2010 November

Forex Technical Strategies

Posted by TFNG Admin On November - 28 - 2010

According to a recently published survey, conducted by a CitiGroup subsidiary, CitiFx_Pro, of 3000 Forex traders, over half use both Forex technical strategies and fundamental analysis in making trading decisions. Over a third use Forex technical strategies exclusively. Fewer than ten percent of Forex traders surveyed use only fundamental analysis of currencies in guiding their trading of Forex currency pairs. Thus over ninety percent of the three thousand traders surveyed in the USA, UK, and India use Forex technical strategies in guiding their trading. For those wishing to learn how to trade Forex it would appear that the wise thing to do is, in fact, to learn technical analysis. But, just what are Forex technical strategies? These strategies are technical analysis tools for foreign exchange trading use mathematical methods to help the trader decide to buy or sell. Oscillators are tools that help the trader predict a change in a price trend. Momentum indicators are tools that help decide if a current trend will continue or not.

The point of using Forex technical strategies is that a mathematical method based strategy is not going to be driven by impulse, fear, or greed, the common demons of trading psychology. By developing and following Forex technical strategies the trader can audit his trading results and modify the strategy as needed. The Forex trader does not need to develop the mathematics underlying Forex technical strategies. Rather the trader can modify parameters in his trading software to allow for more latitude from different variables used in calculating equations and offering trading suggestions. A successful Forex trading system will be based upon technical indicators. Trade station software will have immense amounts of real market data. In order to test various Forex technical strategies the trader need only try them out in simulation trading in various real historic environments to asset their efficiency in delivering profitable trading opportunities.

Using information from the recent CitiFX_Pro survey as a reference, two thirds of traders tend to trade no more than five currency pairs and often only one. As one might imagine developing successful Forex technical strategies will be easier the fewer variable (trading pairs) that are involved. More than half of the traders surveyed trade the EUR/USD pair while just under a fifth trade the GBP/USD pair and only six and five percent respectively trade the EUR/JPY pair and GBP/JPY pair. As Forex trading the Euro versus the US dollar is the most popular pair we can assume that any fundamental analysis these folks are doing is heavily based upon events in Europe and the USA. However, as the survey shows, fewer than one in ten traders relies solely on fundamental analysis of economies and monetary policy. As is the case with most technical trading the trader knows that the fundamentals are already in the system and have already been discounted by the market. Thus technical analysis of Forex markets such as the EUR/USD pair hinges on well developed and implemented technical strategies in Forex trading as opposed to trying to guess what the next move will be in fundamentals.

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Forex Strategies, Forex Trading

How to Short the Euro

Posted by TFNG Admin On November - 24 - 2010

As another round of European debt bailout talks hit the news we look at just how to short the Euro in advance of farther declines. The Forex trader working in the EUR/USD pair can sell Euros and buy dollars. Thus he is “short” the Euro and “long” the dollar. However, people who are used to trading stocks may be looking for something analogous to selling a stock short in which the trader borrows shares from his broker and promptly sells them. How to short the Euro in a way similar to shorting a stock is to deal in futures or options in the Forex market. By selling a futures contract on the Euro a trader expects to be able to profitably exit his position at a later date once the currency has fallen below the futures contract value. Then he earns the contract price and pays the, then current, market price for the Euro. He can also purchase a put option on a futures contract which gives him the right but not the obligation to sell the Euro. In this case, if the Euro recovers, he only loses the price of the options premium. In the current uncertain circumstances how trade Forex on the Euro may well be to short the currency.

For those not directly engaged in trading foreign currencies there are other strategies for how to short the Euro. These involve using the Euro to buy stocks or gold or shorting an ETF that tracks the performance of the Euro. As we watch the downward direction of the Euro not all Europeans are sad to see the decline. European exporters like Siemens stand to see their products become more competitive as the Euro sinks in value. Using Euros to invest in a strong European stock could be a viable means of how to short the Euro. Shorting an ETF that tracks the Euro will be just like shorting any NYSE stock. The trader borrows from his broker and enters a sell position. He will have to buy back the ETF at a later time when, he believes, that the Euro will be cheaper. Likewise buying put options on the ETF gives the trader the option but not the obligation to sell at the contract price and buy at a lower price. Buying gold with the Euro is also a way how to short the Euro.

From the Forex trader’s viewpoint the cleaner solution for how to short the Euro is to trade the EUR/USD pair and sell Euros for dollars. Unlike tying up capital investing in European companies or dealing with the Euro through an ETF trading the Euro directly allows the trader to profit from minute by minute fluctuations in the Euro’s value. As talks about debt relief for Ireland continue the news drives the Euro up and down. A wise trader can make profitable use of these fluctuations without going through a “third party investment” such as buying stocks or gold. The trader will only need to know the factors influencing the EUR/USD pair and not have to further investigate what drives gold prices or the financials of foreign companies.

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Where to Get Important Forex News

Posted by TFNG Admin On November - 20 - 2010

Where to get important Forex news is an integral part of a successful Forex trading system. We list here seven good sources of current news, sound analysis, and useful insights. The online sites we suggest include Bloomberg, Business Week, CNBC, CNNMoney, the Financial Times, Forbes.com Breaking News, and Reuters Business and Finance. Traders in foreign currency markets will want to stay tuned in to economic and political events around the world. They will want, especially, to stay in touch with what is happening in the two nations that comprise their most traded currency pair. Finding out where to get important Forex news that fits the trader’s currency pair and staying in touch with the news will give the trader a decided advantage in Forex trading.

Where to get important Forex news has a bit to do with what pairs you trade and if they are major or minor pairs. Reuters and Bloomberg are well respected sources of international news. Reuters gives a broader scope to its coverage and Bloomberg is exclusively devoted to business news of the world ladled out according to regions. Forbes is a good source of up to date financial information and includes news feeds from the likes of the Associated Press. The Financial Times has a strictly international scope to its news while CNNMoney focuses on US financial news. CNBC cover both international and national news. In general all of these sources will cover major events and within seconds of each other. Where to get important Forex news will be with more with CNNMoney for US dollar news and more with the Financial Times for minor currency pairs. Good Forex advice is to read these sources and get into a routine of updating your trading strategy based upon current news.

Successful Forex trading requires technical skill in reading market trends and reversals. It also requires an overall appreciation of what specifically drives the prices in a given currency pair. Whether it is the monetary policy of a country or recent election results such as the Republican comeback in US mid term elections having a clear idea of how the news may change the value of a given currency is crucial for successful trading. Where to get important Forex news may vary depending upon what currencies the trader trades but having a routine and keeping updated with the Forex news will allow the trader to more effectively profitably apply technical analysis to price changes in the foreign currency markets. Forex strategy and the Forex news are irrevocably intertwined. Knowing where to get important Forex news should be at the top of anyone’s “to do” list if they are not already tuned in to these important news sources. The reader will notice that the New York Times and the Wall Street Journal are missing from the above list. They are excellent news sources but are largely focused on in depth reporting. As such both make a great addition to the breakfast table on a Sunday morning as the trader takes a break from the trade station and widens his reading horizon.

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FX Trading, Forex, Forex News, Forex Trading

Losing Focus is the #1 Mistake of Traders in FOREX

Posted by TFNG Admin On November - 13 - 2010

This article is one that I’m asked to do over and over again…and that’s because so many people fail to focus! In the article I’ll give you some rock solid tips and methods to staying focused, and in my Forex Toolkit I’ll give you an in depth video on making the methods stick! Get my kit here, and enjoy the report!

What you probably don’t realize is that the “mind game” of Forex trading is just as important as having a proper trading system. This is why up to 95% of novice fx traders blow up their accounts. They make simple mistakes that cause a downward spiral of confidence. Or they let greed and fear push them into that one crucial decision that costs them all their profits (remember the big leverage that Forex gives you is a double-sided sword).

We’ve been successfully trading and educating traders at BigTrends.com for over 10 years and we know the proper mindset is extremely crucial to long-term trading success. One of the most important factors is to take the emotion out of your trading as much as possible. Logical, systematized, rule-based trading is a much better bet versus emotional trading and not having a plan.

When you have confidence in your trading systems and indicators, you can then develop a set of rules to follow to ensure that your trade management and profit/loss taking is in correct order to maximize gains and minimize risks. You will learn the proper size and allocation to take of your trades in order to ensure that you “remain in the game” if you take a loss or two. You also will have “powder dry”, aka capital available, for when the super profit opportunity comes along.

The key to having a successful trading system is to have confidence in it and the rules and to follow it properly. Poor execution is one of the leading causes of losses by beginning Forex traders. Don’t fall into the “hope game” of wishing your trade would go your way. Have a proven, tested system and rules to get you in and out quickly — let the winners run and cut the losers short.

Clear your mind when you begin Forex trading each day or week. Remember and learn from your past trades, but don’t let them hang over you like a negative ghost. Follow and execute your system — why have a trading system if you can’t focus on executing it in the first place? Develop a specific time of day that you dedicate to focusing on only Forex trading. Keep a trading journal of your past trades, indicators, thoughts and lessons. Strive to take the emotion out of your trading.

Follow these various principles to creating the proper mindset and you will see your trading results improve. We delve far more into these and have specific proven methods and instructions in the new FIT (Forex Interval Trading) systems. I’ve not taken it live yet as we’re still shoring up the back-end…but in the mean time.

Have you gotten my Forex Toolkit yet?

Article compliments of Scott Downing, Director of Research at BigTrends.com.

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FX Investing, FX Trading, Forex, Forex Tips, Forex Trading

What You Don’t Know About Probability in FOREX

Posted by TFNG Admin On November - 10 - 2010

Today’s article is one that I’m sure any Forex trader will want to know more about…or in this case actually LEARN. Probability is a tricking subject with Forex, and sometimes it’s what you DON’T know that can actually lead to major profits. The article below addresses probability in a new way, and if you’d like to learn even more, check out my Forex Toolkit where I’ve made a video JUST on this subject! Access it here.

When you step into the world of Forex, do you need to be an expert on worldwide economics to make profits? Of course not! In fact, every major bank has PhDs who specialize in analyzing economic data, so you aren’t going to get much of an edge in trying to out-analyze the fundamental data. Also, is knowing the current account balance of Chile going to help you determine whether the Yen/Dollar is going to make a big quick move tomorrow? Of course not!

So what do we utilize to gain an edge over the Forex markets and take profits out of them? It is called technical analysis, and we at BigTrends.com are experts and innovators in this field of trading for over 10 years. Basically, as a famed trader said nearly 100 years ago,”the chart tells the tale”. This means that the price charts of the various Currency Pairs tell us virtually all we need to know about the fundamental, sentiment, and supply/demand factors driving the movement. They tell us when and what to trade, and just as importantly, what not to trade. The Japanese even developed technical analysis techniques to trade Rice hundreds of years ago — this shows the long-term impact and lasting power of these kinds of trading methods.

We can utilize the short-term charts of the Forex Currencies to determine when and where the big explosive moves are about to occur through technical analysis. Our unique and innovative technical analysis systems have a logical basis to them, which captures the price moves from the most important factor, the charts. We layer together multiple technical indicators based on complex mathematical formulas in order to have the highest probability of trading success.

If you are new to technical analysis and charting you may get overwhelmed by the seeming complexity of indicators and the number of different techniques you can use.

Well, we’re experts in this and have been doing it successfully for a long time in every type of market, so we break it down for you on a systemized, simplified basis of the “best of the best” technical analysis for Forex trading. We cut through the noise and grow your profits. Our proprietary FIT (Forex Interval Trading) systems based on technical analysis are historically proven to have a strong profit success ratio, and we live-test them extensively and internally before releasing them to the public.

If you’d like to learn more strategies and get even deeper insight, get the Forex Toolkit today!

Article compliments of Scott Downing, Director of Research at BigTrends.com

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Forex, Forex Trading

Leverage Misuse and Abuse in FOREX

Posted by TFNG Admin On November - 8 - 2010

Forex is the worldwide currency exchange market, also known as the foreign exchange market, “fx” for short. This is an over-the-counter electronic trading market for the major worldwide currencies. It offers easy entry to the average public trader and fairly low margin requirements.

However, this low margin and high leverage is also the #1 risk and cause of loss among novice Forex traders. Misuse of leverage is the Forex cardinal sin. In the article below I’m going to explain the new leverage rules, and show you exactly how to take advantage of it! To give you even more I put together this Free Forex Toolkit with an entire video section dedicated to using the new leverage rules to consistently profit…GET IT HERE.

What do we mean by low margin and what is leverage? Well basically this means that you can control a huge amount of a currency in the Forex market with a very small cash outlay. The normal stock and index options that we trade at BigTrends.com represent 100 shares of stock — you pay a premium to control/own this option. For example, in the stock option market you may be able to control the right to buy 100 shares of IBM for $500 — this is an example of leverage. However, the leverage in Forex is much greater than this in most cases … but so is the risk.

We only have to look at the recent housing market crash to see an example of where leverage and low margin caused massive losses among individual investors. People across the world were buying houses and properties beyond their means and with very little cash down. Many of these were speculative, greedy bets on a continued sharp rise in housing prices — which knowledgeable, experienced traders such as ourselves knew wouldn’t continue forever. They weren’t bad homeowners; they simply misused leverage.

The huge amount of potential leverage and low margin requirements in fx trading is similar to this. The latest rules allow Forex leverage for 50:1 on major currencies and 20:1 on minor currencies. Some brokers may still be able to offer 100:1 leverage. What this means is that a trader can often control millions of dollars of a currency proposition with a very small cash outlay. When novice traders allow emotions such as greed and fear to rule their trading, they often end up on the losing end of large leveraged bets.

Thanks for reading, and I’ve got a lot more where that came from! While I write my next article get my Free Forex Toolkit that will put your Forex trading on the right track!

Article compliments of Scott Downing, Director of Research at BigTrends.com

What is Forex Automatic Trading?

Posted by TFNG Admin On November - 5 - 2010

In a world where artificial intelligence is becoming a distinct possibility so are multiple attempts to introduce algorithms into Forex trading creating Forex automatic trading. What is Forex automatic trading today? First of all it is in the formative stages. Despite what we see in the movies there is not yet a super intelligence capable of out thinking experienced traders in all ways. However, it is possible to program a Forex strategy into a computer. Then the computer will be able to identify specific patterns and execute trades much more rapidly than a trader can. To the extent that speed of execution matters, so will automatic trading. To the extent that a preformed and possibly rigid strategy works so will automatic trading. What is Forex automatic trading? It is a means of executing a preformed Forex strategy rapidly. What is Forex automatic trading? It is giving the decision making of Forex trading over to a machine. How to trade Forex successfully includes learning from one’s mistakes. As computers learn from unsuccessful trades they become more successful.

There are a number of programs available that offer Forex automatic trading. Some tout the fact that a person or panel reviews trading results and continually modifies and, hopefully, improves the program. Some programs tout the ability of the computer and its program to learn from unsuccessful trades. To the degree that a computer can do this successfully it approaches artificial intelligence. However, no one is saying that they have a computer and program that is running on its own, without human programming help, and continually improving its trading success. As far as results go what is Forex automatic trading compared to human trading? That is hard to say. A common claim in advertising for automated programs is that Forex trading is random and that the best anyone can hope for is 50% success. Then the ads go on to say that even getting to 60% trading success allows the trader to make money. The final claim in ads touting automatic trading is that these programs can beat 50% success and, in fact, run at 70% to 90% successful trades. So, is this how to trade Forex successfully?

A wise man once said, in another era, that there is no problem in life that cannot be solved by sitting down and figuring with paper and pencil. That sort of approach is necessary in evaluating success claims in automatic Forex trading. For example, it is conceivable that an automated program scalps profits all day long but makes less money that the trader will pay in commissions. Ignoring the “overhead” of trading is an easy way to claim success for any approach to trading foreign exchange. To the extent that a program waits until a situation is absolutely clear before executing a trade it may approach 100% success in profitable trade execution. However, by waiting until the last minute the machine may well be foregoing the most profitable trades. Anyone who is going to buy one of these programs needs to know just how much profit is included in a 70% + successful system and if, indeed, the profit surpasses the overhead sufficiently to pay for the investment in the software. A pertinent question in this regard is what is Forex automatic trading when the Forex market is trading sideways, as it commonly does? Is it a money maker? If so, for whom?

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Forex Trading

The Forex Nitty Gritty

The Forex Industry’s Nasty Secrets Finally Revealed!

Archive for November, 2010

Forex Technical Strategies

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How to Short the Euro

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Where to Get Important Forex News

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Losing Focus is the #1 Mistake of Traders in FOREX

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What You Don’t Know About Probability in FOREX

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Leverage Misuse and Abuse in FOREX

What is Forex Automatic Trading?

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