It looks and seems so simple - just buy and sell, or buy and sell using sophisticated trading indicators and the modern commercial software. All you have to do - it cut its losses and find a trading system that wins more than loses money polyutsya river!
You are viewing all the best books on trade, in which a trader in another state that they are doing a lot of money, because it knows how to use the correct methods of trading. The author is a man who has just lost his job and now trades from his home and earns much more money than ever before!
You say, "I can do it, I'm ready. I've been using their savings, and by trade will make them millions. So, you're going to make their millions and live a beautiful life! You buy the latest trading system, which promises more profit. No waste of time to a virtual trade or to develop your trading skills - you must begin to make money now, because you need the income and all you want to show that you have succeeded!
This is - a fantasy that lures in a trap so many novice traders. The reality is that it is very difficult to trade with consistent profits. In fact, 90 percent of all traders lose money in the trade! Most novice traders lose their money within the first 6 months. So why trade is so difficult?
Requires responsibility, discipline, reason, concentration, hard work, practice and time to become a profitable trader. It does not depend on trading systems, because the best trading systems are a by-product of the trader. "Best" in one way or another, is a relative term, because what is best for a single trader may not be the best for another, as their trading styles are different.
Beginner trader should strive to develop a reliable trading approach, based on his beliefs and to exercise strict control over the risks and proper management of money. Traders must have the discipline to manage themselves and their trade. Only one out of this because a lot of novice traders. Still, much depends on the fight with his mentality and his reactions to market events that awaken fear and greed.
As a trader, you should be fully aware about the reality. Let your positive beliefs lead you to take the actions necessary in order to succeed. However, this does not mean that traders can enter the financial markets and start trading blindly, simply because they are positive and ignore the whole spectrum of what is possible when trading in the markets.
You should be aware of both sides of the coin, good and bad - and respond with a full understanding of this. Everyone wants easy money, without a hard work necessary to achieve success. However, success must be earned. May take many years before you will make a profit. Everyone has different strengths, which he can use and different weaknesses, which must be overcome, and the time required to achieve success, will be different for everyone. There is no quick path to success, as there is no "Holy Grail chalice".
Most traders spend their time looking for answers side, but the answers are in them!
NAME FOREZ
Friday, May 29, 2009
The psychological aspect Of Trade
The psychological aspect Of Trade
Brett N. Stinberger - Doctor of Philosophy and Professor of Psychiatry at the Medical University in Syracuse, NY. New York. He is also an active trader and writes articles on market psychology. The author of the book "Psychology of Trade, 2003. Doctor Stinberger published over 50 articles on short-term approaches to behavioral change for traders.If I had to give one piece of advice to most traders, who are struggling with their ratio of profits to losses, it would be to trade for a proven systems and models and sell them systematically. If you look at very successful companies, such as "McDonald's", "Dell", "Federal Express" or "Wall-Mart", then find a company that makes the same things and in the same way every day, with high degree of consistency. They invented the formula for victory, which is the key to success and they are doing this formula with high fidelity and regularity. That's exactly the way you have to sell.
Thus, this raises two important questions for any self-trader:
. Do I have a formula for victory, and whether I have checked to make sure it is successful and to have the necessary confidence in this?
. I sincerely follow his formula, and whether I track every transaction and know that I follow the formula and to have confidence in their ability to follow it?
A very large percentage of traders that have applied to me for help, they could not honestly answer these questions affirmatively. They want to get help for themselves, when what they need - is the need to consider their trade as a world-class business.
Trade and individuality
About three years ago, I along with Linda Raška examined a group of about 64 active traders. We wondered whether any particular individual and repetitive style that distinguished the more successful traders from the less successful. We received a large number of results that lead to think. For example, we found that successful traders have a lower level nevrotizma (negative emotional experience) than their less successful colleagues. They also used methods are more focused on problem-solving (developing strategies to deal with problem situations), as compared with the concentration on their emotions. Successful traders, as we found higher were evaluated on a scale of "good faith", reflecting the motivation to follow their plans and commitments. In general, these results confirm what many of us have seen in my career on the market: traders to temper their emotions and act on the basis of his plan, selling better than their more emotional and impulsive counterparts.
However, it was unexpected and a conclusion in our study, which was that a disproportionate number of successful traders - about half - said of the use of mechanical trading systems. Of the unsuccessful traders, no one has used a mechanical approach. When I later took an interview with successful traders, it turned out that even those who were not committed to trading systems that base their transactions on the models that they have carefully studied. On the contrary, almost all unsuccessful traders lacked such training in relation to the models and research.
In his recent book "The Psychology of trade" (2002), I describe these successful traders as the following rules. I am confident that the main reason why they were successful is that they use trade rules for the conduct of its trade, and to maintain a positive mental attitude. In this article, I would like to explore in detail why trade rules are one of the most powerful psychological strategies that can be used in active trade.
Psychology rules
What is a mechanical trading system? Basically, a set of trade rules. They perform several functions. The first of these functions - logic: the rules are designed to maximize profits by exploiting the anomalies that arise in the relatively efficient markets. Each set consists of trading strategies that the statistics referred to as rules of decision-making. That is, they set the terms - A, B,. n, that the market must comply with before traders come in long or short side or a closed position, etc. The idea is that, without these conditions, the likelihood that the open position will be determined by pure happenstance profitable. As soon as we upgrade this probability under certain conditions, greatly increasing the chances in favor of the trader. While any individual transaction may not prove beneficial, for a sufficient period of time and with sufficient number of transactions, the increase is likely to affect the curve of the trader's assets to the extent to which the decision rules were investigated. Is vital for any trader to know how the system has been developed. Has it been tested over a period of time, regardless of when it was developed? Is it work in real-time comparable to its historical performance? Is the built-in logic is obvious, or there are too many parameters, complicated logic or other signs of adapting the system under certain conditions?
Less well-valued function is that such rules have a second decision, psychological function. Body of trade to a set of rules, traders reduce its ambiguity so that it can operate on automatic mode. This allows precise control of the new trading opportunities in a way that improved their chances could ultimately work in favor of the trader. With the reduction of ambiguity, the rules make a significant contribution to the sense of mastery and reduce much of the stress associated with high activity of this kind of activity. Think how hard it would be to move in a lively city where there are no rules of the road! Almost exactly the same emotional state of many traders, who operate without any rules. The existence of trade rules provide the procedure, as opposed to chaotic process.
However, in order to serve the system of psychological help, it must comply with the identity of the trader. A study conducted by the London Business School, shows that there is another personal trait - extraversion, which shows a positive correlation with tolerance of risk. Some traders are far more inclined to take risks than others, simply because of their individual characteristics. It is essential that the system on which you sell, take this into account. Thus, the ratio of profits to losses of the system is only one parameter, which should be evaluated when searching for a better shopping method. Statistics of the recession and the percentage of winning / Losing transactions can be crucial for the psychological comfort of the trader. For instance, I discovered for myself that I was much more successful at short-selling within-day models, than on large fluctuations. With the average holding time positions less than 30 minutes, I can get a small profit with reasonable consistency, maintaining its concentration on trade and limiting its losses. While I theoretically possible, can make more money, in keeping with longer-term fluctuations, in practice this does not happen. Increased volatility of longer-term time period is in conflict with my emotional state, influencing the decision to turn my bargain for the one that does not correspond to a reasonable minimum wage!
Trade is indeed a highly activity. Like other high-level activities, it requires directed effort. The football team, which is a great game is a game plan, the army seeking to wage war, develops a plan of battle; psychotherapist holds sessions with a coherent strategy to help the patient. These plans are actually sets of mainstreaming rules that, in general, the artist focuses on the challenges faced by them. In the same way in which the singer had planned a tree of decisions in advance, quickly and decisively can be found responding to the evolving situation. In many areas, trade one of them, the difference between success and failure can be a matter of seconds or minutes. This makes the cognitive efficiency of the main component of highly active activities. Expression of many years of experience in several approvals, rules and plans that improves efficiency.
This brings us to another important psychological aspect of management - to improve efficiency in decision-making rules should be simple. That is, when all the rules set out in a coordinated manner, they are plans that are flexible guide traders to complex situations. In his own trading on the index, I, for example, share each day into four parts: a morning session, midday session, day and night session (Globex) session. Then I assess market trends and sub-trends, measure the degree of institutional purchases / sales and looking for testing and breakthroughs from one period to the next for the intra-day transactions. By combining simple rules of decision to segmentation trading day, I can come to each day with a flexible strategy that is not slaughters my head.
Regulation and function of the brain
Research in cognitive neuroscience also help illuminate the value in the management of the rules on the basis of performance. We know that the area was named predlobnoy cortex is largely responsible for what is known as "executive functions" of brain. They include planning, reasoning, decision problems, and many of the actions that allow us to engage in purposeful activity. When predlobnaya bark is damaged, the result will be a "disability syndrome" in which patients are unable to plan and carry out complex actions. They are easily distracted, reflecting the lack of memory and concentration. As a result, even the simplest coordinate concerted activities like visits to the food store, can cause trouble.
Recent theories of attention deficit and hyperactivity syndrome (DVSG) argue that the lack of predlobnoy cortex leads to a periodic absentmindedness with hyperactivity children. Indeed, studies have found a decrease of blood flow to predlobnym areas in these children. Interesting, but the same decrease in blood flow occurs in normal people during the high emotional stress or disorders. As an emotional experience is processed by the lower cerebral structures, located far from predlobnoy crust, the relative blood flow to the frontal area is a useful measure of executive abilities. When a person is highly upset, for example, deactivation of frontal cortex leaves him in a position where it is becoming like a child DVSG or incompetent patient. How many times have you looked at a losing deal, and wondered whether you were in his mind, when placed an order? According to brain research may not exist!
Traditional trading wisdom says that we need to manage their emotions, acknowledging that it was very emotional state make us more vulnerable to losses of concentration and impulse behavior. When we activate the wrong brain area, we can expect the adoption of the wrong trade decisions. The rules allow us to firmly adhere to the appropriate trading actions, regardless of the psychological and emotional state, which we feel at this time. Indeed, the full process of formulating, coordinating and following the rules will increase the executive functions necessary for proper trafficking. It is really that remain committed to the rules is a way to stay focused and rational. That is why, I believe, with Linda, we noticed that the successful traders tend to follow the rules and be systematic.
Conclusion
Habitually enough to hear, as traders argue that the emotional composure is the key to profits in the markets. This article suggests that the converse assertion is also true: Strict adherence to good trading rules and systems is one of the most powerful ways to maintain a positive emotional state in the trade. When we operate according to the rules, we are in a psychological state which allows for effective perception of decision problems and actions. Therefore, training to follow the rules during the rehearsals of trade is an effective strategy for the cultivation of the rules for trade in real terms.
Different systems of law can work in different ways for different traders, depending on the time period selected and traded market. For example, some rules will use statistics such as ticks and increasing and decreasing the number of shares during the day, which would not have to trade in agricultural contracts, but may be useful in intraday trading on stock index fluctuations. Other rules, such as trade practices in the breakthrough may be more widely applied in various markets and would allow to hold the position for a long period of time in order to maximize potential profits.
Ultimately, the rules and systems, which you follow, and their implementation in successive trading plans must be your identity, including your risk tolerance. The research work on your system - identifying its strengths and weaknesses, and the initial trade on it on a small position provides a great help in building your confidence to trade and to ensure that the rules work for you. If you believe many of the traders, who took the interview, Jack SCHWAGER, the key to success in trade is the commitment of its own study of the curve. Defining the systems that work for you, transforming them into coherent strategies and methods of trade and the detailed study of them in order to feel comfortable with them, is an important part of this process.
Thursday, May 28, 2009
japanese yen bounces despite record contraction
The Japanese Yen scarcely survived a week of truly dismal economic data, squeezing out a marginal gain against the downtrodden US Dollar but falling sharply against every other major counterpart. Japanese government officials reported the worst Gross Domestic Product contraction in the survey’s 50+ year record, and weak economic fundamentals limited trader demand for the low-yielding Yen. That being said, the currency actually saw a marginal bounce following the GDP news release; forecasters had anticipated an even worse economic contraction. A modestly positive week for the US S&P 500 and other global equity indices only compounded the risk-sensitive Japanese Yen’s woes, and broader JPY momentum remains to the downside.
The USD/JPY finished below the psychologically significant 95.00 marker for the first time since March, and traders expected the Japanese Ministry of Finance to express concern at relative JPY strength. Yet Finance Minister Kaoru Yosano effectively ruled out forex intervention—removing a key source of USD/JPY support. It seems that the days of a highly vocal Ministry of Finance are long gone; current officials are taking a much more hands-off approach to the Japanese Yen exchange rate. We question whether such a laissez-faire stance is truly sustainable, however. Japanese exports have effectively crashed due to the combination of weak global consumption and a stronger Japanese Yen.
Subsequent outlook for the recently-downtrodden Yen is somewhat unclear, but momentum plainly remains to the downside against all except the US Dollar. An ostensibly busy week of economic event risk is unlikely to have a major effect on the Yen. We will instead monitor any and all developments in global risk sentiment—especially as seen through major global equity indices. The correlation between the USD/JPY and the US S&P 500 may have weakened through recent trade, but the equivalent S&P link to the EURJPY and GBPJPY remains near record-highs. In other words, the EUR/JPY and GBP/JPY are likely to take their cues from developments in risky asset classes. The US Dollar’s fate may depend on global investor sentiment towards USD-denominated asset classes - DR
The USD/JPY finished below the psychologically significant 95.00 marker for the first time since March, and traders expected the Japanese Ministry of Finance to express concern at relative JPY strength. Yet Finance Minister Kaoru Yosano effectively ruled out forex intervention—removing a key source of USD/JPY support. It seems that the days of a highly vocal Ministry of Finance are long gone; current officials are taking a much more hands-off approach to the Japanese Yen exchange rate. We question whether such a laissez-faire stance is truly sustainable, however. Japanese exports have effectively crashed due to the combination of weak global consumption and a stronger Japanese Yen.
Subsequent outlook for the recently-downtrodden Yen is somewhat unclear, but momentum plainly remains to the downside against all except the US Dollar. An ostensibly busy week of economic event risk is unlikely to have a major effect on the Yen. We will instead monitor any and all developments in global risk sentiment—especially as seen through major global equity indices. The correlation between the USD/JPY and the US S&P 500 may have weakened through recent trade, but the equivalent S&P link to the EURJPY and GBPJPY remains near record-highs. In other words, the EUR/JPY and GBP/JPY are likely to take their cues from developments in risky asset classes. The US Dollar’s fate may depend on global investor sentiment towards USD-denominated asset classes - DR
swiss franc ignores intervention threats as usd hits 4 month low
The Swiss Franc rallied against the US dollar and Japanese yen last week, pushing USD/CHF below key trendline support to 4-month lows. Meanwhile, the Swissie fell slightly versus the euro, but the moves ultimately left EUR/CHF within a one-month range. All told, the currency’s steep rally against the dollar and yen, and minimal depreciation against the euro suggests that the Swiss National Bank’s verbal intervention efforts from the previous week were ineffective. Indeed, with SNB interest rate targets effectively at zero percent, the bank is exploring various unconventional measures to boost money supply and stave off falling prices, and since the Euro-zone is Switzerland’s biggest trading partner, the central bank is devoted to focusing on EUR/CHF in particular.
The week ahead promises comparatively little in foreseeable event risk, though the release of the Swiss trade balance and the KOF leading indicator should give a decent reflection on how the economy is faring. The Swiss trade balance has managed to remain in positive territory consistently since August 2005, but exports have contracted for the past two months as growth throughout Europe slow. However, an increase in the month of April would suggest that the regions’ recessions bottomed in Q1. Meanwhile, the KOF leading indicator is projected to improve for the first time since June 2007 to -1.78 in May from its record low of -1.86. Though not a market-mover, an increase would add to evidence that the worst has past for the Swiss economy.
Not to be forgotten, we must keep an eye out for SNB intervention, most likely verbal, less likely physical. Whether or not the Swiss central bank will cause a lasting shift in CHF trends is another matter entirely, however. Looking back to their initial intervention, the SNB sent the EUR/CHF an incredible 500 pips higher in a single trading day. As Quantitative Strategist David Rodriguez noted last week, “We would argue that the mere prospect of SNB intervention should be enough to keep the USD/CHF and EUR/CHF afloat, but we recognize that FX markets may nonetheless continue to ignore the threat of CHF sell-offs. Perhaps tellingly, over-the-counter FX Options markets show that sentiment and volatility expectations on the EUR/CHF have scarcely shifted following SNB rhetoric. It seems as though traders are calling the central bank’s bluff.”
The week ahead promises comparatively little in foreseeable event risk, though the release of the Swiss trade balance and the KOF leading indicator should give a decent reflection on how the economy is faring. The Swiss trade balance has managed to remain in positive territory consistently since August 2005, but exports have contracted for the past two months as growth throughout Europe slow. However, an increase in the month of April would suggest that the regions’ recessions bottomed in Q1. Meanwhile, the KOF leading indicator is projected to improve for the first time since June 2007 to -1.78 in May from its record low of -1.86. Though not a market-mover, an increase would add to evidence that the worst has past for the Swiss economy.
Not to be forgotten, we must keep an eye out for SNB intervention, most likely verbal, less likely physical. Whether or not the Swiss central bank will cause a lasting shift in CHF trends is another matter entirely, however. Looking back to their initial intervention, the SNB sent the EUR/CHF an incredible 500 pips higher in a single trading day. As Quantitative Strategist David Rodriguez noted last week, “We would argue that the mere prospect of SNB intervention should be enough to keep the USD/CHF and EUR/CHF afloat, but we recognize that FX markets may nonetheless continue to ignore the threat of CHF sell-offs. Perhaps tellingly, over-the-counter FX Options markets show that sentiment and volatility expectations on the EUR/CHF have scarcely shifted following SNB rhetoric. It seems as though traders are calling the central bank’s bluff.”
Australian dollar rides on demand for yield
Last week, risk appetite soared while the demand for economic stability was simultaneously leveraged by credit rating fears. Few currencies flourish under these normally dichotomous conditions; but the Australian dollar was one of them. With positive growth expected to return well before other major economies and enviable interest rates, the Aussie dollar is proving to be one of the most fundamentally-sound currencies in the currency market. However, can these trends sustain themselves? What’s more, are there any pitfalls that this high-flyer could eventually succumb to?
Optimism is the single greatest advantage the Australian dollar has; but forecasting market sentiment over the coming week is difficult. Making things especially thorny, Monday is a market holiday for the US, UK and New Zealand. This will deprive the Forex market of significant liquidity and could very well elicit extraordinary volatility or start us off with a false move that is immediately reversed when the market is back up to full capacity. Beyond the abnormal trading conditions through the beginning of the week; investors will be put back onto the same themes that have dominated headlines for the past few months. However, it may be too early to be putting so much stock in growth forecasts, positive earnings and the return of speculative capital. Japan marked a record contraction in its recent first quarter revision, the UK confirmed it is sporting its worst slump in over half a century and the US is scheduled to release its first revision next week. Speculation is certainly attuned to future returns; but how promising can the outlook be when the first signs of growth aren’t expected until the turn of the year? What’s more, the foundation to financials stability and growing returns is largely due to government intervention. Liquidity injections, bailouts, toxic debt purchases and other actions taken by central banks around the world will have to eventually be unwound. When the banks are forced to move their illiquid asset-backed derivatives back onto their books and repay their capital buffers, we will seen whether the market can stand on its own two feet.
We have taken stock of the factors for general sentiment going forward; but how does the Australian dollar stack up (regardless of whether risk appetite is on the rise or retreat)? Considering the upbeat assessments for the economy both the Australian Treasury Secretary and Reserve Bank of Australia Governor offered this past week, the Aussie dollar is ahead of the pack. However, these public officials have to be cheerleaders of their economies; and being the outperformer has amplified more than one currency’s plunge when things began to fall apart. Taking in the economic releases due this week, there is scope for short-term volatility and a modest shift in growth forecasts. The Westpac and Conference Board leading composite indicators hold little influence among economists; but credit numbers, home sales and quarterly readings for business investment and construction activity have real bearing on the future. However, the mere presence of the first quarter GDP number, current account balance and RBA rate decision the following week will likely dampen any trends that try to set their roots in traditional fundamentals.
Optimism is the single greatest advantage the Australian dollar has; but forecasting market sentiment over the coming week is difficult. Making things especially thorny, Monday is a market holiday for the US, UK and New Zealand. This will deprive the Forex market of significant liquidity and could very well elicit extraordinary volatility or start us off with a false move that is immediately reversed when the market is back up to full capacity. Beyond the abnormal trading conditions through the beginning of the week; investors will be put back onto the same themes that have dominated headlines for the past few months. However, it may be too early to be putting so much stock in growth forecasts, positive earnings and the return of speculative capital. Japan marked a record contraction in its recent first quarter revision, the UK confirmed it is sporting its worst slump in over half a century and the US is scheduled to release its first revision next week. Speculation is certainly attuned to future returns; but how promising can the outlook be when the first signs of growth aren’t expected until the turn of the year? What’s more, the foundation to financials stability and growing returns is largely due to government intervention. Liquidity injections, bailouts, toxic debt purchases and other actions taken by central banks around the world will have to eventually be unwound. When the banks are forced to move their illiquid asset-backed derivatives back onto their books and repay their capital buffers, we will seen whether the market can stand on its own two feet.
We have taken stock of the factors for general sentiment going forward; but how does the Australian dollar stack up (regardless of whether risk appetite is on the rise or retreat)? Considering the upbeat assessments for the economy both the Australian Treasury Secretary and Reserve Bank of Australia Governor offered this past week, the Aussie dollar is ahead of the pack. However, these public officials have to be cheerleaders of their economies; and being the outperformer has amplified more than one currency’s plunge when things began to fall apart. Taking in the economic releases due this week, there is scope for short-term volatility and a modest shift in growth forecasts. The Westpac and Conference Board leading composite indicators hold little influence among economists; but credit numbers, home sales and quarterly readings for business investment and construction activity have real bearing on the future. However, the mere presence of the first quarter GDP number, current account balance and RBA rate decision the following week will likely dampen any trends that try to set their roots in traditional fundamentals.
The New Zealand dollar may be threatened
The New Zealand dollar was the best-performing currency of the G10, as modest gains in global risky asset classes combined with pronounced US Dollar weakness to push the NZD/USD to fresh 7-month highs. A relatively uneventful week of economic event risk had little effect on the antipodean currency. Generally robust risk appetite instead boosted speculative demand for the relatively high-yielding currency. The safe-haven Japanese Yen was tellingly the second-worst performer through Friday’s close, and the NZD/JPY exchange rate is on pace to test key multi-month highs on current bullish momentum.
In a week where the US Dollar fell on concerns over rapidly-escalating fiscal budget deficits and sovereign debt credit ratings, it is interesting to note that the New Zealand Dollar remained unscathed. Global investors eschewed US Dollar-denominated asset classes following news that Moody’s downgraded its credit rating outlook on UK Government bonds. Fear that a major credit rating agency would take similar action on US Government bonds suddenly became the major driver of currency markets—sending the US Dollar to Year-to-Date lows against the euro and other key currencies. We would argue that a US debt downgrade is highly unlikely through the near-term, and a downgrade of New Zealand’s prized top sovereign debt rating seems to be the more tangible risk.
The New Zealand government remains highly dependent on foreign demand for its debt, and funding costs remain relatively low on its top Aaa and AAA debt ratings from Moody’s and S&P agencies. Yet stable outlook from both firms may come into question if the upcoming Annual Budget announcement shows expectations for outsized fiscal deficits. Though such announcements have not historically forced major moves in currency markets, traders remain especially sensitive to sovereign creditworthiness. The New Zealand government must walk a fine line and balance economic stimulus with fiscal responsibility. Implications for the currency are relatively clear: any hint of a threat of credit downgrade would easily force losses in the risk-sensitive New Zealand dollar. - DR
In a week where the US Dollar fell on concerns over rapidly-escalating fiscal budget deficits and sovereign debt credit ratings, it is interesting to note that the New Zealand Dollar remained unscathed. Global investors eschewed US Dollar-denominated asset classes following news that Moody’s downgraded its credit rating outlook on UK Government bonds. Fear that a major credit rating agency would take similar action on US Government bonds suddenly became the major driver of currency markets—sending the US Dollar to Year-to-Date lows against the euro and other key currencies. We would argue that a US debt downgrade is highly unlikely through the near-term, and a downgrade of New Zealand’s prized top sovereign debt rating seems to be the more tangible risk.
The New Zealand government remains highly dependent on foreign demand for its debt, and funding costs remain relatively low on its top Aaa and AAA debt ratings from Moody’s and S&P agencies. Yet stable outlook from both firms may come into question if the upcoming Annual Budget announcement shows expectations for outsized fiscal deficits. Though such announcements have not historically forced major moves in currency markets, traders remain especially sensitive to sovereign creditworthiness. The New Zealand government must walk a fine line and balance economic stimulus with fiscal responsibility. Implications for the currency are relatively clear: any hint of a threat of credit downgrade would easily force losses in the risk-sensitive New Zealand dollar. - DR
Crude may touch $58-60; US dollar, inventory data eyed
MUMBAI: After nose-diving from a peak of $147 to $ 33 per barrel, crude oil is again displaying a good show of strength. The US crude oil future
oil.jpg
World's top oil exporting countries
World's top 10 oil producers
World's largest refining companies
was trading above $54 a barrel, to a five month high, on improved optimism about an economic recovery. Encouraging data from China and US housing and construction data fuelled hopes that the US economy is stabilizing.
“Crude oil has finally breached the long consolidation pattern on good volumes. Crude closed positive on a month-on-month basis, indicating the continuation of ongoing bullish trend. The momentum is supporting bulls, as the KST cycle turned positive on the daily chart and the same is already positive on the weekly chart,” said a report of Sharekhan.
According to Sameer Mehta, analyst at Connoisseur Wealth Management, “West Texas Crude has breakout above the flag continuation pattern. This upward breakout would offer a target of $70. Downward breakout, though less likely, but would test primary support at $35.”
“The likely target of this current up-move is initially the recent swing high-around $54.65. Once that is breached, crude could test $58-60, which is 23.6% retracement of the entire fall from its all-time high. On the downside, $48 will act as immediate resistance,” Sharekhan added in report.
oil.jpg
World's top oil exporting countries
World's top 10 oil producers
World's largest refining companies
was trading above $54 a barrel, to a five month high, on improved optimism about an economic recovery. Encouraging data from China and US housing and construction data fuelled hopes that the US economy is stabilizing.
“Crude oil has finally breached the long consolidation pattern on good volumes. Crude closed positive on a month-on-month basis, indicating the continuation of ongoing bullish trend. The momentum is supporting bulls, as the KST cycle turned positive on the daily chart and the same is already positive on the weekly chart,” said a report of Sharekhan.
According to Sameer Mehta, analyst at Connoisseur Wealth Management, “West Texas Crude has breakout above the flag continuation pattern. This upward breakout would offer a target of $70. Downward breakout, though less likely, but would test primary support at $35.”
“The likely target of this current up-move is initially the recent swing high-around $54.65. Once that is breached, crude could test $58-60, which is 23.6% retracement of the entire fall from its all-time high. On the downside, $48 will act as immediate resistance,” Sharekhan added in report.
Home Equity Line Of Credit
Home Equity Line of Credit is abbreviated as HELOC. This refers to a loan in which the lender agrees to lend a maximum amount within an agreed period. This differs from standard loans or a reverse mortgage because the borrower is not advanced the entire sum up front, but uses the line of credit to borrow sums totaling no more than the amount.
A Home Equity Line of Credit in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you may borrow up to (this is not a check).
A draw period usually lasts anywhere from 5 to 25 years and allows you to borrow HELOC funds whenever you feel the need; you're only required to pay back the amount you use plus interest.
What's nice about the home equity line of credit is that often, you are only required to pay the interest until the end of the draw period. At the end of the draw period, you'll have to do one of the following:
* Pay back the full principal HELOC amount borrowed
* Pay a Home Equity Line of Credit balloon payment
* Pay based on a loan amortization schedule.
HELOC vs. Conventional Loan
HELOC's differ from a conventional loans in that the interest rate on a home equity line of credit is variable depending on an index (Prime Rate for example). In plain terms, this means your interest rate will most likely change over time!
What makes a Home Equity Line of Credit so popular is that interest paid is usually deductible under federal and most state income tax laws; this makes that cost of borrowing money not as high!
Sounds easy, so why doesn't everyone do it? Most people are doing HELOC's and most can't afford it! These people are considered to be Upside Down – a term used to describe someone who owes more on their home than it's worth (much like a car :)
Here is the catch! You owe $80,000 on your home loan and your house is worth $90,000 on the open market. You decide to apply for home equity Line of Credit and the banker asks you what you would like the loan for - That's right! Most of the time, you can ask for more than your home is worth, say $110,000 and almost always, you'll get the loan.
$30,000 to Invest
Now you have $30,000 and live the life for awhile, perhaps a new boat, car or vacation. Then comes the day you need to sell your home but it's only worth $90,000 and you need $110,000 plus the realtor fee of $7,700 (7%), so you put the house on the market for $117,700 and it never sells, payments become late and worse case scenario, you have a foreclosure on your hands! See for yourself, check out our Mortgage Calculator!
HELOC – Not always bad!
A Home Equity Line of Credit can be good or bad depending on how you use it. There are 10 things savvy home owners should look for when considering a Home Equity Line Of Credit:
1) No HELOC application fee or at least the fee should be refunded at closing. If your lender assesses an application fee, make sure it's refundable at closing.
2) No home loan appraisal or closing costs - there are plenty of no-cost options available that you shouldn't have to pay a HELOC appraisal fee.
3) No HELOC account maintenance or check-writing fees - Lenders already make money when you write checks (read - borrow) on the home equity credit line. If your lender tries this, dump him!
4) No "usage" fees – Apparently, HELOC lenders don't approve of the notion that a homeowner may want to have a HELOC as an emergency "reserve" account. Definitely look for a lender that does not charge this type of fee.
5) Variable APR equal to or near the prime rate (adjusted quarterly) – Interest charged on the balanced borrowed should be the only cost involved with a good home equity credit line!
6) Periodic cap on interest rate changes (the amount that the rate can be changed at one time) - Look for a Home Equity Line of Credit that adjusts quarterly (rather than monthly) in increments of 0.5% or less.
7) Lifetime cap on rate increases (the amount that the rate can be adjusted over the loan's life) - You'll want to find a HELOC loan with a lifetime rate cap that you can live with. Ask your loan officer to clearly spell out the "worst case" scenario for HELOC rate increases!
8) Ability to convert to a fixed rate loan - When rates do rise, people often get skittish about their variable-rate debt. A useful feature to look for in a HELOC loan is the ability to convert the line of credit to a standard fixed-rate, fixed-term home equity loan.
9) Interest-only payments allowed – Get this option but only use it if you need to! It's always best to pay down the principle, not just interest!
10) Unrestricted ability to repay principal without penalty – You should be able to pay off the Home Equity Line of Credit at any time without paying extra!
Enjoy these ten basic tips and now, more than ever, be careful! There are a lot of shady deals out there and if you don't take your time reviewing the fine print, it will come back to bite you! Also make sure the pay close attention to any PMI that are presented.
A Home Equity Line of Credit in many ways is similar to a credit card. At closing you are assigned a specified credit limit that you may borrow up to (this is not a check).
A draw period usually lasts anywhere from 5 to 25 years and allows you to borrow HELOC funds whenever you feel the need; you're only required to pay back the amount you use plus interest.
What's nice about the home equity line of credit is that often, you are only required to pay the interest until the end of the draw period. At the end of the draw period, you'll have to do one of the following:
* Pay back the full principal HELOC amount borrowed
* Pay a Home Equity Line of Credit balloon payment
* Pay based on a loan amortization schedule.
HELOC vs. Conventional Loan
HELOC's differ from a conventional loans in that the interest rate on a home equity line of credit is variable depending on an index (Prime Rate for example). In plain terms, this means your interest rate will most likely change over time!
What makes a Home Equity Line of Credit so popular is that interest paid is usually deductible under federal and most state income tax laws; this makes that cost of borrowing money not as high!
Sounds easy, so why doesn't everyone do it? Most people are doing HELOC's and most can't afford it! These people are considered to be Upside Down – a term used to describe someone who owes more on their home than it's worth (much like a car :)
Here is the catch! You owe $80,000 on your home loan and your house is worth $90,000 on the open market. You decide to apply for home equity Line of Credit and the banker asks you what you would like the loan for - That's right! Most of the time, you can ask for more than your home is worth, say $110,000 and almost always, you'll get the loan.
$30,000 to Invest
Now you have $30,000 and live the life for awhile, perhaps a new boat, car or vacation. Then comes the day you need to sell your home but it's only worth $90,000 and you need $110,000 plus the realtor fee of $7,700 (7%), so you put the house on the market for $117,700 and it never sells, payments become late and worse case scenario, you have a foreclosure on your hands! See for yourself, check out our Mortgage Calculator!
HELOC – Not always bad!
A Home Equity Line of Credit can be good or bad depending on how you use it. There are 10 things savvy home owners should look for when considering a Home Equity Line Of Credit:
1) No HELOC application fee or at least the fee should be refunded at closing. If your lender assesses an application fee, make sure it's refundable at closing.
2) No home loan appraisal or closing costs - there are plenty of no-cost options available that you shouldn't have to pay a HELOC appraisal fee.
3) No HELOC account maintenance or check-writing fees - Lenders already make money when you write checks (read - borrow) on the home equity credit line. If your lender tries this, dump him!
4) No "usage" fees – Apparently, HELOC lenders don't approve of the notion that a homeowner may want to have a HELOC as an emergency "reserve" account. Definitely look for a lender that does not charge this type of fee.
5) Variable APR equal to or near the prime rate (adjusted quarterly) – Interest charged on the balanced borrowed should be the only cost involved with a good home equity credit line!
6) Periodic cap on interest rate changes (the amount that the rate can be changed at one time) - Look for a Home Equity Line of Credit that adjusts quarterly (rather than monthly) in increments of 0.5% or less.
7) Lifetime cap on rate increases (the amount that the rate can be adjusted over the loan's life) - You'll want to find a HELOC loan with a lifetime rate cap that you can live with. Ask your loan officer to clearly spell out the "worst case" scenario for HELOC rate increases!
8) Ability to convert to a fixed rate loan - When rates do rise, people often get skittish about their variable-rate debt. A useful feature to look for in a HELOC loan is the ability to convert the line of credit to a standard fixed-rate, fixed-term home equity loan.
9) Interest-only payments allowed – Get this option but only use it if you need to! It's always best to pay down the principle, not just interest!
10) Unrestricted ability to repay principal without penalty – You should be able to pay off the Home Equity Line of Credit at any time without paying extra!
Enjoy these ten basic tips and now, more than ever, be careful! There are a lot of shady deals out there and if you don't take your time reviewing the fine print, it will come back to bite you! Also make sure the pay close attention to any PMI that are presented.
Saturday, May 23, 2009
Backtesting
It has become an everyday word……backtesting. You can hardly avoid seeing it, because so many marketing efforts are convincing traders during this choppy market that backtesting is the magic bullet for successful trading. I’m not so sure I agree.
Maybe a PC tells you that a given trading system would have made or lost X dollars over the past 6 months. So what? Isn’t the market always in motion, always changing? If it is so easy to just figure out what worked over the past month and apply it toward the coming month, then wouldn’t the market be showing us some phenomenal trends right now with everyone pushing stocks in the same direction rather than the back-and-forth choppy action we see so much of?
Instead, we’re getting a LOT of program trading that keeps things choppy as dips are bought and rallies are sold. With the trendless market, it has truly become a market of stocks. Good swing trading right now is about doing your homework to locate good technical patterns and then keeping your risk/reward in check.
Don’t let glossy advertising from software vendors fool you into thinking that your trading strategy just isn’t complicated enough. Remember Gartman’s rule and the simplicity it offers. Keep tabs on the market environment and adjust your trading plan accordingly. If a good trend exists, then look for some continuation setups like flag patterns and triangle patterns. If prices are stuck in a range, then consider some reversal setups like the double top or trade a channeling stock. Your ability to adapt to existing conditions is what will add to your P&L, not your ability to backtest effectively.
Successful trading is about recognizing what kind of market you’re in and how to trade it most effectively, even if it means that you stand aside at times. Hoping that you could spend the next long weekend backtesting a magic formula based on past conditions may just be a shortcut that will only leave you more frustrated.
Triple Bottom Pattern
Chart patterns work the same on an intraday basis as they do on a daily chart. Today I was watching GRMN, which had been weak all day and was nearing the lows of the day. I actually was waiting for a breakdown to short sell the stock, but once the lows held, I noticed a familiar pattern – the triple bottom pattern. Immediately I bought the stock and set my stop loss for the low of the day. Momentum began to build as the shorts started to get squeezed, and I had quite a nice winner on my screen. While I didn’t catch the entire move up, I did catch a big piece of the move and it was great for my P&L.
Triple bottom patterns aren’t just found on daily charts - they can also be found and traded on an intraday basis.Be sure to apply well-known chart patterns to your day trading as well as your swing trading. Being a flexible trader with a willingness to change directions when your original thesis is proven wrong can pay off very nicely!
Downtrending Stocks - Don’t Buy!
Everyone wants a great deal. If you don’t think so, just consider the day-after-Thanksgiving sales with people lined up outside the stores at 5am to buy merchandise on sale. We want things now and we want them cheap! When it comes to stocks, however, I know better.
They say to buy low and sell high. It’s a good concept if you can get it to work, but it implies that buying low is the first thing to do. Novice stock traders look to buy “cheap” stocks, whether it’s just a low-priced stock or a stock well off its highs. Remember, cheap stocks tend to be cheap for a reason!
Low-dollar stocks often fall into one of two categories: the former high-fliers which have split so many times and come down so far that they are simply too liquid and “thick” to make much of a move (LU, NT, etc.), and stocks which are cheap because they fizzled out long ago and no buzz has been generated since. These kinds of stocks don’t move enough for an active trader, unless you are as interested in trading so many shares that your broker makes as much in commission as you do in profits.
A downtrending stock is making lower highs and lower lows. Money is coming out of it. People are walking away in search of finding something more attractive. When you buy a stock, you want it to go up, so look for stocks with some buzz, some positive activity, and some momentum.
An example of how disastrous it can be to buy a downtrending stock is MOVI. This stock began trending lower many months ago, and has shed most of its value.
MOVI continues to trend lower, and buying a “cheap” stock would have been costly!Consider the novice traders who wanted to buy a stock off its highs. They may have moved in to pick up shares in late June near $27 or so, which was more than $7 off the recent high. Those buyers never saw their trade turn profitable. What if they “averaged down” in the $20 area, hoping to catch a quick bounce to let them out? All they did was compound their losses. What about now that the stock is trading near $5.00? Would you feel like getting up and running after falling off a 20-story building? This stock probably doesn’t either. It’s best to stay away from chart patterns like this until the buyers regain control and the stock begins to build some upside momentum.
Buying stocks in downtrends is a recipe for disaster. Save your bargain-hunting for the retail stores and holiday shopping, but prepare to pay up if you want to buy a stock and turn a profit!
Trend Lines: Good Areas to Buy Stocks
Trend lines define and confirm trends by connecting a series of highs or lows. Trend lines offer excellent places to buy stocks within an uptrend, because they offer a natural stop loss area just below them.
Right now, the stock market is trending higher. We’ve been swing trading aggressively on the long side during the past few weeks, but the virtual straight-up move lately offers little in the way of new stock picks for buying. While the trend remains solidly up and we’re expecting additional rallies in the coming weeks, we’ll be looking for pullbacks to uptrend lines to establish new positions.
One example of an uptrend stock is AAPL. We highlighted AAPL in our stock newsletter on November 10th with a buy price of $61.25. Wednesday it reached $67.98, which is a very nice gain of 11% from our buy price in less than 2 weeks.
This stock and many others will be on our radar to highlight for additional buys in the near future as they find rising support at their uptrend lines.
Why Technical Analysis
When people find out I’m a trader, one of the first things they as is “what stock should I buy right now”? My answer, of course, is that I have no idea.
They want a buy-&-hold investment. They’re wrapped up in their own jobs and lives, and they wouldn’t notice something like a lower high or a high-volume reversal as a signal to bail out. They need some diversity, a long-term outlook, and most importantly, an advancing stock market.
I’m a technical trader with a short-term horizon. If something doesn’t act right, I can change my opinion in a heartbeat. I may even reverse my position. The market can stagnate and I can still make money. That’s the beauty of being short-term. I only have to be right for a limited time, ring the register, and then move on to the next trade.
When I try to explain why I select trades on a technical basis, several reasons always surface:
Short-term trades are all about supply and demand. Technical analysis is founded on price action, not fundamental trends over the course of a business cycle. I want something that can pay me today. Waiting for next year isn’t going to work for me. Chart patterns help me take notice of support, resistance, and momentum which will tell me whether I should be in or out of a stock. Knowing where buyers and sellers lurk provides me with opportunities to make money as I consider the emotions each group may be dealing with. Only technical analysis can reveal this.
Technical analysis of chart patterns provides me with good risk/reward setups. Trading is much more about money management than many give it credit for. By entering positions where I stand to lose only a little if I’m wrong but make much more if I’m right, my approach puts me at a big advantage. Finding chart patterns with a nearby stop-loss allows me to put my money to work with more confidence.
Trading on fundamentals puts me at a disadvantage. If I try to convince myself that my research of XYZ Company will reveal the same information that a multi-billion dollar fund can uncover, I’m kidding myself. Scouring Yahoo Finance in my spare time and trying to guess what next quarter will hold for a company will never compare to a research team that’s regularly in touch with management. The little guy doesn’t have access to the same info as the big dogs, so the playing field isn’t level.
I can compound my money faster. Technical trades are short-term in nature, so I’m in and out of the market much more frequently, compounding my money. Making 5 consecutive trades which each earn me 2% on my money will outpace the return of making one investment which shows me a 10% gain. Considering that fundamentals can take months, quarters, or even years to play out, I’m convinced that consistently hitting singles in the meantime will put me in the Hall of Fame without trying to uncover the next Microsoft or Cisco.
“Good companies” don’t always go up. The object is to turn a profit when my money is at risk. That means only one thing: if I’m buying a stock, it better be moving up. I don’t care if it’s a great company or not, if there’s no demand for it or no new money flowing into it, then it is not going higher. While a company may be great right now, how long will I have my money sitting in it before it is discovered? What opportunities might I miss elsewhere because I’m waiting for this one to pan out? No thanks! Good investments go up, not necessarily good companies.
Ultimately, I put my capital at risk only when opportunities present themselves, and preserve it the rest of the time. Trading with a technical approach allows me limit risk, maximize rewards, and even have a plan of action as I go.
Seeing the Future?
It would be nice to have a crystal ball. But that’s not what trading is all about. Timing is everything. Although we might accurately predict the next move of a stock or the market itself, as traders we must still place the corresponding orders to enter and exit positions at the right times and in the right directions in order to profit. Simply understanding the direction to trade in won’t help you near as much as knowing when to get in and when to get out.
While I think it’s important to be able to locate and use chart patterns and technical analysis for trading, I sure don’t think a trader’s ability to tell the future (or backtest the past) will make him a profitable trader. Chart pattern recognition is certainly helpful to traders, but what about execution? What about psychology and knowing when to ride out a pullback versus recognizing a reversal and knowing when to bail out? The learning curve can be steep. Some things you just have to learn by trading.
Don’t get tied up trying to hone your prediction skills! Every trader is going to go through times of being right and being wrong. Successful trading is about damage control when you’re wrong and pressing it when you’re right. What’s most important is staying in sync with the market and adjusting your trading size and frequency at the right times in order to maximize your profitability.
Friday, May 22, 2009
TRADING ONLY WITH MOVING AVERAGE
At the moment I am rather busy. Moving to a new place and house. The house still needs a lot of work. As a result, I do not have time to update this blog. Trading is still going on but on a shorter timeframe. Result is consistent now. AudUsd is very kind at the moment with no sudden movement.
In the next few weeks I will show you how to trade using only MA. As usual what works for me may not work for you. This is because some of you may not be able to follow the rules of the game.
RULES OF THE GAME
1. Trade based on your capital and the time that you have. The bigger your capital the longer the TF. The more time you have the longer the TF. Vice versa.
2. Only trade at the direction pointed by the MA pairs. If the MA pairs is showing mixed direction, do not trade. The MA pairs must be pointing at the same direction.
3. If a trade suddenly change direction, do not hesitate to close it at a loss and turn the trade. This is the hardest part where most of you failed. Free your mind or become a loser all your life.
4. Keep in mind, there is no such thing as winning all the time. Just make sure you win a lot more than you lose. In the end your profit will grow along with your confident.
Simple system with simple rules. I like to keep it simple. No point of having the most complex system when simple system can have the same result. With this system you will be out of the market most of the time. This is because you will only be taking the big move and avoiding the small move and market noise.
Last advise. Do not anticipate. Forex is not a game of inteligence eventhough this system at full swing will show you possible turning point. I am having a possible turning point for audusd at 0.7200 but I will not take it coz there will be market swing before the actual turn. Why wast time waiting for the big move when you can actually see when its going to move.
In the mean time, good luck for all of you. I will be back once my pc is online again. At the moment I am posting this on a laptop. I dont like laptop, too small keypad, makes it hard to do speed typing.
In the next few weeks I will show you how to trade using only MA. As usual what works for me may not work for you. This is because some of you may not be able to follow the rules of the game.
RULES OF THE GAME
1. Trade based on your capital and the time that you have. The bigger your capital the longer the TF. The more time you have the longer the TF. Vice versa.
2. Only trade at the direction pointed by the MA pairs. If the MA pairs is showing mixed direction, do not trade. The MA pairs must be pointing at the same direction.
3. If a trade suddenly change direction, do not hesitate to close it at a loss and turn the trade. This is the hardest part where most of you failed. Free your mind or become a loser all your life.
4. Keep in mind, there is no such thing as winning all the time. Just make sure you win a lot more than you lose. In the end your profit will grow along with your confident.
Simple system with simple rules. I like to keep it simple. No point of having the most complex system when simple system can have the same result. With this system you will be out of the market most of the time. This is because you will only be taking the big move and avoiding the small move and market noise.
Last advise. Do not anticipate. Forex is not a game of inteligence eventhough this system at full swing will show you possible turning point. I am having a possible turning point for audusd at 0.7200 but I will not take it coz there will be market swing before the actual turn. Why wast time waiting for the big move when you can actually see when its going to move.
In the mean time, good luck for all of you. I will be back once my pc is online again. At the moment I am posting this on a laptop. I dont like laptop, too small keypad, makes it hard to do speed typing.
BIG PLAYERS SEE ONLY BIG NUMBERS
I am typing this from my pc. It a bit of a mess now, the new house still needs a little work and I am not feeling well lately. Maybe its the change in climate.
This week I am going to talk about numbers only. Forex is after all based on numbers. Example, I have a long position on GBPUSD @ 1.4700 with a profit of 320 pips at the moment and still holding.
What I am going to say is big players only see big number. The do not see the last 2 digit. The last 2 digit is for scalpers. Big players only see the 1st 3 or 4 digit only. So if a bank wants to buy or hedge a currency they will give an instruction to buy at 1.47. Thats it. Simple yet people fails to see it.
So what happens at 1.47? The price will bounce of or hover around it but things arent always what they appear to be. What happen is price will have a range between 1.46 - 1.48. That is almost 200 pips wide range. Imagine what happen to your 50 or 100 pip SL?? Now you know why people lose money even though they have the right direction.
These big players have big money they dont mind to stand few hundreds negative pips coz in the end they will profit big time. What they do is they will have a standing order to trade at certain level. Because the total amount of order, the market cannot fill the order in 1 transaction and so price will hover or bounce of a certain level. This is where double top or bottom appear. Behind it is the action of filling orders by these big players.
Example EJ currently have a top of 1.34 and a bottom of 1.30. Big players are playing the game here. At the moment EJ is climbing and there is a big possibility that it will reach 1.34 again. I have a standing order to buy EJ at 1.30. If it hits there is a very big chance for 400 pips gain. Only time will tell.
Attach is a chart of GBPUSD. If you look carefully, you can see my actual entry point. I will explain the rest of the chart in due time.
This week I am going to talk about numbers only. Forex is after all based on numbers. Example, I have a long position on GBPUSD @ 1.4700 with a profit of 320 pips at the moment and still holding.
What I am going to say is big players only see big number. The do not see the last 2 digit. The last 2 digit is for scalpers. Big players only see the 1st 3 or 4 digit only. So if a bank wants to buy or hedge a currency they will give an instruction to buy at 1.47. Thats it. Simple yet people fails to see it.
So what happens at 1.47? The price will bounce of or hover around it but things arent always what they appear to be. What happen is price will have a range between 1.46 - 1.48. That is almost 200 pips wide range. Imagine what happen to your 50 or 100 pip SL?? Now you know why people lose money even though they have the right direction.
These big players have big money they dont mind to stand few hundreds negative pips coz in the end they will profit big time. What they do is they will have a standing order to trade at certain level. Because the total amount of order, the market cannot fill the order in 1 transaction and so price will hover or bounce of a certain level. This is where double top or bottom appear. Behind it is the action of filling orders by these big players.
Example EJ currently have a top of 1.34 and a bottom of 1.30. Big players are playing the game here. At the moment EJ is climbing and there is a big possibility that it will reach 1.34 again. I have a standing order to buy EJ at 1.30. If it hits there is a very big chance for 400 pips gain. Only time will tell.
Attach is a chart of GBPUSD. If you look carefully, you can see my actual entry point. I will explain the rest of the chart in due time.
Thursday, May 21, 2009
FOREX: Limiting Risk in FOREX Currency Trading System
FOREX trading can be risky, but there are ways to limit risk and financial exposure. Every FOREX trader should have a trading strategy – knowing when to enter and exit the market and what kind of movements to expect. Developing strategies requires education - the key to limiting FOREX risk. At all times follow the basic rule: Do not place money in the FOREX that you cannot afford to lose.
Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, know what you are doing.
Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.
As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.
You place an order like this:
Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2148
Margin: $1,000 (1%)
You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.
However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.
Because you entered the transaction by selling US dollars (buying short), you must now buy back US dollars and sell CDN dollars to realize your profit.
You buy back US$100,000 at the current USD/CDN rate of 1.2123 for a cost of 121,223 CDN. Since you originally sold them for CDN$121,380 you made a profit of $157 Canadian dollars or US$129.51 (157 divided by the current exchange rate of 1.2123).
Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, know what you are doing.
Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.
As an example, if you take a short position on USD/CDN it means you expect the US dollar to fall against the Canadian dollar. The quote is USD/CDN 1.2138/43 - you can sell US$1 for 1.2138 CDN dollars or sell 1.2143 CDN dollars for US$1.
You place an order like this:
Sell USD: 1 standard lot USD/CDN @ 1.2138 = $121,380 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2148
Margin: $1,000 (1%)
You are selling US$100,000 and buying CDN$121,380. Your stop loss order will be executed if the dollar goes above 1.2148, in which case you will lose $100.
However, USD/CDN falls to 1.2118/23. You can now sell $1 US for 1.2118 CDN or sell 1.2123 CDN for $1 US.
Because you entered the transaction by selling US dollars (buying short), you must now buy back US dollars and sell CDN dollars to realize your profit.
You buy back US$100,000 at the current USD/CDN rate of 1.2123 for a cost of 121,223 CDN. Since you originally sold them for CDN$121,380 you made a profit of $157 Canadian dollars or US$129.51 (157 divided by the current exchange rate of 1.2123).
FOREX SECRETS
How did the taipans and billionaires get so filthy rich?!
Besides the more obvious hard work and diligence and always saving little by little in their piggy banks, the really rich guys know how to work up the foreign exchange. Basically, foreign exchange trading or simply FOREX trading is just the buying and selling of the world’s currencies. Money today is not the same as money tomorrow. Money has time value. The worth of a currency can go up or down. There is one secret that FOREX traders live by. And it is buy low, sell high. Don’t ever forget that rule. However, the trick is to know when to buy and when to sell. In FOREX trading, everything is by speculation. Sure, there are graphs to aid decisions. Business pages also give out strategies for the day. But the next step is always a guess based from the previous actions. FOREX traders like to call their speculations as smart guesses. Usually, patterns on the currency values can be derived from how the politics of a specific country is running. For example, if there is a plan to oust the president, most probably the value of that country’s currency will go down—how low, we don’t know. Usually. Because there are still a lot of factors to consider why a currency is going strong or not. Improvement on the tourism sector can mean more foreign investments. This will be good for a particular currency, but this may affect how the other countries are doing. These are just trade scenarios. As the cliché goes, one man’s medicine may be another man’s poison. One country’s good tidings may be another country’s, well, downfall. That is why in FOREX trading, another secret to live by is to be aware of the national news in the country concerned. Current events have a say on the economics of a country. Money makes the world go round, so to speak. But, if one is truly serious in earning their first million in FOREX trading, another secret is—it might be a good idea to invest in a FOREX trading training school. Learn from the pros and conquer the world afterwards. Let me leave you one last secret I learned from my father. If everyone is going in this direction, go the other way. This applies to FOREX and other areas of life. You won’t ever get rich by following the crowd.
Besides the more obvious hard work and diligence and always saving little by little in their piggy banks, the really rich guys know how to work up the foreign exchange. Basically, foreign exchange trading or simply FOREX trading is just the buying and selling of the world’s currencies. Money today is not the same as money tomorrow. Money has time value. The worth of a currency can go up or down. There is one secret that FOREX traders live by. And it is buy low, sell high. Don’t ever forget that rule. However, the trick is to know when to buy and when to sell. In FOREX trading, everything is by speculation. Sure, there are graphs to aid decisions. Business pages also give out strategies for the day. But the next step is always a guess based from the previous actions. FOREX traders like to call their speculations as smart guesses. Usually, patterns on the currency values can be derived from how the politics of a specific country is running. For example, if there is a plan to oust the president, most probably the value of that country’s currency will go down—how low, we don’t know. Usually. Because there are still a lot of factors to consider why a currency is going strong or not. Improvement on the tourism sector can mean more foreign investments. This will be good for a particular currency, but this may affect how the other countries are doing. These are just trade scenarios. As the cliché goes, one man’s medicine may be another man’s poison. One country’s good tidings may be another country’s, well, downfall. That is why in FOREX trading, another secret to live by is to be aware of the national news in the country concerned. Current events have a say on the economics of a country. Money makes the world go round, so to speak. But, if one is truly serious in earning their first million in FOREX trading, another secret is—it might be a good idea to invest in a FOREX trading training school. Learn from the pros and conquer the world afterwards. Let me leave you one last secret I learned from my father. If everyone is going in this direction, go the other way. This applies to FOREX and other areas of life. You won’t ever get rich by following the crowd.
UK sovereign debt risk
Not only do those debt and budgetary issues put the GBP at risk, the potential for a ratings downgrade on UK sovereign debt adds a tremendous amount of risk. Just like Treasuries and Bunds, Gilts are AAA rated but it's my opinion their rating is now at risk. With UK government expenses running almost 125% higher than revenues, how can their sovereign debt rating not be at risk?
The way the UK is dealing with the staggering expense-to-revenue situation is by printing more money but anybody with half a brain cell in their head knows that's not an answer to the problem. In a perfect and honest world the UK's debt rating would have already been reduced to at least emerging market levels (BBB) even though their budget, expense-to-revenue, and debt-to-GDP ratios rival that of any third world country. At this point Great Britain's monetary and fiscal situation reminds me of another island, Haiti.
According to the latest UK debt figures, the DMO will need to raise an additional £197 billion in public debt in 2010, £154 billion in 2012 and 2013, and £125 billion in 2013 and 2014. So, what does all this mean for us as Forex traders, especially for those that trade the pound? It's very simple, and it won't matter what your chart or your techs say, should Standard and Poors, Moodys, or Fitch drop the triple-A rating on Gilts, the pound sterling will be brutalized, end of story.
The way the UK is dealing with the staggering expense-to-revenue situation is by printing more money but anybody with half a brain cell in their head knows that's not an answer to the problem. In a perfect and honest world the UK's debt rating would have already been reduced to at least emerging market levels (BBB) even though their budget, expense-to-revenue, and debt-to-GDP ratios rival that of any third world country. At this point Great Britain's monetary and fiscal situation reminds me of another island, Haiti.
According to the latest UK debt figures, the DMO will need to raise an additional £197 billion in public debt in 2010, £154 billion in 2012 and 2013, and £125 billion in 2013 and 2014. So, what does all this mean for us as Forex traders, especially for those that trade the pound? It's very simple, and it won't matter what your chart or your techs say, should Standard and Poors, Moodys, or Fitch drop the triple-A rating on Gilts, the pound sterling will be brutalized, end of story.
Forex Software – A Buyer’s Guide
1.Take off your blinders. Don’t believe everything you read. Websites and advertisements are worded a certain, compelling way for a good reason – to make a sale. You’re kidding yourself if you think these software sellers have one iota of a conscience. They don’t and will sleep perfectly fine at night regardless of the number of people they’ve financially burned in any given day.
2.Research, research, research! Before turning over your money, become an expert. This means you have to do some work. There are plenty of review sites and forums out there that offer so-called “unbiased” opinions. But, remember point one – don’t repeat my early mistakes; scrutinize everything you read. To be an expert means you must study reviews, ask questions in forums, and download free trials prior to making your final decision. When it comes to purchasing forex software, there is no such thing as doing too much homework.
3.Know Good from Evil. There are three types of forex software and they range in both price and options. If I were you, I would consider both your budget and level of experience before purchasing. One type of forex software gives you more information and data but may be too overwhelming for beginners, while a second type of forex software allows visibility of trading activity and helps you make smarter decisions. A third type of forex software is designed for the most advanced forex trader and may not be appropriate for your level or frequency of trading. My goal is to help you understand the difference and make the most cost-effective forex software investment decision.
Wednesday, May 20, 2009
WisdomTree Unveils New Multi-Currency ETF
On Wednesday, the latest addition the Wisdom Tree family of currency ETFs officially debuted, and in its first two days of trading, the Emerging Currency Fund (CEW) returned an impressive 2.2%. It’s not worth annualizing this figure, but suffice it to say that its performance is already turning heads.
According to the prospectus, CEW “is an actively managed exchange-traded fund that seeks to provide the investor with a liquid, broad-based exposure to money market rates and currency movements within emerging market countries.” Investors will gain exposure both to the currencies themselves and to their respective short-term interest rates, via “short-term U.S. money market securities and forward currency contracts and swaps of the constituent currencies…designed to create a position economically similar to a money market security denominated in each of the selected currencies.”
According to the prospectus, CEW “is an actively managed exchange-traded fund that seeks to provide the investor with a liquid, broad-based exposure to money market rates and currency movements within emerging market countries.” Investors will gain exposure both to the currencies themselves and to their respective short-term interest rates, via “short-term U.S. money market securities and forward currency contracts and swaps of the constituent currencies…designed to create a position economically similar to a money market security denominated in each of the selected currencies.”
Try Forex Demo Account Before Starting Trading
Newcomers to the Forex or stock market need time to be able to learn and comprehend the details of trading.Having a Forex demo account is an excellent method for rookies that are new to the investment world. Having a Forex demo account is where the newbie learns not to fumble away his or her investments .
Having a Forex demo account is where the newbie learns not to fumble away his or her investments. You always hear stories about traders losing money in the Forex market. Forex demo trading is a method whereby you can reduce the number of these stories. This technique allows the new investor the ability to practice without putting their investments in jeopardy. You do not have to pay anything for the Forex software as it is free and is readily available to any new traders that are looking to gain experience and knowledge in the Forex market.
Forex demo trading is all about learning how to be successful. It does not take the place of you having to have a trading plan or of technical and fundamental analysis. What Forex demo trading does is to test the waters by putting your own research to the test as well as a plan so that you are sure that you understand just what it takes to invest in the Forex market. Forex trading is a refined skill and it forces investors to master a very high level of expertise.
Large amounts of money can be made or lost in the Forex market. With this form of investing, you can lose a lot more money than what you had originally invested. Just like the NFL, the stakes are high so training is of the utmost importance.
Many of the brokerage companies that are involved in Forex trading have demo accounts readily available. Some of them are free and some may require a small fee. However, the fee that is paid is usually well worth it because a Forex trader can use his knowledge and skills to make vast profits after spending some time practicing with a Forex demo account.
You can easily and quickly set up a Forex demo account through a broker. You can always go online and find a great number of companies that are ready and willing to help the new student trader set up an account so as to enhance his or her trading skills. It is always a smart thing to know what you are doing no matter what game you are playing. Forex trading can be likened to an advanced financial game.
If there is any hesitation, then a Forex demo account is definitely the way to go. When you set up your own Forex demo account you are allowed to make trades as though you were using real money. As the saying goes, "practice makes perfect"!
In conclusion, having a Forex demo account is much like learning NFL. Forex trading can often seem like a contact sport, and if you are not careful you may be taking hits in your wallet if you do not learn the ins and outs of the game. A Forex demo account will help you learn the investment basics before you have a chance to dive into the real game.
Having a Forex demo account is where the newbie learns not to fumble away his or her investments. You always hear stories about traders losing money in the Forex market. Forex demo trading is a method whereby you can reduce the number of these stories. This technique allows the new investor the ability to practice without putting their investments in jeopardy. You do not have to pay anything for the Forex software as it is free and is readily available to any new traders that are looking to gain experience and knowledge in the Forex market.
Forex demo trading is all about learning how to be successful. It does not take the place of you having to have a trading plan or of technical and fundamental analysis. What Forex demo trading does is to test the waters by putting your own research to the test as well as a plan so that you are sure that you understand just what it takes to invest in the Forex market. Forex trading is a refined skill and it forces investors to master a very high level of expertise.
Large amounts of money can be made or lost in the Forex market. With this form of investing, you can lose a lot more money than what you had originally invested. Just like the NFL, the stakes are high so training is of the utmost importance.
Many of the brokerage companies that are involved in Forex trading have demo accounts readily available. Some of them are free and some may require a small fee. However, the fee that is paid is usually well worth it because a Forex trader can use his knowledge and skills to make vast profits after spending some time practicing with a Forex demo account.
You can easily and quickly set up a Forex demo account through a broker. You can always go online and find a great number of companies that are ready and willing to help the new student trader set up an account so as to enhance his or her trading skills. It is always a smart thing to know what you are doing no matter what game you are playing. Forex trading can be likened to an advanced financial game.
If there is any hesitation, then a Forex demo account is definitely the way to go. When you set up your own Forex demo account you are allowed to make trades as though you were using real money. As the saying goes, "practice makes perfect"!
In conclusion, having a Forex demo account is much like learning NFL. Forex trading can often seem like a contact sport, and if you are not careful you may be taking hits in your wallet if you do not learn the ins and outs of the game. A Forex demo account will help you learn the investment basics before you have a chance to dive into the real game.
FOREX CURRENCY TRADING
FX, Forex or Foreign Exchange, is all about exchange of currencies from one hand to another at an ongoing price in the market. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. Earlier, not many traders were clear about the Forex trading and that Forex is just short for "foreign exchange", as it did not get much publicity through media.
Foreign Exchange market is the biggest financial market in the world, with a potential of fast and great gains and a sizable number of investors. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.
About a decade ago, currency trading was only limited to large banks and financial firms because they were the only ones to have access to the tools and methods required to trade Forex market. However recently, due to up and coming efficient online platforms, technology has advanced to the point of being accessible to any and every individual trader who wishes to trade or invest in Forex. Marketforex.net being one of finest online trading platforms is easily accessible by all who are interested in investing in Forex.
lthough trading in the Forex market is done for almost all the foreign currencies, there are still, some foreign currency pairs which are considered as “Major” currency pairs as compared to the others. This is because these currency pairs are some of the most traded and most in demand currencies in the Forex trading market. These pairs dominate the percentage of trades and are as follows: Euro/ U.S. Dollar
US Dollar/ Japanese Yen
US Dollar/ Swiss Franc
US Dollar/ British Pound
The FOREX trading market offers its investors with exclusive and lucrative investing opportunities. Other factors like 24 hours open market, high leverage, commission-free trading and easy accessibility through various means of communications has helped Forex to become one of the most popularly invested financial markets.
With a daily volume of about $1.2 trillion money changing hands everyday, the magnitude of Forex market is definitely one of the highest as compared to the Equities and the Futures market. So, you should educate yourself comprehensively and take advantage of this giant investment vehicle.
Marketforex.net provides all the new as well as experienced traders with the opportunity to trade Forex more easily and more advantageously. We offer our clients with quicker results, better deals, higher leverage and superior customer support, thus offering them efficient and genuine Forex trading services through an advanced online trading platform
Tuesday, May 19, 2009
Asia Session
Ladies and gentleman, risk appetite is once again back in the markets.....After what can only be described as a energetic start to the week by US equities, Asian equities did not disappoint, gaining ground to the tune of 3% for the Japanese Nikkei. As we have witnessed countless times over in the past months, as stocks rise, the Yen and the US Dollar sink, however, with most of the damage to the Yen and Dollar happening in the NY session, the follow through was not as drastic in Asia with the currencies only slightly lower after all was said and done.
EUR/USD was up about 10 pips for the session after being in a 50 pip range in sluggish trading. Many investors could be looking ahead to the important German ZEW data later in
Upcoming Economic Data Releases (
| 5/19/2009 | 8:30 | | CPI (MoM) | APR | 0.20% | 0.40% |
| 5/19/2009 | 8:30 | | CPI (YoY) | APR | 2.90% | 2.40% |
| 5/19/2009 | 8:30 | | Core CPI YOY | APR | 1.70% | 1.60% |
| 5/19/2009 | 8:30 | | Retail Price Index | APR | 211.3 | 211.6 |
| 5/19/2009 | 8:30 | | RPI (MoM) | APR | 0.00% | 0.20% |
| 5/19/2009 | 8:30 | | RPI (YoY) | APR | -0.40% | -1.10% |
| 5/19/2009 | 8:30 | | RPI Ex Mort Int.Payments (YoY) | APR | 2.20% | 1.70% |
| 5/19/2009 | 9:00 | GE | ZEW Survey (Econ. Sentiment) | MAY | 13 | 20 |
| 5/19/2009 | 9:00 | GE | Zew Survey (Current Situation) | MAY | -91.6 | -90 |
| 5/19/2009 | 9:00 | EC | ZEW Survey (Econ. Sentiment) | MAY | 11.8 | 18 |
| 5/19/2009 | 9:00 | EC | Construction Output SA MoM | MAR | -1.80% | - - |
| 5/19/2009 | 9:00 | EC | Construction Output WDA YoY | MAR | -11.80% | - - |
| 5/19/2009 | 9:30 | EC | ECB's Tumpel-Gugerell Speaks in | 19-May | | |
Subscribe to:
Posts (Atom)
name
