Forex Traders | Forex Exchange

Forex Trading – When Do I Enter The Market?

Posted by forexmaster On October - 8 - 2010

By Paul W. Dean-Hack the Forex Market REVIEW

The biggest question that surrounds trading Forex or any other financial market is simply this, When do I enter the market? Anyone who has traded a demo trading account or a live account knows that this is the most important question. When do you “pull the trigger”?

Before we answer that we need to understand what is happening on a day-to-day basis in the Forex market.

Many Forex traders are not aware of the large number of traders in the Forex market and the influence or non-influence that traders have on supply and demand. If you are trading the Pound/Dollar then you want to place your order when demand for the Pound is increasing or demand for the Dollar is increasing. When is that exactly and how do you measure it?

In Forex the largest group of traders by far, are Commercial traders. The results of their positions can be seen each week at the CFTC site under the Commitment of Traders Report. Commercial traders DO NOT try to make money from their currency transactions. They are not interested in Volatility but Stability. They are like a big ship going one direction that takes time and effort to turn. Even more than that, they resist turning. Their goal is stable prices in order to run their businesses, countries, and institutions.

The second group of traders are Non-Commercial traders who speculate. They are trying to make money in the Forex market for themselves and their clients. There is some debate as to whether this group can create a trend. It is my opinion that if conditions are right a herding affect can take place where there is a sustained demand for one currency or another and therefore a trend but these traders do not have the power to sustain a trend and maintain it on their own.

Does this help us answer the question of when to enter the market?

Let make up an example. Say we have a large company about to invest in something that requires U.S. Dollars. The bank that is doing this for them begins to make purchases. Retail traders, you and I, don’t know about this obviously. Other traders however in the network of Non-commercial traders have their contacts and the word gets out in particular when the demand for Dollars increases. More Non-commercial traders jump on board and demand for the Dollar increases even more.

Retail traders see a solid move on the trading charts. Perhaps this occurred in the beginning of the New York session and by 4PM the Dollar had gained 100 pips against the pound. Sharp retail traders would have been looking for this kind of trade every day. Depending on the type of trading system they would have seen more than just the bars or candles moving on their charts, they would also see momentum changes.

However, at the end of the trading day, the trade momentum created by the sales of the initial bank may have slowed (intentionally). Many traders still would not know the reason for the change in prices because the banks job is to subtly make the investments. To do otherwise could cause a buying panic and prices for the investment would increase.

The lull overnight might turn into a small retracement. In fact, the lull may look like a move back into consolidation.

The next day however, the bank must buy more. Now traders not holding Dollars required to purchase the investment must have found out about the investment and are converting their currency in favor of the dollar. This creates more volatility. Now, the big Commercial traders must get into action to stabilize their positions. This can cause even greater demand. This continues until the bank in question completes its job. The size of the investment that was initially begun directly relates to home much of a trend was created.

This is a simple example of a situation in the market that can cause volatility.

As a retail trader, how would you have known? Maybe a better question is when would you have known?

The top traders learn to not only follow price but to understand momentum changes in price. Momentum changes tied with actual “key” trading times in the market can provide the first indications that the market is reading to move. It is this understanding of momentum that alerts top traders to the conditions that something is happening in the market.

Many very wealthy traders have admitted that they are more lucky than good but they also will tell you that they were prepared to take advantage of the luck. Momentum from an indicator like RSI can help with that preparedness.

Try learning about RSI, The Relative Strength Index, to locate momentum changes, in particular Positive and Negative Reversals. This will get you prepared to take part in those trend opportunities when to enter the market.

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Is Forex For You? Can Anyone Be Successful With Forex Trading?

Posted by forexmaster On September - 13 - 2010

By Mike Valles – Forex Hippo Review

Forex trading is a very popular and many ads promise a lot. Find out if you have what it takes to become successful with FX currency trading.

There has never been a day when so much information is available as to what is happening around the world. This makes it easier than ever to have the right information available to know about possible currency fluctuations for successful Forex trading. Many people have been wondering for some time if Forex is something that they want to get involved in. Here are some basic tips to help make that decision intelligently.

Forex could be ideal if…

There is a Willingness to Learn about Forex Trading, and then Learn Some More

Despite a lot of claims to the contrary, it is impossible to learn enough about Forex in one sitting to be able to start making money on a regular basis. To be successful, it will take a good Forex trading education, and this will probably require more than one Forex trading course.

As long as there is a desire to continue to learn, an individual could do well in Forex day trading. It will be necessary to learn from various training materials, from the experts, and from personal experiments on the demos or mini-Forex. An option would be to go with managed Forex, which means a dependence on the knowledge of others, and less earnings. There will also have to be some hope that it is being managed well.

The greatest profit, however, will come when a Forex trader can do all of their own investing. This will take more knowledge, but it will be more exciting, too.

Good Advice Can Be Followed Carefully

Forex can work if good advice can heeded. Many experts have books and other materials out there that provide expert advice for the novice. As experience and abilities increase, Forex traders will want to incorporate their expert advice and personal experience into a new personal investing scheme – a FX strategy of the trader’s own design.

Another good piece of advice necessary to follow concerns an investment strategy. Professional Forex traders generally make small investments – never large amounts. This ensures that there is more money for tomorrow to invest, and it minimizes loss potential, too.

Patience as a Forex Trader is a Necessary Virtue

Trading in Forex means that there cannot be a hurry to make a million dollars. Professionals do not trade every day, either. Rather, they only make an investment when they are quite sure (in their mind) of a win. They also make sure that there is a reasonable expectation of a profit – not just an emotional experience.

Realistic Expectations are Needed in Forex Trading

Forex currency trading is a great way to increase personal income if it is done right. Unfortunately, it also is a great way to lose a lot of money quickly – and unnecessarily if there is a real rush to get rich.

Trading successfully will take patience, a lot of common sense and knowledge of how the FX market works. If the goal is to become rich quickly then FX is probably not what is needed. Those who are looking for get rich quick schemes should also watch out because there will probably also be an inclination to fall for those ads that promise “Forex made easy” – which is a lot of hype!

Don’t Give Up FX Practice Accounts too Quickly

This goes along with that last point of being in a hurry to make a ton of money. Most likely, it won’t happen. The key for success is to take time to learn the system, be able to understand how to read and interpret the charts, understand the features of more than one Forex trading software, know how to choose a good Forex broker, and know how to set stop losses.

Then, take the time needed to develop a solid Forex trading strategy that works. This means take some time to develop it, and then tweak it to perfection, so that it can provide a much higher rate of successes than losses, on a demo account. If these investing tips are followed, success can’t be too far behind in Forex – just keep on learning more.

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Trading – Commodity Trading Oil: Keep On Eyes On Movements In The Market

Posted by forexmaster On June - 16 - 2010

Predicting the next move in the markets is the key to making money in trading, but putting this simple concept into action is much harder than it sounds. Professional forex traders have long known that trading currencies requires looking beyond the world of FX. The fact is that currencies are moved by many factors – supply and demand, politics, interest rates, economic growth, and so on. More specifically, since economic growth and exports are directly related to a country’s domestic industry, it is natural for some currencies to be heavily correlated with commodity prices. The top three currencies that have the tightest correlations with commodities are the Australian dollar, the Canadian dollar and the New Zealand dollar. Other currencies that are also impacted by commodity prices but have a weaker correlation are the Swiss franc and the Japanese yen. Knowing which currency is correlated with what commodity can help traders understand and predict certain market movements. Here we look at currencies correlated with oil and gold and show you how you can use this information in your trading. (For background reading, see The Most Popular Forex Currencies.)

Oil and the Canadian Dollar
Over the past few years, the price of commodities has fluctuated significantly. Oil, for example, surged from $60 a barrel in 2006 to a high of $147.27 a barrel in 2008 before plummeting back below $40 a barrel in the first quarter of 2009. Similar volatility can be seen in the price of gold, which hit a high of $1,033 an ounce in March 2008 before falling below $700 an ounce in June of the same year. With many countries around the world in recession, the trend of commodity prices can mean the difference between a deeper downturn and a faster recovery. Knowing which currencies are affected by what commodities will help you make more educated trading decisions. (Find out how the everyday items you use can affect your investments in Commodities That Move The Markets.)

Oil is one of the world’s basic necessities – at least for now, most people in developed countries cannot live without it. In February 2009, the price of oil was nearly 70% below its all-time high of $147.27 set on July 11, 2008. A decline in oil prices is a nightmare for oil producers, while oil consumers enjoy the benefits of greater purchasing power. This is a complete 180-degree change from the situation at the beginning of 2008, when record-high oil prices put a big smile on the faces of oil producers while forcing oil consumers to pinch pennies. There are a number of reasons to explain the fall in oil prices, including a stronger dollar (oil is priced in dollars) and weaker global demand. As a net oil exporter, Canada is severely hurt by declines in oil, while Japan – a major net oil importer – tends to benefit.

Between the years 2006-2009, for example, the correlation between the Canadian dollar and oil prices was approximately 80%. On a day-to-day basis, the correlation can break, but over the long term it has been strong because the value of the Canadian dollar has good reason to be sensitive to the price of oil. Canada is the seventh-largest producer of crude oil in the world and continues to climb up the list, with production in oil sands increasing regularly. In 2000, Canada surpassed Saudi Arabia as the United States’ most significant oil supplier. Unbeknownst to many, the size of Canada’s oil reserves is second only to those in Saudi Arabia. The geographical proximity between the U.S. and Canada, as well as the growing political uncertainty in the Middle East and South America, makes Canada one of the more desirable places from which the U.S. can import oil. But Canada does not service only U.S. demand. The country’s vast oil resources are beginning to get a lot of attention from China, especially since Canada stumbled upon a new stash of oil after a reclassification of its Alberta oil sands to the “economically recoverable” category. This makes the Canadian dollar extremely vulnerable in the event that oil prices continue to spiral downward. (Read more in Peak Oil: What To Do When The Wells Run Dry.)

Figure 1 shows the clearly positive relationship between oil and the Canadian loonie. In fact, it should come as no surprise that the price of oil actually acts as a leading indicator for the price action of the CAD/USD. Since the traded instrument is the inverse, or USD/CAD, it’s important to note that based on the historical relationship, when oil prices go up, USD/CAD falls and when oil prices go down, USD/CAD rises.

Oil and the Japanese Economy
At the other end of the spectrum is Japan, which imports nearly all of its oil (compared to the U.S., which imports approximately 50%). As of 2009, it is the world’s third-largest net oil importer behind the U.S. and China. Japan’s lack of domestic sources of energy, and its need to import vast amounts of crude oil, natural gas and other energy resources, make it particularly sensitive to changes in oil prices. Japan also lacks the flexibility to switch to nuclear power because it is a huge net importer of uranium for its nuclear power plants. As of 2008, the country’s dependence on imports for primary energy stood at more than 84%. Oil provided Japan with 49% of its total energy needs, coal with 20%, nuclear power 13%, natural gas 14%, hydroelectric power 3% and renewable sources a mere 1%. Therefore, when oil prices skyrocket, the Japanese economy suffers. (Hedge against rising energy prices and diversify your portfolio; read ETFs Provide Easy Access To Energy Commodities.)

An Attractive Oil Play: CAD/JPY
Looking at this from a net oil exporter/importer perspective, the currency pair that tops the list of currencies to trade to express a view on oil prices is the Canadian dollar against the Japanese yen. Figure 2 illustrates the tight correlation between oil prices and CAD/JPY. More often than not, oil prices tend to be the leading indicator (as with USD/CAD) for CAD/JPY price action with a noticeable delay. As oil prices continued to fall during this period, CAD/JPY broke the 100 level to hit a low of 76.

Going for Gold
Gold traders may also be surprised to hear that trading the Australian dollar is just like trading gold in many ways. As the world’s third-largest producer of gold, the Australian dollar had an 84% positive correlation with the precious metal between 1999 and 2008. Generally speaking, this means that when gold prices rise, the Australian dollar appreciates as well. The proximity of New Zealand to Australia makes Australia a preferred destination for exporting New Zealand goods. Therefore, the health of New Zealand’s economy is closely tied to the health of the Australian economy, which explains why the NZD/USD and the AUD/USD have had a 96% positive correlation over the same time period. The correlation of the NZD/USD with gold is slightly less than that of the Australia dollar but is still strong at 78%.

A weaker, but still important, correlation is that of gold prices and the Swiss franc. The country’s political neutrality and the fact that its currency used to be backed by gold have made the franc the currency of choice in times of political uncertainty. From January 2006 until January 2009, USD/CHF and gold prices had a 77% positive correlation. However, the relationship broke down somewhat in September 2005 as the U.S. dollar decoupled from gold price movements. (For further reading, see The Gold Standard Revisited and What Is Wrong With Gold?)

Trading Currencies as a Supplement to Trading Oil or Gold
For seasoned commodity traders, it may also be worthwhile to look at trading currencies as an alternative or a supplement to trading commodities. In addition to being able to capitalize on a similar outlook (e.g. higher oil), traders may also be able to earn interest if they are on 2% margin or higher with most brokers. When trading currencies, you are dealing with countries, and countries have interest rates, of course. For example, a trader who may have bought the AUD/USD in March 2009 would be able to earn up to 3% in interest income if Australian interest rates remained at 3.25% and U.S. interest rates remained at 0.25% for the entire year. The 3% comes from taking Australia’s central bank rate, which is the amount earned, and subtracting the nearly 0% rates paid for shorting the U.S. dollar. These are unleveraged rates, which mean that with 10 times leverage, for example, net of any exchange rate changes, the interest income would be that much higher. Leverage also makes the trade riskier, which means that if the trade turns against you, losses will be larger.

Along the same lines, if you shorted AUD/USD to express a short gold view, you would end up paying interest. If you’re a commodity trader looking for a bit of a change from the usual pro gold trade (for example), commodity currencies such as the AUD/USD and NZD/USD provide good opportunities worth looking into.Commodity Trading.

Conclusion
If you want to trade commodity currencies, the best way to use commodity prices in your trading is to always keep one eye on movements in the oil or gold market and the other eye on the currency market to watch how quickly it responds. Due to the slightly delayed impact of these movements on the currency market, there is generally an opportunity to overlay a broader movement that is happening in the commodity market to that of the currency market. Bottom line: It never hurts to be more informed about commodity prices and how they drive currency movements. For more insight, read Oil Prices here

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Forex Trading

Forex Trading Robots – Common Myths Surrounding Auto Trading

Posted by forexmaster On May - 29 - 2010

The FX market is one of the most unpredictable and frequently changing markets you can trade on. Although trading this kind of market is often high risk, the potential rewards mean there are still lots of people who are prepared to give it a go.

Forex trading robots, like the Forex Megadroid Robot, are just one of the tools many Forex traders use to try and increase their profits, and whilst there is a degree of divided opinion when it comes to whether using them is a good idea for the newbie Forex trader, many do consider them a valuable resource to gaining an establishment in the industry. Here we will look at such trading robots, and attempt to detach the truth from the myths surrounding them:

Clever and complicated Forex robots offer the best service

Unfortunately, this is not true. Sometimes the more simple systems are the ones that work best. The good thing about simple systems is that they use just simple algorithms and require fewer elements.

Apart from that, vendors will often claim that their programs were designed by brilliant people. Some even claim that their programs are created by people trained by NASA, but what would these people know about trading anyway?

Trading can be improved by scientific and predictive systems

Yes, Forex trading and automated trading systems use mathematical calculations to understand and analyze trading signals and their trends. But, are the mathematical calculations some programs carry out really effective?

These formulas may help you analyze the market, but they could never guarantee to accurately PREDICT the outcome of a trade. If this were possible, then these vendors could have become rich by simply trading Forex themselves.

Forex robots can eliminate losses

There are Forex robots and automated system claiming to have zero losses. Again, if this was true then there would a great deal more walking millionaires in the world. The fact is that approximately 95% of Forex traders lose their money. So, the remaining 5% are the only successful ones, and out of that small percentage, how many are trading with Forex robots? That said, it is absolutely normal for all traders to suffer some losing periods.

You can leave your Forex robots to operate by themselves

Some Forex robot vendors claim that you can just set up their robot on your account and let it operate on its own. It can enter and complete trades for you, without you even participating in the process.

Any successful trading system has to be carried out in a way were it can be monitored, and follow the trader’s overall trading strategy. For a robot to do this depends on how you make your robot work for what you want and your strategy, not the other way around.

Some robots, such as the Forex Megadroid Robot, do allow you to alter the settings to allow it to trade according to your own strategy.

Success in demo accounts means the same for live accounts

Just because you have proven the effectiveness of a robot in a demo account, it doesn’t guarantee it will show the same results on a live account. It is important to do correct research and check customer reactions and comments about the product in question. Most Forex trading forums will have discussions about what are the common problems encountered in trading live accounts with particular robots.

Access helpful advice about forex trading – make sure to study the site. The times have come when concise information is really at your fingertips, use this opportunity.

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