOVED TO TARGET 1: 0.8600 [Double/Triple Top] (+90-pips)
- Target 1 HIT (Reward/Risk Ratio): 0.8600 (90/104, 0.87)
- Target 2 HIT: 0.8523 [76.4 Fibo] (167/104, 1.61)
- Target 3: 0.8465 [Range Bottom] (225/104, 2.16)
- Timeframe: 2-weeks
PENDING
Long EUR/AUD
- Entry: Long at 1.3640 [above Moving Average Confluence Zone]
- Stop: 1.3407 [61.8 Fibo] (233-pips)
- Target 1 (Reward/Risk Ratio): 1.3775 [Last Week's High] (135/233, 0.58)
- Target 2: 1.3827 [23.6 Fibo] (187/233, 0.80)
- Target 3: 1.4030 [Range Top] (390/233, 1.67)
- Timeframe: 2-weeks
Long USD/CAD
- Entry: Long at 1.0369 [sub-wave a of wave 4]
- Stop: Stop to 1.0234
- Target 1(Reward/Risk Ratio): 1.0657 [termination of wave 3, weekly high] (288/135, 2.13)
- Target 2: 1.0854 [projected termination of wave 5] (485/135, 3.59)
- Timeframe: 2-weeks
Short AUD/USD
- Entry: Short at 0.9845 [38.2 Fibo]
- Stop: 1.0046 [23.6 Fibo] (201-pips)
- Target 1(Reward/Risk Ratio): 0.9683 [50.0 Fibo] (162/201, 0.81)
- Target 2: 0.9521 [61.8 Fibo] (324/201, 1.61)
- Target 3: 0.9386 [October low] (459/201, 2.28)
- Timeframe: 3-weeks
by DailyFx
Sunday, June 19, 2011
The Power of Small Consistent Returns
For most of us, 'safe investments' are limited to the rate of return that we can earn on our savings accounts or long-term deposits. The return would depend on the interest rate applicable in each country. At the time of writing, November 2007, the interest rate earned on a savings account in Australia is around 7% a year. That is a return of 0.57% a month. Despite this fact, many have preconceptions regarding the type of returns they can make from trading the financial markets.
A novice trader puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, if we assume a 20% return per month on a $10,000 trading account, we can expect $89,161 by the end of our first twelve months of trading. What if we assume an estimate of 50% return per month? We would have $1,297,463 by the end of the year. Of course, the problem with expectations like these is that they are unrealistic. Even most of those who claim to have made these types of returns have only done so in simulated environments, in trading competitions using game accounts, for example, where real money was not at risk.
It is possible to make these types of returns for a short while but I have not heard of anybody achieving such steep returns consistently year after year. After testing hundreds of trading systems and ideas I have come to believe that systems, which seem to promise exorbitant returns, turn out to be over-optimized for the period they have been tested on. Or even worse, they have flaws in their logic or assumptions.
Lately, I have been looking at the performance reports of trading firms in the USA. What would you say if I told you that the top trading firm over the last ten years only made an average return of 25% a year and the median trading firm made somewhere around 15% a year? Well, this is in fact what I am telling you.
A 20% and a 15% return a year is 'only' 1.877% and 1.171% return a month, respectively. I am sure that many novice traders and investors reading this article will have a mix of reactions towards these figures. Some might laugh and scoff at such 'paltry' returns, secretly believing that they can do a lot better than just 1.877% a month. Others may be surprised or even disappointed because their dreams of living rich will not come as quickly as they hoped.
Setting aside your initial reaction to these figures however, let us refocus on what these numbers actually mean in the real world. I would like to show you that these types of returns are very powerful. With time, these seemingly small, but consistent, gains will give you enormous profits in the future.
15% A YEAR RETURN ON A $10,000 ACCOUNT
Let us start with the assumption of having a $10,000 account, making at least 1.171% return a month, or 15% a year, trading the market. Based on these, the projections are:
1.$11,500 (15% growth) after 1 year.
2.$13,223 (32% growth) after 2 years.
3.$20,108 (101% growth) after 5 years.
4.$40,432 (304% growth) after 10 years.
5.$163,475 (1535% growth) after 20 years.
6.$660,960 (6510% growth) after 30 years.
25% A YEAR RETURN ON A $10,000 ACCOUNT
Let us now assume having a $10,000 account, making at least 1.877% a month, or 25% a year, trading the market Based on these, the projections are:
1.$12,500 (25% growth) after 1 year.
2.$15,625 (56% growth) after 2 years.
3.$30,519 (205% growth) after 5 years.
4.$93,140 (831% growth) after 10 years.
5.$867,512 (8575% growth) after 20 years.
6.$8,080,034 (80700% growth) after 30 years.
It is very important to note that not all fund managers make money. Returns of 15% or 25% a year belong only to those money managers who were consistently profitable. Furthermore, these types of returns are out-of-bounds for most investors. To invest in such schemes, most of the fund managers I have been looking into will deal with you only if you are a 'sophisticated' investor with a spare $500,000 minimum to invest. In fact, the highest earner only took on investors with a minimum of $25,000,000 US dollars to invest. (I will not mention any names here, however, you can do your own research by typing "commodity trading advisors" in your favourite search engine.)
I do not know about you but I certainly do not have 25 million dollars lying around, to hand over for someone else to manage. The dilemma, however, is that life is way too short for me to be satisfied with a 7% annual return either. I guess this is why you and I have taken the decision to trade and invest in the financial markets ourselves. At least there, we have full control and responsibility over the returns we get. It has its risks, but we can all avoid being reckless if we keep realistic expectations.
(This article was first published in The Part-Time Investor Magazine, Issue 3.)
by Marquez Comelab
A novice trader puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, if we assume a 20% return per month on a $10,000 trading account, we can expect $89,161 by the end of our first twelve months of trading. What if we assume an estimate of 50% return per month? We would have $1,297,463 by the end of the year. Of course, the problem with expectations like these is that they are unrealistic. Even most of those who claim to have made these types of returns have only done so in simulated environments, in trading competitions using game accounts, for example, where real money was not at risk.
It is possible to make these types of returns for a short while but I have not heard of anybody achieving such steep returns consistently year after year. After testing hundreds of trading systems and ideas I have come to believe that systems, which seem to promise exorbitant returns, turn out to be over-optimized for the period they have been tested on. Or even worse, they have flaws in their logic or assumptions.
Lately, I have been looking at the performance reports of trading firms in the USA. What would you say if I told you that the top trading firm over the last ten years only made an average return of 25% a year and the median trading firm made somewhere around 15% a year? Well, this is in fact what I am telling you.
A 20% and a 15% return a year is 'only' 1.877% and 1.171% return a month, respectively. I am sure that many novice traders and investors reading this article will have a mix of reactions towards these figures. Some might laugh and scoff at such 'paltry' returns, secretly believing that they can do a lot better than just 1.877% a month. Others may be surprised or even disappointed because their dreams of living rich will not come as quickly as they hoped.
Setting aside your initial reaction to these figures however, let us refocus on what these numbers actually mean in the real world. I would like to show you that these types of returns are very powerful. With time, these seemingly small, but consistent, gains will give you enormous profits in the future.
15% A YEAR RETURN ON A $10,000 ACCOUNT
Let us start with the assumption of having a $10,000 account, making at least 1.171% return a month, or 15% a year, trading the market. Based on these, the projections are:
1.$11,500 (15% growth) after 1 year.
2.$13,223 (32% growth) after 2 years.
3.$20,108 (101% growth) after 5 years.
4.$40,432 (304% growth) after 10 years.
5.$163,475 (1535% growth) after 20 years.
6.$660,960 (6510% growth) after 30 years.
25% A YEAR RETURN ON A $10,000 ACCOUNT
Let us now assume having a $10,000 account, making at least 1.877% a month, or 25% a year, trading the market Based on these, the projections are:
1.$12,500 (25% growth) after 1 year.
2.$15,625 (56% growth) after 2 years.
3.$30,519 (205% growth) after 5 years.
4.$93,140 (831% growth) after 10 years.
5.$867,512 (8575% growth) after 20 years.
6.$8,080,034 (80700% growth) after 30 years.
It is very important to note that not all fund managers make money. Returns of 15% or 25% a year belong only to those money managers who were consistently profitable. Furthermore, these types of returns are out-of-bounds for most investors. To invest in such schemes, most of the fund managers I have been looking into will deal with you only if you are a 'sophisticated' investor with a spare $500,000 minimum to invest. In fact, the highest earner only took on investors with a minimum of $25,000,000 US dollars to invest. (I will not mention any names here, however, you can do your own research by typing "commodity trading advisors" in your favourite search engine.)
I do not know about you but I certainly do not have 25 million dollars lying around, to hand over for someone else to manage. The dilemma, however, is that life is way too short for me to be satisfied with a 7% annual return either. I guess this is why you and I have taken the decision to trade and invest in the financial markets ourselves. At least there, we have full control and responsibility over the returns we get. It has its risks, but we can all avoid being reckless if we keep realistic expectations.
(This article was first published in The Part-Time Investor Magazine, Issue 3.)
by Marquez Comelab
Forex Money Management: Leverage and Margin Basics
Two very important concepts of forex money management are leverage and margin. Leverage allows forex traders to invest much more into currency trading than is available in their trading accounts. Thus, forex traders can operate larger funds. Margin is the real funds that are required to be held in the trading account as a collateral to cover any possible losses.
Forex Money Management: Leverage
Profits and losses in the forex market tend to be higher than what you would experience in the stock market even though the actual price of currencies may not fluctuate wildly. Most brokers allow a 100:1 leverage. This means you can buy or sell €100,000 worth of currencies, even though you have only €1,000 in your trading account. Some brokers offer leverage as high as 400:1.
Leverage can also work against you in forex trading. For example, if a currency moves against your expectations, the leverage would multiply your loss by the same factor as it would multiply the gain. Many people starting forex trading do not completely understand the concepts of leverage and margin. Leverage appears to be an amazing service provided by brokers. However, one must remember that even a 1% fluctuation of currency prices could wipe out your entire capital, depending on the amount of leverage offered by the forex broker. Using a smaller leverage could help you prevent losing too much too fast. So, you need to find the perfect balance.
Forex Money Management: Margin
In the example stated above, when you buy €100,000 worth of currencies, you are in fact borrowing €99,000 for your purchases. The €1,000 that is used to cover your losses is the margin.
Leverage
Margin Required
Amount Traded
Required Margin
20:1
5%
€100,000
€5,000
50:1
2%
€100,000
€2,000
100:1
1%
€100,000
€1,000
200:1
0.5%
€100,000
€500
A trader may choose the highest leverage (200:1), with the margin being only 0.5%. However, sound money management principles say that the trader should never trade huge lots. This would prevent leverage from hurting the trader.
Therefore, it is essential to understand how much leverage your forex broker offers and what the margin requirements are. If you are new to trading, you should compare the leverage and margin specifications of different brokers.
by Kitz S
Forex Money Management: Leverage
Profits and losses in the forex market tend to be higher than what you would experience in the stock market even though the actual price of currencies may not fluctuate wildly. Most brokers allow a 100:1 leverage. This means you can buy or sell €100,000 worth of currencies, even though you have only €1,000 in your trading account. Some brokers offer leverage as high as 400:1.
Leverage can also work against you in forex trading. For example, if a currency moves against your expectations, the leverage would multiply your loss by the same factor as it would multiply the gain. Many people starting forex trading do not completely understand the concepts of leverage and margin. Leverage appears to be an amazing service provided by brokers. However, one must remember that even a 1% fluctuation of currency prices could wipe out your entire capital, depending on the amount of leverage offered by the forex broker. Using a smaller leverage could help you prevent losing too much too fast. So, you need to find the perfect balance.
Forex Money Management: Margin
In the example stated above, when you buy €100,000 worth of currencies, you are in fact borrowing €99,000 for your purchases. The €1,000 that is used to cover your losses is the margin.
Leverage
Margin Required
Amount Traded
Required Margin
20:1
5%
€100,000
€5,000
50:1
2%
€100,000
€2,000
100:1
1%
€100,000
€1,000
200:1
0.5%
€100,000
€500
A trader may choose the highest leverage (200:1), with the margin being only 0.5%. However, sound money management principles say that the trader should never trade huge lots. This would prevent leverage from hurting the trader.
Therefore, it is essential to understand how much leverage your forex broker offers and what the margin requirements are. If you are new to trading, you should compare the leverage and margin specifications of different brokers.
by Kitz S
Forex Risk Management
This aspect is one of the most important aspects you will ever read about trading.
Why is it important? In reality, we are in the business of making money, and to be able to do so we need to learn how to manage it well in order to prevent continuous loss. Ironically, this is one of the most overlooked areas in trading. Many traders are just anxious to get right into trading with no regards to their total account size. They simply determine how much they can lose in a single trade and get into the trade.
Trading on Forex, the investor has opportunities to multiply his money, but he also risks losing future profit and much more, the invested capital. Deviation from expected profit average is what determines the investor's risk on the financial market. Risk management methods are applied before and after opening positions. The main risk management method is applied to reduce losses.
Using Protective Stop-Loss to Control Risk
It is advisable to place a protective stop-loss for every open position. Stop-loss is a point when the trader leaves the market in order to avoid an unfavourable situation. When opening a position it is recommended to use stop-loss to insure against extra losses.
While in active trade it is good to protect your fund against potential total loss. That is the central purpose of money and risk management. Too often, the beginning trader will be overly concerned about incurring losing trades. Trader therefore lets losses mount, with the hope that the market will turn around and the loss will turn into a gain.
Almost all successful trading strategies include a disciplined procedure for cutting losses. When a trader is down on a position, many emotions often come into play, making it difficult to cut losses at the right level. The best practice is to decide where losses will be cut before a trade is even initiated. This will assure the trader of the maximum amount he or she can expect to lose on the trade.
Risk a Tolerable Account Portion Per Trade Position
To manage your invested fund well, you have to decide before the opening of any position how much of the money you can afford to lose in case the trade goes negative from your projection. For instance, you may decide that for every opened position your risked money will be 3%, 5% or 10% of the total fund, by so doing you have known prior to the execution of the trade the highest amount that can ever go out of your money on that single trading position, by so doing you have even taken away emotion.
The factor needed to work out this are:
1.The fund balance in your account.
2.The number of pip set as stop loss.
3.The lot size (volume) traded.
For example:
Let's say your fund balance is $5000 and your predetermined stop loss pip is 50 pips (selecting the number of your stop-loss pips should be from your analytical research) and you are ready to risk only 2% of your fund for a position.
What do you do?
Work out the 2% of $5000
Which is = $100.
Implying that you can afford to lose $100 in case of any eventuality.
Then, Divide $100 by 50 pips
It will be $2
Your lot size must be 1 pip to $2. That will be 0.2 lot size.
So you must use 0.2 lot size.
As much as possible try not to be greedy, to be less greedy is to be able to minimize risk.
In a way leverage can help to control risk: if your leverage is relatively low it will limit you against opening a trade with high lot size.
Re-Evaluate Your Strategies
The other key element of risk control is overall account risk. If trade is going against you, at what point will you stop and re-evaluate your trading strategy? Is it when you lost 30% of your money or 50% or 80% or when you lost the entire money? Assess your market analytical methods and see if there would be need for further perfection or even a change.
Also, check out if your set lot size is too large for your entire account size.
Risk management and fund management go hand in hand, if you manage your FUNDD well you are equally reducing your risk, also if you control your risk well you are equally protecting your fund.
by Duro Olorunniji
Why is it important? In reality, we are in the business of making money, and to be able to do so we need to learn how to manage it well in order to prevent continuous loss. Ironically, this is one of the most overlooked areas in trading. Many traders are just anxious to get right into trading with no regards to their total account size. They simply determine how much they can lose in a single trade and get into the trade.
Trading on Forex, the investor has opportunities to multiply his money, but he also risks losing future profit and much more, the invested capital. Deviation from expected profit average is what determines the investor's risk on the financial market. Risk management methods are applied before and after opening positions. The main risk management method is applied to reduce losses.
Using Protective Stop-Loss to Control Risk
It is advisable to place a protective stop-loss for every open position. Stop-loss is a point when the trader leaves the market in order to avoid an unfavourable situation. When opening a position it is recommended to use stop-loss to insure against extra losses.
While in active trade it is good to protect your fund against potential total loss. That is the central purpose of money and risk management. Too often, the beginning trader will be overly concerned about incurring losing trades. Trader therefore lets losses mount, with the hope that the market will turn around and the loss will turn into a gain.
Almost all successful trading strategies include a disciplined procedure for cutting losses. When a trader is down on a position, many emotions often come into play, making it difficult to cut losses at the right level. The best practice is to decide where losses will be cut before a trade is even initiated. This will assure the trader of the maximum amount he or she can expect to lose on the trade.
Risk a Tolerable Account Portion Per Trade Position
To manage your invested fund well, you have to decide before the opening of any position how much of the money you can afford to lose in case the trade goes negative from your projection. For instance, you may decide that for every opened position your risked money will be 3%, 5% or 10% of the total fund, by so doing you have known prior to the execution of the trade the highest amount that can ever go out of your money on that single trading position, by so doing you have even taken away emotion.
The factor needed to work out this are:
1.The fund balance in your account.
2.The number of pip set as stop loss.
3.The lot size (volume) traded.
For example:
Let's say your fund balance is $5000 and your predetermined stop loss pip is 50 pips (selecting the number of your stop-loss pips should be from your analytical research) and you are ready to risk only 2% of your fund for a position.
What do you do?
Work out the 2% of $5000
Which is = $100.
Implying that you can afford to lose $100 in case of any eventuality.
Then, Divide $100 by 50 pips
It will be $2
Your lot size must be 1 pip to $2. That will be 0.2 lot size.
So you must use 0.2 lot size.
As much as possible try not to be greedy, to be less greedy is to be able to minimize risk.
In a way leverage can help to control risk: if your leverage is relatively low it will limit you against opening a trade with high lot size.
Re-Evaluate Your Strategies
The other key element of risk control is overall account risk. If trade is going against you, at what point will you stop and re-evaluate your trading strategy? Is it when you lost 30% of your money or 50% or 80% or when you lost the entire money? Assess your market analytical methods and see if there would be need for further perfection or even a change.
Also, check out if your set lot size is too large for your entire account size.
Risk management and fund management go hand in hand, if you manage your FUNDD well you are equally reducing your risk, also if you control your risk well you are equally protecting your fund.
by Duro Olorunniji
Forex Trading Is Driven By Five Top Economic Indicators
Many factors affect Forex trading. It is critical to know and understand the various factors that cause the Forex to fluctuate from day to day. The foreign exchange market will change depending on the economic factors that play a role in the movement of currency.
Economic factors and indicators are released by the government or by private organizations that can look in depth at economic performances. These indicators can be used to analyse economic performances from any country. The economic reports measure a country's economic health, in addition to government policies and current events.
For the most part, a reputable broker can look at economic indicators and know which trades will be best. Reports on these indicators are released at scheduled times and can tell if a certain country is experiencing improvement in the economy or if the country's economy is on the decline. When the prices fluctuate, a great deal one way or the other, the price can be affected.
Current events and the state of the economy in any given nation is one of the top economic indicators used when analyzing the Forex. Factors such as unemployment numbers, housing statistics and the current state of a country's government can all affect changes in the Forex. When a country is feeling optimisitic about the current state of affairs in their country, prices of the Forex will reflect this. When a nation experiences political unrest, large amounts of unemployed workers and inflation, the rate of the currency will be reflected. Sometimes, this indicator tends to be overlooked, but can serve as an important gauge in the fluctuations of the Forex.
The gross domestic product,or GDP,is another economic indicator used when looking at the foreign exchange market. The GDP is considered the widest and broadest measure of the economy in a country. The gross domestic product represents the total market value of all goods and services that are normally produced within any given country. This is usually measured in the time frame of a year, and not in weeks or months. Using a larger time period gives good statistics on the products and services that are produced in the country. This indicator is not used alone when forecasting the Forex. The GDP is considered a lagging indicator, meaning that is a measurable factor that changes after the economy has already began to follow a certain trend.
Retail sales reports are the third economic factor that is often used in analyzing the Forex. This is the total receipt of all retail stores in any country. Usually, this measurement is not every single retail sale, but is a sample of diverse retail stores throughout the country. This is considered a very reliable and important economic indicator because of the consumer spending patterns that are expected throughout the year. This factor is usually more important that lagging indicators and gives a clearer picture of the state of the economy in any country.
Another reliable economic indicator in the foreign exchange market is the industrial production report. This report shows the fluctuation in productions in industries such as factories, and utilities. The report looks at actual production in relation to what the production capacity potential is over a period of time. When a country is producing at a maximum capacity it positively affects the Forex and is considered ideal conditions for traders.
The consumer price index, or the CPI, is the last critical economic indicator in analyzing the Forex. The CPI is the measure of the change in the prices of consumer goods in 200 categories. This report can tell whether or not a country is making or losing money on their products and services. The exports that a country has are very important when looking at this indicator because the amount of exports can reflect a currency's weakness or its strength.
The Forex is affected by many factors. These factors usually follow a certain trend so it is important to understand how each factor works in forecasting the Forex. Some are good indicators alone while others should be used together for accurate Forex predications.
by David Mclauchlan
Economic factors and indicators are released by the government or by private organizations that can look in depth at economic performances. These indicators can be used to analyse economic performances from any country. The economic reports measure a country's economic health, in addition to government policies and current events.
For the most part, a reputable broker can look at economic indicators and know which trades will be best. Reports on these indicators are released at scheduled times and can tell if a certain country is experiencing improvement in the economy or if the country's economy is on the decline. When the prices fluctuate, a great deal one way or the other, the price can be affected.
Current events and the state of the economy in any given nation is one of the top economic indicators used when analyzing the Forex. Factors such as unemployment numbers, housing statistics and the current state of a country's government can all affect changes in the Forex. When a country is feeling optimisitic about the current state of affairs in their country, prices of the Forex will reflect this. When a nation experiences political unrest, large amounts of unemployed workers and inflation, the rate of the currency will be reflected. Sometimes, this indicator tends to be overlooked, but can serve as an important gauge in the fluctuations of the Forex.
The gross domestic product,or GDP,is another economic indicator used when looking at the foreign exchange market. The GDP is considered the widest and broadest measure of the economy in a country. The gross domestic product represents the total market value of all goods and services that are normally produced within any given country. This is usually measured in the time frame of a year, and not in weeks or months. Using a larger time period gives good statistics on the products and services that are produced in the country. This indicator is not used alone when forecasting the Forex. The GDP is considered a lagging indicator, meaning that is a measurable factor that changes after the economy has already began to follow a certain trend.
Retail sales reports are the third economic factor that is often used in analyzing the Forex. This is the total receipt of all retail stores in any country. Usually, this measurement is not every single retail sale, but is a sample of diverse retail stores throughout the country. This is considered a very reliable and important economic indicator because of the consumer spending patterns that are expected throughout the year. This factor is usually more important that lagging indicators and gives a clearer picture of the state of the economy in any country.
Another reliable economic indicator in the foreign exchange market is the industrial production report. This report shows the fluctuation in productions in industries such as factories, and utilities. The report looks at actual production in relation to what the production capacity potential is over a period of time. When a country is producing at a maximum capacity it positively affects the Forex and is considered ideal conditions for traders.
The consumer price index, or the CPI, is the last critical economic indicator in analyzing the Forex. The CPI is the measure of the change in the prices of consumer goods in 200 categories. This report can tell whether or not a country is making or losing money on their products and services. The exports that a country has are very important when looking at this indicator because the amount of exports can reflect a currency's weakness or its strength.
The Forex is affected by many factors. These factors usually follow a certain trend so it is important to understand how each factor works in forecasting the Forex. Some are good indicators alone while others should be used together for accurate Forex predications.
by David Mclauchlan
Forex Market Trading Hours
The Forex market has a huge advantage over the other investment markets - it's open 24 hours a day, six days a week. Whereas the commodities and stock market operates five days a week (Monday through Friday) during normal business hours, the Forex market continues its activity around the clock. If you want to trade at 2:00 am EST Monday morning, feel free to place your trade. If you would like to invest at 9:00 pm Thursday night when you have the time to concentrate on the market, simply place your trade on one of the many online Forex trading systems. However, even though the market is considered a 24-hour market, it's important to know when the market is actually active and when is the best time to place a trade on the market.
Actual operating hours
Even though the Forex market is open 24 hours a day, each financial center (i.e. New York, London, Frankfort, Tokyo, and Australia) has its own operating hours, which are usually from 8:00 am - 4:00 pm, local time. That means if it's 8:00 am (Tokyo time) on Monday morning, the Tokyo market will be open for trading even though it's 10:00 pm EST, on Sunday night. You could therefore take advantage of trading on the Forex market late Sunday night from your New York apartment.
Overlapping of hours
With so many financial centers around the globe, you will have times when two or more markets overlap. For instance, the New York and London markets overlap from 8:00 am to 12:00 pm EST, while the London and Tokyo markets overlap from 3:00 am to 4:00 am EST. The Sydney and Tokyo markets also overlap from 7:00 pm - 2:00 am EST. These overlapping periods are the best time to trade since volume (liquidity) is at it's greatest.
Other good times to trade
Besides the overlapping periods, it's best to trade at the following times:
•During the middle of the week (shows most movement)
•During trading hours of the three largest markets - London, New York, and Tokyo.
Times to avoid
It's best to avoid the following times/days:
•Sundays (limited volume)
•Fridays (unpredictable)
•Holidays (limited volume)
•Release of economic reports (volatility)
•4:00 pm - 6:00 pm EST (low market volume).
by Harman Gilly
Actual operating hours
Even though the Forex market is open 24 hours a day, each financial center (i.e. New York, London, Frankfort, Tokyo, and Australia) has its own operating hours, which are usually from 8:00 am - 4:00 pm, local time. That means if it's 8:00 am (Tokyo time) on Monday morning, the Tokyo market will be open for trading even though it's 10:00 pm EST, on Sunday night. You could therefore take advantage of trading on the Forex market late Sunday night from your New York apartment.
Overlapping of hours
With so many financial centers around the globe, you will have times when two or more markets overlap. For instance, the New York and London markets overlap from 8:00 am to 12:00 pm EST, while the London and Tokyo markets overlap from 3:00 am to 4:00 am EST. The Sydney and Tokyo markets also overlap from 7:00 pm - 2:00 am EST. These overlapping periods are the best time to trade since volume (liquidity) is at it's greatest.
Other good times to trade
Besides the overlapping periods, it's best to trade at the following times:
•During the middle of the week (shows most movement)
•During trading hours of the three largest markets - London, New York, and Tokyo.
Times to avoid
It's best to avoid the following times/days:
•Sundays (limited volume)
•Fridays (unpredictable)
•Holidays (limited volume)
•Release of economic reports (volatility)
•4:00 pm - 6:00 pm EST (low market volume).
by Harman Gilly
Understanding What Influences Forex Prices
This article will explain some of the differences between Technical Analysis and Fundamentals and explain a bit about each type of trading. Excerpts are taken from the best-selling book 'Market Wizards' where Jack Schwager interviews Ed Seykota and Bruce Kovner.
Ed is a trend trader (uses technical analysis) and also relies on hunches from 20 years of experience. He definitely emphasizes his reliance on technical analysis. While reading this, I liken, the 'hunches' to knowing the effect fundamentals can have on a market although I could be mistaken, they could be purely from reading lots of charts so well. Here are is exact words "Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them 'funny-mentals.' However, if you catch on early, before others believe, then you might have valuable 'surprise-a-mentals.'"
Ed says his priorities when trading are the long term trend, the current charts and picking a good spot to buy or sell, in that order.
Bruce says technical is awesome and very useful but by no means disregards fundamentals.
It's important to note that technical analysis is a critical method of understanding the history of market movements and hence useful to identify trends. It doesn't actually tell us where the currency is going but analyses historical data. We then need to use our own intelligence to see what the activity of trading says about future trades.
Technical Analysis can be compared to taking a patient's temperature. To ignore it is ignorance and it can tell you whether a market is active, or cold and dormant.
It also picks up unusual behaviour. Anything that creates a new chart pattern is something unusual. He also says "Studying the charts is absolutely crucial and alerts me to existing disequilibria and potential changes."
It's the fundamentals that will help to indicate whether a trading value will increase or decrease.
Everything that makes a country tick, in Forex terms. Consumer spending, government spending, employment cost index, government policy, political concerns and even an individual event can influence the market heavily.
In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so together you can really increase your chances of coming away with some pips.
The reason technical analysis is so emphasized is that many traders use charts to trade and at any given time, will be drawing the same lines of resistance and same lines of support. So if you can read the charts well, you have an awesome chance of predicting market movements. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.
by Sorna Devadas
Ed is a trend trader (uses technical analysis) and also relies on hunches from 20 years of experience. He definitely emphasizes his reliance on technical analysis. While reading this, I liken, the 'hunches' to knowing the effect fundamentals can have on a market although I could be mistaken, they could be purely from reading lots of charts so well. Here are is exact words "Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them 'funny-mentals.' However, if you catch on early, before others believe, then you might have valuable 'surprise-a-mentals.'"
Ed says his priorities when trading are the long term trend, the current charts and picking a good spot to buy or sell, in that order.
Bruce says technical is awesome and very useful but by no means disregards fundamentals.
It's important to note that technical analysis is a critical method of understanding the history of market movements and hence useful to identify trends. It doesn't actually tell us where the currency is going but analyses historical data. We then need to use our own intelligence to see what the activity of trading says about future trades.
Technical Analysis can be compared to taking a patient's temperature. To ignore it is ignorance and it can tell you whether a market is active, or cold and dormant.
It also picks up unusual behaviour. Anything that creates a new chart pattern is something unusual. He also says "Studying the charts is absolutely crucial and alerts me to existing disequilibria and potential changes."
It's the fundamentals that will help to indicate whether a trading value will increase or decrease.
Everything that makes a country tick, in Forex terms. Consumer spending, government spending, employment cost index, government policy, political concerns and even an individual event can influence the market heavily.
In summary, the fundamentals will indicate the direction of a price but not exact prices. The chart analysis or technical analysis is better for that, so together you can really increase your chances of coming away with some pips.
The reason technical analysis is so emphasized is that many traders use charts to trade and at any given time, will be drawing the same lines of resistance and same lines of support. So if you can read the charts well, you have an awesome chance of predicting market movements. The best way to learn about the effect of fundamentals is to learn one piece of economic data at a time. This will help you make better-educated trades.
by Sorna Devadas
Forecasting Forex Trading
What is Forex or Foreign Exchange: It is the largest financial market in the world, with a volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another.
What about Forecasting: Predicting current and future market trends using existing data and facts. Analysts rely on technical and fundamental statistics to predict the directions of the economy, stock market and individual securities.
For those who trade using the Forex, or foreign currency exchange, knowing how to forecast the Forex can make the difference between trading successfully and losing money. When you begin learning about Forex trading, it is vital that you understand how to forecast the Forex trading market.
There are a few methods that are used when forecasting the Forex. Each system is used to understand how the Forex works and how the fluctuations in the market can affect traders and currency rates. The two methods that are most often used are called technical analysis and fundamental analysis. Both methods differ in their own ways, but each one can help the Forex trader understand how the rates are affecting the currency trade. Most of the time, experienced traders and brokers know each method and use a mixture of the two to trade on the Forex.
One method used in forecasting foreign currency exchange is called technical analysis. This method uses predictions by looking at trends in charts and graphs from past Forex market happenings. This system is based on solid events that have actually taken place in the Forex in the past. Many experience Forex traders and brokers rely on this system because it follows actual trends and can be quite reliable.
When looking at the technical analysis in the Forex, there are three basic principles that are used to make projections. These principles are based on the market action in relation to current events, trends in price movements and past Forex history. When the market action is looked at, everything from supply and demand, current politics and the current state of the market are taken into consideration. It is usually agreed that the actual price of the Forex is a direct reflection of current events.
The trends in price movement are another factor when using technical analysis. This means that there are patterns in the market behavior that have been known to be a contributing factor in the Forex. These patterns are usually repeating over time and can often be a consistent factor when forecasting the Forex market. Another factor that is taken into consideration when forecasting the Forex is history. There are definite patterns in the market and these are usually reliable factors. There are several charts that are taken into consideration when forecasting the Forex market using technical analysis. The five categories that are look at include indicators, number theory, waves, gaps and trends.
Most of these can be quite complicated for those who are inexperienced using the Forex. Most professional Forex brokers understand these charts and have the ability to offer their clients well-informed advice about Forex trading.
Another way that experienced brokers and traders in the Forex use to forecast the trends is called fundamental analysis. This method is used to forecast the future of price movements based on events that have not taken place yet. This can range from political changes, environmental factors and even natural disasters. Important factors and statistics are used to predict how it will affect supply and demand and the rates of the Forex. Most of the time, this method is not a reliable factor on its own, but is used in conjunction with technical analysis to form opinion about the changes in the Forex market.
For those interesting in being involved with Forex trading, a basic understanding of how the system works is essential. Understanding both forecasting systems and how they can predict the market trends will help Forex traders be successful with their trading. Most experienced traders and brokers involved with the Forex use a system of both technical and fundamental information when making decisions about the Forex market. When used together, they can provide the trader with invaluable information about where the currency trends are headed.
Always leave the forecasting to the pros unless you are playing the Forex as a hobby and don't have a lot of money invested..
What about Forecasting: Predicting current and future market trends using existing data and facts. Analysts rely on technical and fundamental statistics to predict the directions of the economy, stock market and individual securities.
For those who trade using the Forex, or foreign currency exchange, knowing how to forecast the Forex can make the difference between trading successfully and losing money. When you begin learning about Forex trading, it is vital that you understand how to forecast the Forex trading market.
There are a few methods that are used when forecasting the Forex. Each system is used to understand how the Forex works and how the fluctuations in the market can affect traders and currency rates. The two methods that are most often used are called technical analysis and fundamental analysis. Both methods differ in their own ways, but each one can help the Forex trader understand how the rates are affecting the currency trade. Most of the time, experienced traders and brokers know each method and use a mixture of the two to trade on the Forex.
One method used in forecasting foreign currency exchange is called technical analysis. This method uses predictions by looking at trends in charts and graphs from past Forex market happenings. This system is based on solid events that have actually taken place in the Forex in the past. Many experience Forex traders and brokers rely on this system because it follows actual trends and can be quite reliable.
When looking at the technical analysis in the Forex, there are three basic principles that are used to make projections. These principles are based on the market action in relation to current events, trends in price movements and past Forex history. When the market action is looked at, everything from supply and demand, current politics and the current state of the market are taken into consideration. It is usually agreed that the actual price of the Forex is a direct reflection of current events.
The trends in price movement are another factor when using technical analysis. This means that there are patterns in the market behavior that have been known to be a contributing factor in the Forex. These patterns are usually repeating over time and can often be a consistent factor when forecasting the Forex market. Another factor that is taken into consideration when forecasting the Forex is history. There are definite patterns in the market and these are usually reliable factors. There are several charts that are taken into consideration when forecasting the Forex market using technical analysis. The five categories that are look at include indicators, number theory, waves, gaps and trends.
Most of these can be quite complicated for those who are inexperienced using the Forex. Most professional Forex brokers understand these charts and have the ability to offer their clients well-informed advice about Forex trading.
Another way that experienced brokers and traders in the Forex use to forecast the trends is called fundamental analysis. This method is used to forecast the future of price movements based on events that have not taken place yet. This can range from political changes, environmental factors and even natural disasters. Important factors and statistics are used to predict how it will affect supply and demand and the rates of the Forex. Most of the time, this method is not a reliable factor on its own, but is used in conjunction with technical analysis to form opinion about the changes in the Forex market.
For those interesting in being involved with Forex trading, a basic understanding of how the system works is essential. Understanding both forecasting systems and how they can predict the market trends will help Forex traders be successful with their trading. Most experienced traders and brokers involved with the Forex use a system of both technical and fundamental information when making decisions about the Forex market. When used together, they can provide the trader with invaluable information about where the currency trends are headed.
Always leave the forecasting to the pros unless you are playing the Forex as a hobby and don't have a lot of money invested..
Choosing Your Forex Broker... Important Facts
The best advice I can give to you is to conduct yourself like a boss interviewing a potential employee. This employee will be making major decision on your financial future (or lack there of) and therefore it is of most importance that you ask the right questions. This decision cannot be taken lightly as must be well thought out. I would interview (more like grill) at least 5 potential Brokers before picking the final two.
When choosing a forex broker there are many factors to take into account.
— Trust
— Experience
— References from past clients
— Level of success
— Amount of advice to be given
— Convenience
— Amount of margin offered
— Speed
All of the above are of course important. In any financial transaction it is important to trust the broker you work with. This trust is garnered by the experience level the broker has. Of course there are some new brokers starting out who are quite trustworthy, but most people would rather work with an experienced broker. For that reason most new brokers attach themselves to a firm where they can be mentored and gain experience.
References from past clients are important. If your broker has helped someone else is successful in the past and that person is willing to speak up for him that says a lot. You can gage the level of success your broker has had by speaking with past clients and seeing how well they did working with this broker. Next, take a look at the amount of advice your broker is willing to give you. Of course, you make your own decisions and will never take another person's word for everything, but it is good to have knowledge to work with, and advice from an experienced broker is key information to factor in. Convenience is also impotent. If you live in California then an Ohio broker might not be the best choice. But in the age of the internet that factor has become less relevant. With fax and email where you and your broker live has become less important.
The amount of margin offered is important. Margin is used to leverage your money. A broker who gives you a 50 to one margin is more valuable than one who gives you 20 to one. And of course speed. Is your broker quick? Does he return phone calls and emails promptly? If so, perhaps you can work with him.
Your broker will b a trusted advisor and someone that you may be working with for years to come so choose the relationship carefully. Ask friends and acquaintances who are active in forex trading what broker they use and how they met. It is quite possible that you can get a referral from a friend or acquaintance you trust and acquire a good forex broker that way.
Another good way to find a forex broker is to go online. There are message forums, chat rooms, and email groups through portals like Yahoo, Google and MSN that contain a wealth of information. Getting onto one of these online communities and asking other people for advice is the way that many people found their broker. If a broker has several clients in an online community who are happy with what he has accomplished for them, then that is a good indication that you might be happy with him as well. Take advantage of the number of people who are on the internet and join some of these online communities. Ask question and you'll probably learn a great deal from the experiences that other people have had. Also find trade journals, magazines and ezines to subscribe to. Read as much as you can about the subject of forex trading before going into it. Become a smart shopper and smarter trader.
Finding a good forex broker is a job in itself. When you visit with a forex broker you are in essence conducting an employment interview to determine if this is the broker you wish to handle your financial affairs, so be thorough. Ask plenty of questions. Ask for references. Don't be shy. Also check with other people in the office of the broker and see if you would trust them to fill in for your broker if he were not available. And, see if the broker is willing to offer you a demo account to use to get in some practice before you actually make an investment. If the broker is able to do so and encourages you then it means that the broker wants educated clients and is not just out for the quick buck. See what kind of training and tutoring the broker is willing to offer. A good broker will offer to answer your questions and help you through the learning process.
by David Mclauchlan
When choosing a forex broker there are many factors to take into account.
— Trust
— Experience
— References from past clients
— Level of success
— Amount of advice to be given
— Convenience
— Amount of margin offered
— Speed
All of the above are of course important. In any financial transaction it is important to trust the broker you work with. This trust is garnered by the experience level the broker has. Of course there are some new brokers starting out who are quite trustworthy, but most people would rather work with an experienced broker. For that reason most new brokers attach themselves to a firm where they can be mentored and gain experience.
References from past clients are important. If your broker has helped someone else is successful in the past and that person is willing to speak up for him that says a lot. You can gage the level of success your broker has had by speaking with past clients and seeing how well they did working with this broker. Next, take a look at the amount of advice your broker is willing to give you. Of course, you make your own decisions and will never take another person's word for everything, but it is good to have knowledge to work with, and advice from an experienced broker is key information to factor in. Convenience is also impotent. If you live in California then an Ohio broker might not be the best choice. But in the age of the internet that factor has become less relevant. With fax and email where you and your broker live has become less important.
The amount of margin offered is important. Margin is used to leverage your money. A broker who gives you a 50 to one margin is more valuable than one who gives you 20 to one. And of course speed. Is your broker quick? Does he return phone calls and emails promptly? If so, perhaps you can work with him.
Your broker will b a trusted advisor and someone that you may be working with for years to come so choose the relationship carefully. Ask friends and acquaintances who are active in forex trading what broker they use and how they met. It is quite possible that you can get a referral from a friend or acquaintance you trust and acquire a good forex broker that way.
Another good way to find a forex broker is to go online. There are message forums, chat rooms, and email groups through portals like Yahoo, Google and MSN that contain a wealth of information. Getting onto one of these online communities and asking other people for advice is the way that many people found their broker. If a broker has several clients in an online community who are happy with what he has accomplished for them, then that is a good indication that you might be happy with him as well. Take advantage of the number of people who are on the internet and join some of these online communities. Ask question and you'll probably learn a great deal from the experiences that other people have had. Also find trade journals, magazines and ezines to subscribe to. Read as much as you can about the subject of forex trading before going into it. Become a smart shopper and smarter trader.
Finding a good forex broker is a job in itself. When you visit with a forex broker you are in essence conducting an employment interview to determine if this is the broker you wish to handle your financial affairs, so be thorough. Ask plenty of questions. Ask for references. Don't be shy. Also check with other people in the office of the broker and see if you would trust them to fill in for your broker if he were not available. And, see if the broker is willing to offer you a demo account to use to get in some practice before you actually make an investment. If the broker is able to do so and encourages you then it means that the broker wants educated clients and is not just out for the quick buck. See what kind of training and tutoring the broker is willing to offer. A good broker will offer to answer your questions and help you through the learning process.
by David Mclauchlan
The Best Forex Broker: One for Everyone
Dishonest and illegitimate brokers who defraud their customers are a disgrace to the online Forex brokerage business. Many traders are rightfully scornful of those who lack the basic decency to allow them to withdraw their funds, even after losses. And sometimes traders can't help but feel that if they could just locate that best Forex broker hidden somewhere in the far reaches of the cyber-jungle, trading and profiting would give the taste of fine French wines, instead of the usual vinegar. But are Forex brokers really such a wicked lot that even the Evil One himself is put to shame by his incompetence in comparison? Is the oversight of multiple government agencies, newspapers and the trader community insufficient to convince them to behave like normal people? Most importantly, since retail Forex is like a shower of gold and silver for online brokers, do they really need to kill their Golden Goose by defrauding traders and destroying their Forex strategies through misquotes and stop-running?
The fact of the matter is that the number of fraudsters in the Forex market is a lot smaller than what many disgruntled traders believe. If you have the misfortune of being a victim of one of them, no doubt, our words will not do much to help you trust the brokers. But we invite you to recall the fact that there are a significant number of firms which have been in operation for many years in nations where regulation and oversight is strictest. Surely, a broker with a long history in Switzerland does not prove much about the reliability of Forex brokers, but others headquartered in New York, and monitored and authorized by the authorities for years cannot have had the skills to keep everyone blind for so many years. Forex is risky, and requires patient study, but it is no longer a shady corner of the internet world: it is regulated and monitored, and more and more a part of the mainstream of financial business.
And while we'd love to send you to the best broker in this article, the good news is that we don't even need to. There are a large number of firms operating online today which cater to different kinds of investors with different expectations and skills. If you're a professional, you will not be equally satisfied by the offer of a decent, legitimate broker which caters to beginners and average traders for the most part. As a beginner, you're unlikely to have all your needs expectations fulfilled by a well-established firm with excellent services and yet a significant minimum deposit requirement. It is this diversity of offers that makes online Forex the field of pioneers, and such an exciting place to be for traders. If you're one of those brave people who want to explore this brave new world, go check your Forex broker ratings now, and who knows, maybe you'll grow to become the next Martin Schwartz of the century. Anything is possible in Forex.
By Carl Hayes
This article was brought to you by forextraders.com, the premiere destination for Forex strategies, analysis, news and commentary. Run by traders for traders, forextraders.com offers you an extensive online library, along with a comprehensive Forex school where you can grow from a Forex rookie to a formidable trader in the course of a week. In-depth reviews with clear-cut Forex broker ratings complete the picture for the most powerful online resource on Forex trading. Pump up your career, go and visit forextraders.com now!
The fact of the matter is that the number of fraudsters in the Forex market is a lot smaller than what many disgruntled traders believe. If you have the misfortune of being a victim of one of them, no doubt, our words will not do much to help you trust the brokers. But we invite you to recall the fact that there are a significant number of firms which have been in operation for many years in nations where regulation and oversight is strictest. Surely, a broker with a long history in Switzerland does not prove much about the reliability of Forex brokers, but others headquartered in New York, and monitored and authorized by the authorities for years cannot have had the skills to keep everyone blind for so many years. Forex is risky, and requires patient study, but it is no longer a shady corner of the internet world: it is regulated and monitored, and more and more a part of the mainstream of financial business.
And while we'd love to send you to the best broker in this article, the good news is that we don't even need to. There are a large number of firms operating online today which cater to different kinds of investors with different expectations and skills. If you're a professional, you will not be equally satisfied by the offer of a decent, legitimate broker which caters to beginners and average traders for the most part. As a beginner, you're unlikely to have all your needs expectations fulfilled by a well-established firm with excellent services and yet a significant minimum deposit requirement. It is this diversity of offers that makes online Forex the field of pioneers, and such an exciting place to be for traders. If you're one of those brave people who want to explore this brave new world, go check your Forex broker ratings now, and who knows, maybe you'll grow to become the next Martin Schwartz of the century. Anything is possible in Forex.
By Carl Hayes
This article was brought to you by forextraders.com, the premiere destination for Forex strategies, analysis, news and commentary. Run by traders for traders, forextraders.com offers you an extensive online library, along with a comprehensive Forex school where you can grow from a Forex rookie to a formidable trader in the course of a week. In-depth reviews with clear-cut Forex broker ratings complete the picture for the most powerful online resource on Forex trading. Pump up your career, go and visit forextraders.com now!
6 Critical Factors For Successful Forex Trading
Online, Day trading has exploded across America. Some investors have been very successful and boast of huge gains made in incredibly short periods of time. However, there are many others who experience devastating losses because they have not tapped into the 6 critical factors necessary for successful Futures and FOREX Trading. Http://Free-Cash-Site.com
Success in any profession can be broken down into a number of critical factors. Trading is no different. A successful trading strategy incorporates the following 6 factors.
1. Determination of An Edge: Trading Futures is a zero sum game. There must be an identifiable edge over the other market participants.
2. Disciplined Execution:There is no point in identifying an edge if there is no discipline to follow thru. Create a plan, stick with it, then determine if the plan is successful. If it is not, change the plan. The important thing is disciplined execution.
3. Money Management: If the risk per trade is too aggressive, then there is the risk of blowing an account. If trades are too conservative, then the opportunity to optimize returns is missed. It is critical to establish the maximum expected draw down of any system and set money management rules accordingly.
4. Create a Trading Plan: A trading plan will determine what will be done in any given situation during the trade day. A plan helps keep one focused on execution and not distractions.
5. Responsibility: Responsibility lies with the trader. Gains, losses, success, or failure is determined by the skill, determination and discipline of the trader.
6. Commitment: There must be commitment to placing every trade according to plan, even through the losing periods where every trade seems to end up a loser. Trading seems to throw up extremes of good times and bad times. One must not be over confident during the good times, and one must not give up in the bad times. There also must be adequate time every day to compare actual performances against the trading plan.
by Roxanne Manning
Success in any profession can be broken down into a number of critical factors. Trading is no different. A successful trading strategy incorporates the following 6 factors.
1. Determination of An Edge: Trading Futures is a zero sum game. There must be an identifiable edge over the other market participants.
2. Disciplined Execution:There is no point in identifying an edge if there is no discipline to follow thru. Create a plan, stick with it, then determine if the plan is successful. If it is not, change the plan. The important thing is disciplined execution.
3. Money Management: If the risk per trade is too aggressive, then there is the risk of blowing an account. If trades are too conservative, then the opportunity to optimize returns is missed. It is critical to establish the maximum expected draw down of any system and set money management rules accordingly.
4. Create a Trading Plan: A trading plan will determine what will be done in any given situation during the trade day. A plan helps keep one focused on execution and not distractions.
5. Responsibility: Responsibility lies with the trader. Gains, losses, success, or failure is determined by the skill, determination and discipline of the trader.
6. Commitment: There must be commitment to placing every trade according to plan, even through the losing periods where every trade seems to end up a loser. Trading seems to throw up extremes of good times and bad times. One must not be over confident during the good times, and one must not give up in the bad times. There also must be adequate time every day to compare actual performances against the trading plan.
by Roxanne Manning
How To Find A Forex Broker That Won`t Rob You Blind
It`s not always easy to know what to look for in a forex broker, especially in any market, much less a market as complex as currency. But, if you want to trade in the market you need a good firm to work with. While it might be tempting to simply ask the brokers what they can do for you, you can`t always depend on them to give you a straight answer. So instead, I`ve put together a few things to consider when choosing your forex broker. You will want a forex broker that has low spreads. The spread, which is calculated in pips, is the difference between the price at which a currency can be bought and the price at which it can be sold at any specific point in time. Since forex brokers don`t charge a commission, this difference is how they make money. Low spreads will save you money.
Along with this, you should be looking for a forex broker attached to a reputable institution. Unlike equity brokers, they are usually attached to large banks or lending institutions. The firm should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you`ve narrowed your choices down to brokers that won`t cost you too much, and that are reputable, consider the trading tools that they are offering you. Forex brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real time charts, technical analysis tools, real time news and data, and may even offer support for the various trading systems.
Before you commit to any one company, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a forex broker who will give you everything that you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential partner has. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any forex broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the partner you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
A brokerage firm that meets all of these needs should be a good forex broker for you, but you still need to be certain that they are honest. Dishonest brokers can be prone to prematurely buying or selling near preset points (commonly referred to as sniping and hunting) or may indulge in other habits that will cost you money.
Obviously, no brokerage firm admits to doing things like these, but there are ways to know if they have. The best ways to find out more about your potential forex broker is to talk to fellow traders. There is no list or organization that reports dishonest activity, but a visit to online discussion forums, or a simple conversation will often reveal who is an honest forex broker.
You should also watch to see if a brokerage firm has strict margin rules. Since you are trading with borrowed money, your forex broker has a say in how much risk you are able to take. You agree to this when you sign a margin agreement for your account. This means your firm can buy or sell at his discretion, to cover the brokerage firm's interests, which could have repercussions for you.
Say you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all time highs. Even if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low point. This action on their part can cost you dearly. You can only find out whether the firm is prone to this kind of activity by talking to other traders. Being informed on all aspects of a forex broker before you make the decision to trade with them will allow you to start trading the forex market with confidence.
by Jimmy Cox
Along with this, you should be looking for a forex broker attached to a reputable institution. Unlike equity brokers, they are usually attached to large banks or lending institutions. The firm should also be registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC).
Once you`ve narrowed your choices down to brokers that won`t cost you too much, and that are reputable, consider the trading tools that they are offering you. Forex brokers have many different trading platforms for their clients, just like brokers in other markets. These often show real time charts, technical analysis tools, real time news and data, and may even offer support for the various trading systems.
Before you commit to any one company, request free trials of their tools. Brokers generally provide technical as well as fundamental commentaries, economic calendars, and other research to help you make good trades. Shop around until you find a forex broker who will give you everything that you need to succeed.
The next item that you will need to evaluate carefully is the number of leverage options your potential partner has. Leverage is a necessity in forex trading because the price deviations in the currencies are set at fractions of a cent. Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Many brokerage firms will offer you as much as 250:1. If you have low levels of capital you will need a brokerage with high levels of leverage to make reasonable profits.
If capital is not a problem, any forex broker that has a wide variety of leverage options would be a good choice for you. A variety of options will let you vary the amount of risk you choose to take. For example, less leverage (and therefore less risk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for brokers that offer different types of accounts. Many brokers will offer you two or more types. The smallest account is known as a mini account and it requires you to trade with a minimum of around $300. The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different leverages, but it requires minimum initial capital of $2,000. And finally, there are premium accounts, which often require significant amounts of capital. They also generally have different levels of leverage available to the traders who use them, and often offer additional tools and services. You will need to make sure that the partner you choose has the right leverage, tools, and services for the amount of capital that you are able to work with.
A brokerage firm that meets all of these needs should be a good forex broker for you, but you still need to be certain that they are honest. Dishonest brokers can be prone to prematurely buying or selling near preset points (commonly referred to as sniping and hunting) or may indulge in other habits that will cost you money.
Obviously, no brokerage firm admits to doing things like these, but there are ways to know if they have. The best ways to find out more about your potential forex broker is to talk to fellow traders. There is no list or organization that reports dishonest activity, but a visit to online discussion forums, or a simple conversation will often reveal who is an honest forex broker.
You should also watch to see if a brokerage firm has strict margin rules. Since you are trading with borrowed money, your forex broker has a say in how much risk you are able to take. You agree to this when you sign a margin agreement for your account. This means your firm can buy or sell at his discretion, to cover the brokerage firm's interests, which could have repercussions for you.
Say you have a margin account, and your position takes a headlong nosedive before it begins to rebound to all time highs. Even if you have enough cash to cover it, some brokers will liquidate your position on a margin call at that low point. This action on their part can cost you dearly. You can only find out whether the firm is prone to this kind of activity by talking to other traders. Being informed on all aspects of a forex broker before you make the decision to trade with them will allow you to start trading the forex market with confidence.
by Jimmy Cox
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