It’s just a few hours away before the announcement of key interest rates from Reserve Bank of Australia (RBA) for AUD. All technicals seem to be pointing a bear for the AUD.
Wednesday, October 21, 2009
Technical Trade - A Hawkish AUD Ahead of AUD/USD
It’s just a few hours away before the announcement of key interest rates from Reserve Bank of Australia (RBA) for AUD. All technicals seem to be pointing a bear for the AUD.
GBP Still Strong
The British pound is still strong today, showing a little bit of follow through from yesterdays gains. Yesterday I called out a trade in GBP/AUD as a low risk opportunity based on some technical factors, despite the fact that the trade was “counter-trend”. Let’s see how its doing:
As you can see, this trade is up about 169 pips from yesterdays entry price (1.7828-1.7659=169 pips). While you’re not going to be able to retire just yet LOL, this high probabilty set-up is showing some initial gains and looks promising going forward. To give you an idea of what this means, with just one lot, you would have made $169 if you were in this trade.
And the cost to get into this trade? Just $50 in margin. So in theory, you put up $50 to make $169. That’s pretty good coin! Now imagine what happens when you use the multiplier effect of leverage!
While its never a good idea to over-leverage your account, taking high probability trade set-ups can be extremely profitable if you know what you’re doing!
To learn about how to spot trade set-ups such as these, check out our currency trading courses
Good Day for the Commodity Currencies
Today’s top gainer is the NZD, the New Zealand kiwi, up 2.2% vs. USD, 1.8% vs. JPY, and 1.68% vs. EUR. This comes on the back of recent gains in both gold and oil up today to 1058 and 79 respectively. Also, helping the gains was Helicopter Ben, who again today re-iterated that accommodative monetary policy will be pursued for “an extended period”.
This means its game on for the commodity currencies, who benefit from the carry trade as investors seek out higher yielding currencies. As a result, both the Aussie and the Kiwi have traded to 14-month highs, back to the levels pre-credit crisis collapse which sent investors back to the US dollar in a flight to safety.
As confidence rises here in the US, (a rising stock market will do that- recent history be damned), investors will seek out more “risk” and move to the currencies that will benefit from strong commodities prices and higher interest rates.
Let’s take a look at a daily chart of Kiwi vs. US dollar (NZD/USD) (click chart to enlarge)
While this chart is a trend followers dream, its always difficult to jump in as it may seem close to a top. I usually like to wait for a pullback or for a sideways move (consolidation) before attempting to initiate a new trade, although I’m not certain that I will get one.
But for now, it looks like Bernanke is going to continue to get away with his “strong dollar policy” as the US dollar continues to tank against all currencies (except maybe the Yen- but that’s another discussion). If US stock earnings continue to “surprise” (meaning beat analyst low-ball expectations) and commodity prices hold up, expect Bernanke to sit idly by and do nothing as the US dollar continues to get crushed.
To learn about how you can participate in this global market and protect your dollar savings, be sure to check out our
GBP/AUD Trade Follow-Up
I just wanted to give readers a heads up on this trade that I called out last week. To give you a little background, I don’t typically like to say that I am doing this or that, but rather like to point out “possible trades” with “theoretical results.” Whether I am actually in the trade or not is immaterial for discussion purposes on this blog, as I don’t want to be seen as recommending specific trades, but rather as just trying to point out some tidbits that may be unconventional to some.
The reason I say this (and have disclaimers LOL) is because right after I posted this initial trade idea, I got a call from a good friend of mine who asked me in no uncertain terms, “Are you Nuts?” When I asked what he meant he gave me the usual response of don’t fight the trend, the fundamentals don’t add up, the Aussie is benefiting from the carry trade, BOE trying to keep GBP low through further threats of more QE, etc. And while I was aware of all of these factors before I picked this trade, something told me I should investigate this a little further.
Perhaps it was yesterdays sell-off of this pair that had me second guessing myself, but I realized that when dealing with trend-reversals rarely do they happen and then go strait up. So I decided to do some multi-time frame analysis.
Now you may be asking yourself, why don’t you use technical indicators? Well, I do, but do after the fact as confirmation to see if it matches up with what I’m seeing from the price action on the chart. What I’d rather do is begin looking at shorter time-frames to see if any discernible patterns are emerging.
Voila! I dropped down 1 time-frame (which for me is the 4-hour chart) and noticed what I thought to be a possible cup & handle formation. This is a very bullish pattern if it completes properl
Now you’ll have to forgive my awful chart-drawing skills, but as you can see, there is a very rudimentary c&h formation in progress. Should this pair breakout above the “brim” of the cup at around 1.785, then we could see some momentum to the upside.
To come up with a target price, I added the height of the cup to the breakout price of the handle and came up with roughly 500 pips. But because I am already in this trade (half position- I took some profits), I don’t need to take any action at this point. But if this should breakout above the handle, then one could play the break-out by buying just above that price level.
So while at this point the fundamentals still don’t add up for this trade, stranger things have happened. Its amazing to watch how the technicals sometimes predict fundamental action. Whether or not it will in this case is anyone’s guess. But that is what trading is about, not trying to guess where the market is going, but rather trying to increase your odds that a particular action may take place and having sufficient risk management in place if it doesn’t occur.
So keep an eye on this pair to see if this formation “activates”, and if so, listen to the news to see if anything material has taken place. Or you can just check back here… as I will be sure to update.
Good trading to all!
To learn about these possible set-ups, be sure to check out our
Trade Update- GBP/AUD
As I’m sure you know by now, GBP had a nice move overnight and is currently up vs. (USD & JPY). Earlier this morning, it was also up a lot vs. AUD (this trade) to 1.8. When I saw this this morning, I placed a protective stop at 1.795 for another piece of my position and got stopped out on that piece.
Since that time, GBP/AUD has traded down and is now at 1.782. Anytime I am in a position that has a significant move, the DAY AFTER, I enter a new or confirm an older position, I will always take some profits. 150 pips looked good to me.
The commodity currencies, particularly NZD and AUD, are having good days as Reserve Bank Governor Bollard stated that the fact that the Kiwi is already strong would not preclude them from raising interest rates. Similar thoughts were made by Australia’s Glenn Stevens as well.
So while that all but kills any further chance of this trade succeeding more than it already has, I’m still going to sit in this last piece and see what happens. So my stop is at 1.766, my entry price on the initial trade.
Let’s see what happens as the all bank-talk seems to be heating up!
Since that time, GBP/AUD has traded down and is now at 1.782. Anytime I am in a position that has a significant move, the DAY AFTER, I enter a new or confirm an older position, I will always take some profits. 150 pips looked good to me.
The commodity currencies, particularly NZD and AUD, are having good days as Reserve Bank Governor Bollard stated that the fact that the Kiwi is already strong would not preclude them from raising interest rates. Similar thoughts were made by Australia’s Glenn Stevens as well.
So while that all but kills any further chance of this trade succeeding more than it already has, I’m still going to sit in this last piece and see what happens. So my stop is at 1.766, my entry price on the initial trade.
Let’s see what happens as the all bank-talk seems to be heating up!
Dollar at a (Technical) Crossroads
I deliberately concluded my last post on a somewhat ambiguous note; even though though the deck is stacked against the Dollar, its 14% decline in 2009 has left it perilously close to record lows, and traders are nervous about pushing the limits further.
Euro
On the one hand, everyone believes that the Dollar is fundamentally still in a weak position. The US balance of trade remains deep in deficit. Government spending has exploded, with record-setting deficits and an expansion in the national debt. Interest rates are at rock bottom, and are by some measures, the lowest in the world. Despite signs of life, the economy remains mired in recession. The money supply has also expanding, to the extent that some long-term investors are wondering out loud about the possibility of future inflation.
As a result, the decline in the Dollar since last spring has suffered very few blips, with volatility declining at the same pace as the currency, itself. “There seems to be a paradigm shift underway where more and more foreign investors are becoming concerned that the long-term path of the dollar is downward,” summarized one analyst. The consensus among investors is almost eerie. “Speculators betting that the dollar index will fall outnumber those betting that it will rise by nearly 2 to 1, according to the Commodity Futures Trading Commission.”
Some (mainstream) analysts have even begun to open consider the possibility of a crash in the Dollar, a view that had previously been relegated to conspiracy theorists and doomsday scenarists. “In a run on the dollar, that thinking would create a cascade — fearful global investors would shy away from dollars, expecting further steep declines, creating a self-fulfilling prophesy.” Adds a former Chief Economist of the IMF, “Every time the dollar starts depreciating there is angst and everybody starts raising the question what happens if there is a collapse.” While the majority of Dollar-watchers still believe that a Dollar crash is unlikely, the point is that they are now discussing it actively.
Despite the fact that all of these factors are already in place, the Dollar remains relatively buoyant. Personally, I think this is because investors don’t really want to acknowledge that this is a real possibility. For one thing, the alternatives aren’t any better. While forex investors in recent years have enjoyed ganging up on the Dollar, the fact remains the fundamentals for the other major currencies remain just as weak. For example, a model of purchasing power parity developed by “the Organization for Economic Cooperation and Development finds the dollar is worth roughly 0.85 euro, compared with its market valuation of 0.67 euro, suggesting that the euro is 21% overvalued.” Likewise, the Yen is held to be 22% undervalued.
As a result, the market as a whole is having trouble pushing the boundaries. The Dollar has approached the psychologically important level of $1.50/Euro on several occasions, but has retreated each time. “People are wondering whether we’re going back to $1.46 in euro/dollar or heading toward $1.54. But one thing is for sure, as we head toward $1.50, we’re going to experience a lot of volatility,” summarized one analyst.
“Risk reversals, a measure of currency sentiment in the options market derived by looking at the difference in implied volatility between out of the money calls and out of the money puts, show a bias for euro puts, trading at a mid-market level of 0.2. That means investors are hedging their short dollar positions with bets for a euro downside even though no one expects the euro to fall.” Meanwhile, volatility has edged up slightly, reflecting an increased level of uncertainty surround the near-term direction of the Dollar. It could be the case that if the Euro breaks through $1.50, heartened investors will send the currency up even higher, while a failure to break through means investors just aren’t read to commit. A classic technical crossroads!
Sunday, October 18, 2009
Daily Forex Predictions for Oct 16, 2009
Daily Forex Predictions for Oct 16, 2009
(update: 10:12am GMT+7)
EUR/USD
It is more likely to go up to around 1.5, and after that, it might have potentially to go down. Prefer to find the best price first to enter Buy, may be at around 1.49.
(Current Price: 1.4940)
GBP/USD
It is more likely to go up to around 1.64, and after that, it might have potentially to go down to around 1.63.
(Current Price: 1.6379)
(update: 10:12am GMT+7)
EUR/USD
It is more likely to go up to around 1.5, and after that, it might have potentially to go down. Prefer to find the best price first to enter Buy, may be at around 1.49.
(Current Price: 1.4940)
GBP/USD
It is more likely to go up to around 1.64, and after that, it might have potentially to go down to around 1.63.
(Current Price: 1.6379)
Friday, October 16, 2009
Enjoy forex trading
Hey all, forst time posting here after coming across the site a few days ago.
WOW what an intense few days of net surfing I have had, several property forums, small business forums and now this..soo much to learn.. I can feel my brain expanding already =P
I got this e-mail just yesterday, and wondered if anyone had come accross it before ? E-mail link was to here http://www.forexenterprise.com/ .
Any feedback would be much appreciated =)
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The Secret of Best Time to Trade Forex
Forex is a 24 hour market, what’s The Best Time to Day Trade the Forex Market?
The Absolute Best Time To Trade Is From 3 AM TO 11 AM EST.
The New York and London trading sessions overlap between 7 and 11 am EST.
The volatility is much higher and trading opportunities are much more frequent with
bigger moves, especially in these four hours. You can make 30-100 pips
trading in a few minutes or hours, using any of your strategies in any time
frame.
Three major forex trading ‘sessions’ are as follows (Eastern Standard Time):
* New York open 7:00 AM to 4:00 PM
* Japanese/Australian open 7:00 PM to 3:00 AM
* London open 3:00 AM to 11:00 AM
The beginning 3-5 hours of the above mentioned opening times is the best time to trade, The major currency pairs tend to move the most in a particular direction. Especially when there are economic news releases.
The currency pair that moves the most during these hours are the Usd/Chf ,Gbp/Usd, Eur/Usd,Usd/Jpy.
The economic news release is scheduled for 8:30 AM EST. If you are in a
trade at this time, make sure you have your stop loss at a place you are happy with.
The volatility is scary and fast, you can jump in once you see the major trend, usually after the first 5 minutes. Look at a 30 min chart to check the major trend.
Check your local time a
The Absolute Best Time To Trade Is From 3 AM TO 11 AM EST.
The New York and London trading sessions overlap between 7 and 11 am EST.
The volatility is much higher and trading opportunities are much more frequent with
bigger moves, especially in these four hours. You can make 30-100 pips
trading in a few minutes or hours, using any of your strategies in any time
frame.
Three major forex trading ‘sessions’ are as follows (Eastern Standard Time):
* New York open 7:00 AM to 4:00 PM
* Japanese/Australian open 7:00 PM to 3:00 AM
* London open 3:00 AM to 11:00 AM
The beginning 3-5 hours of the above mentioned opening times is the best time to trade, The major currency pairs tend to move the most in a particular direction. Especially when there are economic news releases.
The currency pair that moves the most during these hours are the Usd/Chf ,Gbp/Usd, Eur/Usd,Usd/Jpy.
The economic news release is scheduled for 8:30 AM EST. If you are in a
trade at this time, make sure you have your stop loss at a place you are happy with.
The volatility is scary and fast, you can jump in once you see the major trend, usually after the first 5 minutes. Look at a 30 min chart to check the major trend.
Check your local time a
BetOnMarkets - A historic Week
Traders, investors, and financial journalists must have been glad to reach the end of a week that will surely go down in the history of financial markets. The FTSE closed the week just 66 points down which the S&P 500 actually managed a small profit. Homeowner, the closing figures do not even begin to tell the whole story with the FTSE trading in a 521 point range and posting its best one day rally in history on Friday.
The turmoil began last week with the bail out of Fannie Mae and Freddie Mac. This raised hopes of a similar bail out of the Lehman Brothers. To say that investors were shocked when Lehmans was not only denied a bailout, but filed for insolvency would be an understatement. Lehmans collapse sent shockwaves throughout equity markets sparking a domino effect that knocked over Merrill Lynch, AIG and HBOS .
Even the most seasoned investors had a hard time steadying themselves last week as the newswires continue pump out dark news, and once in a generation headlines. Fear was understandably widespread with the Russian stock market suspended indefinitely after dropping 10% in an hour, and a large money market fund breaking the buck, meaning they lost their unit holders money. When the supposed safe havens of money market funds start to break down, investors see little choice but to fly to quality. There is a flood of assets transferring to safety of short term US Government Treasuries, forcing the yield on three month Treasury Bonds down to their lowest level since the great depression. Gold endured a remarkable week trading in a $140 range before closing the week up around $90.
On the economic data front, US CPI was in line with expectations, and oil prices have continued to stay below $100. Both of these factors indicate that the inflation monster may be coming back under control. However, the FOMC voted to keep rates on hold last week, initially markets had a mixed reaction. Many believe the Fed has now left itself some ammunition to deal with a weakening economy further down the line. It also sent out the signal that it would not be influenced by market makers into cutting rates as they did back in July.
It was the two emergency announcements on Wednesday and Thursday that had the greatest impact last week. After central banks dropped a coordinated liquidity bomb overnight on Wednesday, global equity and credit markets initially seemed to show a very cautious reaction. The greatest reaction seemed to come from the Feds plan to create a giant bad bank that would absorb many of the toxic subprime assets held by banks. This measure accompanied with a crack down on short sellers, seemed to have hit the nail on the head for the financial institutions, with the root cause of the credit crunch (sub prime assets) being attacked.
Next weeks headlines will be dominated by Ben Bernankes testimony before congress starting on Wednesday. We also have US existing home sales on Wednesday and new home sales on Thursday. However, the planned economic announcements could be secondary to any surprise headlines or further emergency measures. When stock markets move percentage points in the matter of minutes, anything can happen.
Although equity markets bounced last week, the panic at one stage reached such an extreme that the yield on 3 month US Treasuries reached 0.02% on Thursday, returning just $2 on a $10,000 investment. Investors werent just running to safety, they were blindly staggering to anywhere with no exposure to the credit markets. When investors press the panic button as they undoubtedly have done, there is potential for a counter rally to set in the short term as we saw on Friday. However, looking at large crashes from 1987, 1997, 1998, 2000 and 2001, the follow on reaction is typically a range bound market. A barrier range trade returns a profit if neither of two predetermined levels are hit within a specified time. A barrier range trade predicting the Dow Jones not to touch 12200 or 10500 over the next 16 days could return 39%.
BetOnMarkets
The turmoil began last week with the bail out of Fannie Mae and Freddie Mac. This raised hopes of a similar bail out of the Lehman Brothers. To say that investors were shocked when Lehmans was not only denied a bailout, but filed for insolvency would be an understatement. Lehmans collapse sent shockwaves throughout equity markets sparking a domino effect that knocked over Merrill Lynch, AIG and HBOS .
Even the most seasoned investors had a hard time steadying themselves last week as the newswires continue pump out dark news, and once in a generation headlines. Fear was understandably widespread with the Russian stock market suspended indefinitely after dropping 10% in an hour, and a large money market fund breaking the buck, meaning they lost their unit holders money. When the supposed safe havens of money market funds start to break down, investors see little choice but to fly to quality. There is a flood of assets transferring to safety of short term US Government Treasuries, forcing the yield on three month Treasury Bonds down to their lowest level since the great depression. Gold endured a remarkable week trading in a $140 range before closing the week up around $90.
On the economic data front, US CPI was in line with expectations, and oil prices have continued to stay below $100. Both of these factors indicate that the inflation monster may be coming back under control. However, the FOMC voted to keep rates on hold last week, initially markets had a mixed reaction. Many believe the Fed has now left itself some ammunition to deal with a weakening economy further down the line. It also sent out the signal that it would not be influenced by market makers into cutting rates as they did back in July.
It was the two emergency announcements on Wednesday and Thursday that had the greatest impact last week. After central banks dropped a coordinated liquidity bomb overnight on Wednesday, global equity and credit markets initially seemed to show a very cautious reaction. The greatest reaction seemed to come from the Feds plan to create a giant bad bank that would absorb many of the toxic subprime assets held by banks. This measure accompanied with a crack down on short sellers, seemed to have hit the nail on the head for the financial institutions, with the root cause of the credit crunch (sub prime assets) being attacked.
Next weeks headlines will be dominated by Ben Bernankes testimony before congress starting on Wednesday. We also have US existing home sales on Wednesday and new home sales on Thursday. However, the planned economic announcements could be secondary to any surprise headlines or further emergency measures. When stock markets move percentage points in the matter of minutes, anything can happen.
Although equity markets bounced last week, the panic at one stage reached such an extreme that the yield on 3 month US Treasuries reached 0.02% on Thursday, returning just $2 on a $10,000 investment. Investors werent just running to safety, they were blindly staggering to anywhere with no exposure to the credit markets. When investors press the panic button as they undoubtedly have done, there is potential for a counter rally to set in the short term as we saw on Friday. However, looking at large crashes from 1987, 1997, 1998, 2000 and 2001, the follow on reaction is typically a range bound market. A barrier range trade returns a profit if neither of two predetermined levels are hit within a specified time. A barrier range trade predicting the Dow Jones not to touch 12200 or 10500 over the next 16 days could return 39%.
BetOnMarkets
Managed Fund Program
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If you are interested or need more information don’t hesitate to PM me.
1st type of business: I accept investors fund and invest it in Forex, Commodity, Stock and Oil market. Minimum investment per person is only $300 and payment will be made monthly or profit will be compounded and be paid when investor wish.
2nd type of business: My second plan is to start a web service and provide Forex Signals to clients for a monthly subscription fee. I need investors or marketers to do the marketing part and gather clients.
3rd type of business: After sometime You the investor will see that I’m not lying and providing guaranteed results (at least 10% a month) than the best thing would be is to put the part of the capital to create our own investment firm that will be owned by the investors who provided capital for it. At later stage the firm can become a corporation and provide CreditCard service for a monthly fee for the investors.
If you are interested or need more information don’t hesitate to PM me.
Choosing The Right Forex Broker
The first and most important step you will take as a Forex trader is choosing a broker. Forex brokers come in all different styles, types and qualities. Some are very user friendly, with easy to use platforms, instant, hassle free execution and excellent customer service, while others will take your initial in the blink of an eye. It's so important to choose the right broker because you want to be able to focus on trading and let the broker handle the all the other aspects of Forex.
These 5 things to look for will help you find the best Forex broker, the one that's right for you.
1.) Minimum Deposits
As an expert trader, the first thing I look for in a broker is always the minimum deposit. Those offering mini accounts, with a minimum deposit of $25, are generally great for more inexperience, possibly new traders. Those which offer higher minimum deposits are generally geared from more professional, experienced traders who are ready to risk more money trading currencies. While this isn't an indication of whether or not it's a quality broker, it surely tells you the type you're dealing with.
As a newer trader, a mini account with a small initial deposit is a great choice. If you're an expert trader, choosing a broker with an advanced platform geared towards experienced traders may be the best option.
2.) Customer Reviews
Independent reviews and testimony's are very important because they show you the types of experiences real people have had with a specific brokerage. When looking for reviews, remember that people are more likely to post if their experience has been negative and reviews on a broker's own website will always be positive, so I wouldn't even take those into account as they are usually biased.
3.) 24/7 Customer Service
Customer care is extremely important to me! If you're having trouble with execution, using the platform or making deposits & withdrawals, it really helps to have understanding, knowledgeable & caring customer service agents on your site 24 hours a day. Talking to a real person about a question or problem is so much easier and more convenient than reading an FAQ page. You deserve a broker with 24/7 service, after all, it's your money!
4.) Other Services Offered
Check for market news feeds, commodity trading or other currency pairs besides the majors that are offered by all brokers. These types of services may not seem like a big deal now, but once you're making money and gaining experience, you may be interested in them later.
It's also important to note that a broker which offers more services generally has more financial backup, meaning the chances of it going under with your money are very small.
5.) Trying A Demo Account
Always trade on a demo account before choosing a broker. A demo will let you try the platform, test the execution, customer service and news feeds which are all vital parts of your trading experience. Demo account should be free and you can try as many as you like before actually making a deposit
These 5 things to look for will help you find the best Forex broker, the one that's right for you.
1.) Minimum Deposits
As an expert trader, the first thing I look for in a broker is always the minimum deposit. Those offering mini accounts, with a minimum deposit of $25, are generally great for more inexperience, possibly new traders. Those which offer higher minimum deposits are generally geared from more professional, experienced traders who are ready to risk more money trading currencies. While this isn't an indication of whether or not it's a quality broker, it surely tells you the type you're dealing with.
As a newer trader, a mini account with a small initial deposit is a great choice. If you're an expert trader, choosing a broker with an advanced platform geared towards experienced traders may be the best option.
2.) Customer Reviews
Independent reviews and testimony's are very important because they show you the types of experiences real people have had with a specific brokerage. When looking for reviews, remember that people are more likely to post if their experience has been negative and reviews on a broker's own website will always be positive, so I wouldn't even take those into account as they are usually biased.
3.) 24/7 Customer Service
Customer care is extremely important to me! If you're having trouble with execution, using the platform or making deposits & withdrawals, it really helps to have understanding, knowledgeable & caring customer service agents on your site 24 hours a day. Talking to a real person about a question or problem is so much easier and more convenient than reading an FAQ page. You deserve a broker with 24/7 service, after all, it's your money!
4.) Other Services Offered
Check for market news feeds, commodity trading or other currency pairs besides the majors that are offered by all brokers. These types of services may not seem like a big deal now, but once you're making money and gaining experience, you may be interested in them later.
It's also important to note that a broker which offers more services generally has more financial backup, meaning the chances of it going under with your money are very small.
5.) Trying A Demo Account
Always trade on a demo account before choosing a broker. A demo will let you try the platform, test the execution, customer service and news feeds which are all vital parts of your trading experience. Demo account should be free and you can try as many as you like before actually making a deposit
Non Deposit Broker for forex newbies
A good forex broker for newbies has not necessarily to be a good forex broker for an advanced trader. A good forex broker for a trader who also wants to trade commodities, oil, silver, gold, futures, indices (s & p, DAX etc.) has not necessarily to be the right broker for a pure forex trader. A good forex broker for newstrader has not necessarily to be the best broker for technical traders. A good broker for high funded big account holders has not necessarily to be the best broker for the newbie partime traders with capital less than 1000 dollar to invest. In this article I will focus on brokers for newbie traders with less capital.
First recommended broker is for sure Marketiva. Recommended because its a stable broker with a good and stable platform, lot of indicatiors (newbies love indicators!!!), but what is more important, because Marketiva let you trade with cents. Spreads are, with the exception of newstimes, reasonable (2 pips EUR/USD) Best of all, they give you 5 Dollar for free to trade with without having to deposit own money. 5 Dollars to start and being able to trade with 1 cent makes sense for a newbie, who wants to test forex trading, and dont want to test only with virtual money. Worst case you lose your 5 Dollar present, best case you may multiplicate your 5 dollars and withdraw the profit. I know traders who made from this 5 dollar over time a 1000 dollar account. They also offer a no-time-limit demo account, you can trade real money or virtual money on the same platform simultaneously, so its also a very good broker to test your trading strategy.
you may fund your account and withdraw the money through bank wire, and Marketiva also allow e-currency funding for people without bank account or credit card (libertyreserve etc.). They also offer 24 h excellent live support, very important for the currency newbie.
See my blog for further non-deposit-broker
First recommended broker is for sure Marketiva. Recommended because its a stable broker with a good and stable platform, lot of indicatiors (newbies love indicators!!!), but what is more important, because Marketiva let you trade with cents. Spreads are, with the exception of newstimes, reasonable (2 pips EUR/USD) Best of all, they give you 5 Dollar for free to trade with without having to deposit own money. 5 Dollars to start and being able to trade with 1 cent makes sense for a newbie, who wants to test forex trading, and dont want to test only with virtual money. Worst case you lose your 5 Dollar present, best case you may multiplicate your 5 dollars and withdraw the profit. I know traders who made from this 5 dollar over time a 1000 dollar account. They also offer a no-time-limit demo account, you can trade real money or virtual money on the same platform simultaneously, so its also a very good broker to test your trading strategy.
you may fund your account and withdraw the money through bank wire, and Marketiva also allow e-currency funding for people without bank account or credit card (libertyreserve etc.). They also offer 24 h excellent live support, very important for the currency newbie.
See my blog for further non-deposit-broker
Dealing Desk Overview
Dealing Desk Overview
In the past, most retail traders have been accustomed to trading with a standard dealing desk operated by the FCM where their funds are held and platform connected to. A dealing desk provides traders with access to trade execution, allowing clients to access the FX market when they want and take advantage of price movements between currencies. The dealing team is tasked with generating revenues for their firm using the transaction flow generated by client orders. FDMs with Dealing Desk business models therefore rely on human intervention to generate revenues, so all trades placed by clients of the firm are seen by at least one human being.
How it works:
A Dealing Desk works as the counter party to your trades. If you buy 100,000 EUR/USD, then the dealing desk has sold those EUR/USD to you. You are long; the Dealing Desk is short. The dealers now have a choice; they can buy 100,000 EUR/USD from someone else to cover their short position or they can choose to hold their short position that you have given them and wait for the position to be offset either by another client’s order, or by you closing your position. If the dealing desk decides to cover the position that you have given them (your long 100,000 EUR/USD causes the dealing desk to be short 100,000 EUR/USD), they will make money if they buy back at a lower price, or lose money if they buy back at a higher price. If the dealing desk chooses to hold their short position that you have given them, they will make money if an offsetting transaction takes place at a better price level, and lose money if the offsetting transaction takes place at a worse level.
In the institutional market, most all dealing desks (and they are all dealing desk models at the highest interbank level) seek to make money on a transactional basis which means they cover the risk they are given by client orders and attempt to make money on each transaction. In the non-institutional market, another dealing desk model is prevalent. Armed with the knowledge that in any leveraged market, such as Foreign Exchange, the majority of participants lose money, many successful dealing desks never offset the risk exposure that they are given by client orders. Instead they act as a Las Vegas casino, warehousing all the client risk knowing that most participants will lose money and therefore the dealing desk will harvest the aggregated client losses. Since Foreign Exchange is a “zero-sum” game, any money lost by one participant is gained by another.
The problem with the non-institutional dealing desk model is that by holding the risk given to them by clients’ orders, the dealers have incentive to want the clients to lose on their trades. The retail FX industry has been beleaguered by firms that held client risk and played games with pricing and execution of orders to help the dealing team make more revenues. But, there is a benefit to clients of this dealing desk model…
FDMs that have a traditional retail dealing desk tend to have slightly better execution of client orders during times of high volatility than FDM’s that have gone to a ECN model. That is because the traditional dealing desk will accept all orders knowing that a majority of client trades will lose money. The retail dealing desk model is not particularly worried about a pip or two here or there. So, these FDMs allow more client orders to be executed even if the order is not “at market” during a time of high volatility.
Pros:
• The trading platform usually comes with free charting software and news feeds. (For related reading, see Demo Before You Dive In.)
• Some of them have more user-friendly trading platforms.
• Currency price movements can be less volatile compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.
Cons:
• Because they may trade against you, market makers can present a clear conflict of interest in order execution.
• They may display worse bid/ask prices than what you could get from another market maker or ECN.
• It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives. Market makers may also move their currency quotes 10-15 pips away from other market rates.
• A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.
• Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution", which means their orders may not get filled at the prices they want.
ECN Overview
The ECN clearing model is a bit cleaner (more accurate) for clients though not necessarily better. In an ECN model, all client orders are passed through the FDM’s trading platform to an ECN for execution. In effect, these firms have automated their dealing desk so that the firm does not take on any financial risk. These FDM’s are really just technology providers that allow clients to access the FX market through their platform. So for firms that use an ECN business model, they generate their revenues by taking the prices provided by the ECN and marking those prices up, either by adding to the spread or by charging a commission. FDMs that use an ECN dealing model are more dependant on technology than traditional dealing desk model firms.
How it works:
When a client order to buy 100,000 EUR/USD is entered into the FDM’s trading platform, that same order to buy 100,000 EUR/USD is sent to the ECN that is linked to the FDM’s platform. If and when the client order is executed by a participating bank on the ECN, an electronic message is sent to the FDM’s trading platform confirming to the client that their order has been accepted an executed. There are a number of technology “bridges” that have to be working in order to allow for smooth operation. First, the client’s order on the FDM’s platform. Second, the bridge from the FDM’s platform to the ECN. And third, the return of information across those bridges. For these ‘no deal desk’ FDM firms, there is no financial risk being taken so long as the bridges are working correctly. This business model involves less risk, but does not have the high revenue margins associated with traditional dealing desks.
The main problem with this model is the rate of execution of client orders. There are two factors at play here. The first is the number of “bridges” that an order must pass over before the trade is confirmed as executed. The more bridges used to carry an order, the slower the confirmation. The second factor is that ECNs tend to have more price changes than traditional dealing desk platforms and that can lead to poor execution rates. If a client attempts to buy EUR/USD at a price of 1.2978 but in the milliseconds it takes for that order to get to the ECN the price has changed to 1.2979, the client’s order is not executed. In contrast, traditional dealing desks do not reflect every single price change and are more likely to have executed the above example order at the original price.
Pros:
• You can usually get better bid/ask prices because they are derived from several sources.
• It is possible to trade on prices that have very little or no spread at certain times.
• Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.
• Prices may be more volatile, which will be better for scalping purposes.
• Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.
Cons:
• Many of them do not offer integrated charting and news feeds.
• Their trading platforms tend to be less user-friendly.
• Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.
• Traders have to pay commissions for each transaction.
SO WHAT TYPE OF FDM EXECUTION MODEL IS BEST FOR MY TRADING?
Great question and there is no standard answer, but this is where you can gain a significant advantage over other traders who do not have the correct trade set up. There are a number of pros and cons to each execution model (ECN vs. DD) and depending on your needs may or may not weigh heavily on your decision.
Consulting with an established Introducing Broker is usually the right step to take in getting paired up with a firm that can properly cater to your trading. In such an ever-changing industry, an IB can advise and consult for multiple FDMs and help you make the best decision on where to keep your money and trade FX.
A reputable IB with strong relationships in the FX industry should always be on top of any industry changes and advancements and inform you before anyone else. Additionally, they are usually the first to know of any new information that may even slightly impact your trading so it’s a good idea to always speak with your IB about any new brokerage services that you are considering.
With so many different brokers to choose from and so many different ways to trade Forex, it’s imperative to your trading performance that you are trading with an FDM that caters to your needs and meets your requirements. Always be wary of what you may read on forums and be sure to steer clear of those guys with the “guaranteed” returns…
It’s strongly suggested that if you plan to trade Forex or are currently active in the market that you contact a licensed and registered IB that has already conducted the due diligence necessary on the FDMs available to you to make a qualified recommendation.
In the past, most retail traders have been accustomed to trading with a standard dealing desk operated by the FCM where their funds are held and platform connected to. A dealing desk provides traders with access to trade execution, allowing clients to access the FX market when they want and take advantage of price movements between currencies. The dealing team is tasked with generating revenues for their firm using the transaction flow generated by client orders. FDMs with Dealing Desk business models therefore rely on human intervention to generate revenues, so all trades placed by clients of the firm are seen by at least one human being.
How it works:
A Dealing Desk works as the counter party to your trades. If you buy 100,000 EUR/USD, then the dealing desk has sold those EUR/USD to you. You are long; the Dealing Desk is short. The dealers now have a choice; they can buy 100,000 EUR/USD from someone else to cover their short position or they can choose to hold their short position that you have given them and wait for the position to be offset either by another client’s order, or by you closing your position. If the dealing desk decides to cover the position that you have given them (your long 100,000 EUR/USD causes the dealing desk to be short 100,000 EUR/USD), they will make money if they buy back at a lower price, or lose money if they buy back at a higher price. If the dealing desk chooses to hold their short position that you have given them, they will make money if an offsetting transaction takes place at a better price level, and lose money if the offsetting transaction takes place at a worse level.
In the institutional market, most all dealing desks (and they are all dealing desk models at the highest interbank level) seek to make money on a transactional basis which means they cover the risk they are given by client orders and attempt to make money on each transaction. In the non-institutional market, another dealing desk model is prevalent. Armed with the knowledge that in any leveraged market, such as Foreign Exchange, the majority of participants lose money, many successful dealing desks never offset the risk exposure that they are given by client orders. Instead they act as a Las Vegas casino, warehousing all the client risk knowing that most participants will lose money and therefore the dealing desk will harvest the aggregated client losses. Since Foreign Exchange is a “zero-sum” game, any money lost by one participant is gained by another.
The problem with the non-institutional dealing desk model is that by holding the risk given to them by clients’ orders, the dealers have incentive to want the clients to lose on their trades. The retail FX industry has been beleaguered by firms that held client risk and played games with pricing and execution of orders to help the dealing team make more revenues. But, there is a benefit to clients of this dealing desk model…
FDMs that have a traditional retail dealing desk tend to have slightly better execution of client orders during times of high volatility than FDM’s that have gone to a ECN model. That is because the traditional dealing desk will accept all orders knowing that a majority of client trades will lose money. The retail dealing desk model is not particularly worried about a pip or two here or there. So, these FDMs allow more client orders to be executed even if the order is not “at market” during a time of high volatility.
Pros:
• The trading platform usually comes with free charting software and news feeds. (For related reading, see Demo Before You Dive In.)
• Some of them have more user-friendly trading platforms.
• Currency price movements can be less volatile compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.
Cons:
• Because they may trade against you, market makers can present a clear conflict of interest in order execution.
• They may display worse bid/ask prices than what you could get from another market maker or ECN.
• It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives. Market makers may also move their currency quotes 10-15 pips away from other market rates.
• A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.
• Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution", which means their orders may not get filled at the prices they want.
ECN Overview
The ECN clearing model is a bit cleaner (more accurate) for clients though not necessarily better. In an ECN model, all client orders are passed through the FDM’s trading platform to an ECN for execution. In effect, these firms have automated their dealing desk so that the firm does not take on any financial risk. These FDM’s are really just technology providers that allow clients to access the FX market through their platform. So for firms that use an ECN business model, they generate their revenues by taking the prices provided by the ECN and marking those prices up, either by adding to the spread or by charging a commission. FDMs that use an ECN dealing model are more dependant on technology than traditional dealing desk model firms.
How it works:
When a client order to buy 100,000 EUR/USD is entered into the FDM’s trading platform, that same order to buy 100,000 EUR/USD is sent to the ECN that is linked to the FDM’s platform. If and when the client order is executed by a participating bank on the ECN, an electronic message is sent to the FDM’s trading platform confirming to the client that their order has been accepted an executed. There are a number of technology “bridges” that have to be working in order to allow for smooth operation. First, the client’s order on the FDM’s platform. Second, the bridge from the FDM’s platform to the ECN. And third, the return of information across those bridges. For these ‘no deal desk’ FDM firms, there is no financial risk being taken so long as the bridges are working correctly. This business model involves less risk, but does not have the high revenue margins associated with traditional dealing desks.
The main problem with this model is the rate of execution of client orders. There are two factors at play here. The first is the number of “bridges” that an order must pass over before the trade is confirmed as executed. The more bridges used to carry an order, the slower the confirmation. The second factor is that ECNs tend to have more price changes than traditional dealing desk platforms and that can lead to poor execution rates. If a client attempts to buy EUR/USD at a price of 1.2978 but in the milliseconds it takes for that order to get to the ECN the price has changed to 1.2979, the client’s order is not executed. In contrast, traditional dealing desks do not reflect every single price change and are more likely to have executed the above example order at the original price.
Pros:
• You can usually get better bid/ask prices because they are derived from several sources.
• It is possible to trade on prices that have very little or no spread at certain times.
• Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.
• Prices may be more volatile, which will be better for scalping purposes.
• Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.
Cons:
• Many of them do not offer integrated charting and news feeds.
• Their trading platforms tend to be less user-friendly.
• Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.
• Traders have to pay commissions for each transaction.
SO WHAT TYPE OF FDM EXECUTION MODEL IS BEST FOR MY TRADING?
Great question and there is no standard answer, but this is where you can gain a significant advantage over other traders who do not have the correct trade set up. There are a number of pros and cons to each execution model (ECN vs. DD) and depending on your needs may or may not weigh heavily on your decision.
Consulting with an established Introducing Broker is usually the right step to take in getting paired up with a firm that can properly cater to your trading. In such an ever-changing industry, an IB can advise and consult for multiple FDMs and help you make the best decision on where to keep your money and trade FX.
A reputable IB with strong relationships in the FX industry should always be on top of any industry changes and advancements and inform you before anyone else. Additionally, they are usually the first to know of any new information that may even slightly impact your trading so it’s a good idea to always speak with your IB about any new brokerage services that you are considering.
With so many different brokers to choose from and so many different ways to trade Forex, it’s imperative to your trading performance that you are trading with an FDM that caters to your needs and meets your requirements. Always be wary of what you may read on forums and be sure to steer clear of those guys with the “guaranteed” returns…
It’s strongly suggested that if you plan to trade Forex or are currently active in the market that you contact a licensed and registered IB that has already conducted the due diligence necessary on the FDMs available to you to make a qualified recommendation.
brokers discussions
With all the new regulation and changes going on in the Forex industry, it can be very difficult finding the right broker. In this article, I will aim to clearly outline the differences between Forex brokers and what is going to be best for your trading.
(My apologies for the length of the article, it may take up a few of the first posts)
ECN vs. Deal Desk; Which is right for you?
The popular debate between ECN and dealing desk brokers has been going on for quite some time now and there will soon be a clean dividing line.
The age old question still remains: Which type of broker is better for retail FX traders; a clearing firm that passes on all orders (ECN) or a traditional dealing desk? And, what exactly are the pros and cons of each?
Due to the generational events in the global economic markets within the last 18 months, the Foreign Exchange market has changed, and drastically at that. A few of the more notable events that have heavily impacted the spot FX markets include the demise of two of the largest interbank dealers (AIG and Lehman Brothers) which has played a role in the decreased available credit for many of the remaining firms. Additionally, and even more specific to the non-institutional trader, the NFA (National Futures Association) continues to pass increasingly tough regulation on all NFA member firms.
This informational FX update aims to explain the differences between clearing firms that pass through all client orders (ECN or STP models) and traditional Dealing Desks, and help traders decide which type of broker is the best choice for themselves.
Important Terms to Know:
ECN – Electronic Communication Network. Often referred to in financial markets as a platform where buyers and sellers can connect anonymously. An electronic market where the “price” of the underlying item is either the lowest offer where a platform participant can buy from another participant or the highest bid where a platform participant can sell to another participant. The more buyers and sellers on any given ECN, the better pricing one can expect.
With an ECN, your broker is NOT the counterparty to your trades. Orders are passed along to multiple liquidity providers (in most cases) or are paired with fit counterparties (other traders).
FDM – Forex Dealer Member. A National Futures Association name for a member firm that holds client deposits and executes trading orders for clients. Referred to as a clearing firm.
IB – Introducing Broker. An NFA member firm that introduces clients to a clearing firm. Introducing Brokers act as a consultant to clients offering services and information that clearing firms traditionally do not offer. Additionally, an established IB can offer insight to the industry and provide a certain level of clout when it comes to dealing with FDMs.
Dealing Desk – A clearing firm that acts as counterparty to client orders. The dealers on the desk execute client orders and are responsible for using that client order flow to generate revenue for the clearing firm. Dealers can choose to cover their risk by entering into offsetting transactions with other firms, or keep their risk exposed by choosing not to cover positions given to the desk by client orders.
(My apologies for the length of the article, it may take up a few of the first posts)
ECN vs. Deal Desk; Which is right for you?
The popular debate between ECN and dealing desk brokers has been going on for quite some time now and there will soon be a clean dividing line.
The age old question still remains: Which type of broker is better for retail FX traders; a clearing firm that passes on all orders (ECN) or a traditional dealing desk? And, what exactly are the pros and cons of each?
Due to the generational events in the global economic markets within the last 18 months, the Foreign Exchange market has changed, and drastically at that. A few of the more notable events that have heavily impacted the spot FX markets include the demise of two of the largest interbank dealers (AIG and Lehman Brothers) which has played a role in the decreased available credit for many of the remaining firms. Additionally, and even more specific to the non-institutional trader, the NFA (National Futures Association) continues to pass increasingly tough regulation on all NFA member firms.
This informational FX update aims to explain the differences between clearing firms that pass through all client orders (ECN or STP models) and traditional Dealing Desks, and help traders decide which type of broker is the best choice for themselves.
Important Terms to Know:
ECN – Electronic Communication Network. Often referred to in financial markets as a platform where buyers and sellers can connect anonymously. An electronic market where the “price” of the underlying item is either the lowest offer where a platform participant can buy from another participant or the highest bid where a platform participant can sell to another participant. The more buyers and sellers on any given ECN, the better pricing one can expect.
With an ECN, your broker is NOT the counterparty to your trades. Orders are passed along to multiple liquidity providers (in most cases) or are paired with fit counterparties (other traders).
FDM – Forex Dealer Member. A National Futures Association name for a member firm that holds client deposits and executes trading orders for clients. Referred to as a clearing firm.
IB – Introducing Broker. An NFA member firm that introduces clients to a clearing firm. Introducing Brokers act as a consultant to clients offering services and information that clearing firms traditionally do not offer. Additionally, an established IB can offer insight to the industry and provide a certain level of clout when it comes to dealing with FDMs.
Dealing Desk – A clearing firm that acts as counterparty to client orders. The dealers on the desk execute client orders and are responsible for using that client order flow to generate revenue for the clearing firm. Dealers can choose to cover their risk by entering into offsetting transactions with other firms, or keep their risk exposed by choosing not to cover positions given to the desk by client orders.
brokers more
There are so many brokers in the Forex market and it is easy to say about some of good brokers but it is really hard to say a best, because every broker has some good and some bad features. It may be possible that I dislike the broker which you prefer or you dislike the broker I prefer. so to select the best broker among of all these broker you have to think which broker fulfills your exact trading requirement..
I selected some points which you must keep in mind while selecting a good broker
Comparing FX trading brokers
Average offered
Minimum deposit required
Amount/type of commissions charged
Spreads for major currencies
Availability of mini Forex accounts
Availability and quality of demo currency trading account
Number of currency pairs offered
Try demo accounts
See the demerits of the broker as well...
Well all you need to select a broker which suits your trading style
For an example I always look for scalping and not all the brokers
Allow to use scalping strategies so I chose a broker which allows me to scalp...
May my post will help you..
I selected some points which you must keep in mind while selecting a good broker
Comparing FX trading brokers
Average offered
Minimum deposit required
Amount/type of commissions charged
Spreads for major currencies
Availability of mini Forex accounts
Availability and quality of demo currency trading account
Number of currency pairs offered
Try demo accounts
See the demerits of the broker as well...
Well all you need to select a broker which suits your trading style
For an example I always look for scalping and not all the brokers
Allow to use scalping strategies so I chose a broker which allows me to scalp...
May my post will help you..
Forex Brokers: Choosing The Right One
One of the most important first steps to being successful in Forex is choosing the right broker. The potential for profit in Forex is unprecedented but let's face it, Forex trading comes with a high level of risk as well. When investing your hard earned money in this market, it's essential to choose a broker which allows you to most effectively minimize your losses & maximize your profits.
However, many traders are not sure what to look for when choosing a broker. There's so many advertisements, promotions & bonuses being offered by various brokers, it's difficult to tell which brokers are really worth trading with. Here are some things to look for when making this important decision:
1.) First & foremost, check online reviews for this broker.
Independent reviews sites, Forex message boards, forums & rating sites can be excellent sources of information on brokers. Individual traders visit these sites and post their experiences with a specific broker, positive or negative.
2.) What does this broker offer that makes it unique?
You want to choose the best broker out there right? Have a look at what each broker is offering that makes it fit to your trading needs. Is it MT4? Do they offer managed accounts? Is it a commission or non-commission broker? Are there micro/mini accounts? etc.
Along with the different features, have a look at the promotions that broker is running. Deposit bonuses have become common so I would recommend choosing a broker that offers one.
3.) Does this broker have a forum?
Ok, this one is very important. A forum indicates that a broker has nothing to hide and is very open to traders questions & concerns. A forum is a place for traders to congregate & voice their opinions, only a legit broker would provide one because, let's face it, a low quality broker wouldn't want it's traders conversing about all of it's problems on it's own site.
4.) Try the demo account
All legit brokers offer a demo account so you can try their trading platform and see if the broker's specific style & feel fits your trading techniques. Use the demo account to test your trading strategies & methods.
5.) The essentials
Any Forex broker worth their salt provides:
* Live market news feeds
* 24/7 customer service
* Charts & graphs for your trading convenience
* Instant Execution of Order(sounds obvious)
* Execution of stop loss rate
Once you’ve chosen the right broker, the odds are in your favor & your chances of succeeding in Forex increase greatly.
However, many traders are not sure what to look for when choosing a broker. There's so many advertisements, promotions & bonuses being offered by various brokers, it's difficult to tell which brokers are really worth trading with. Here are some things to look for when making this important decision:
1.) First & foremost, check online reviews for this broker.
Independent reviews sites, Forex message boards, forums & rating sites can be excellent sources of information on brokers. Individual traders visit these sites and post their experiences with a specific broker, positive or negative.
2.) What does this broker offer that makes it unique?
You want to choose the best broker out there right? Have a look at what each broker is offering that makes it fit to your trading needs. Is it MT4? Do they offer managed accounts? Is it a commission or non-commission broker? Are there micro/mini accounts? etc.
Along with the different features, have a look at the promotions that broker is running. Deposit bonuses have become common so I would recommend choosing a broker that offers one.
3.) Does this broker have a forum?
Ok, this one is very important. A forum indicates that a broker has nothing to hide and is very open to traders questions & concerns. A forum is a place for traders to congregate & voice their opinions, only a legit broker would provide one because, let's face it, a low quality broker wouldn't want it's traders conversing about all of it's problems on it's own site.
4.) Try the demo account
All legit brokers offer a demo account so you can try their trading platform and see if the broker's specific style & feel fits your trading techniques. Use the demo account to test your trading strategies & methods.
5.) The essentials
Any Forex broker worth their salt provides:
* Live market news feeds
* 24/7 customer service
* Charts & graphs for your trading convenience
* Instant Execution of Order(sounds obvious)
* Execution of stop loss rate
Once you’ve chosen the right broker, the odds are in your favor & your chances of succeeding in Forex increase greatly.
Forex brokers
Forex Brokers: Choosing the right one
Before starting to trade, you need to setup an account with a Forex broker. Put simply, a broker is a company that charges small commissions for executing buy & sell orders on the traders command.
At first, deciding on which broker to choose may be overwhelming as there are many available, the key is to do your research & follow these simple steps.
1.) Customer Service
Most importantly, a broker's customer service must be excellent! 24/7 customer service reps available is an absolute must & you can't do without it. A quality customer service team is the first step to finding the best broker for you.
2.) Platform
Analyze the brokers trading platform. Are you comfortable with it? Does it have all the necessary information you need to trade? Is there a market news feed somewhere in the corner or somewhere else on the site?
3.) Mini/Micro Accounts
If you are a beginner, try looking for a broker which offers Mini & even micro accounts. For just a few hundred bucks you can test your trading skills, hone your market savy & learn the tricks of trading forex.
4.) Instant Execution of Your Orders
This is an absolute must! If execution isn't instant, as soon as you place your order, find a new broker.
5.) Do Your Research
Look online & check out forums for reviews of the broker you're thinking of trading with. Make sure that they have been around for a long time & that traders have had good experiences.
Before starting to trade, you need to setup an account with a Forex broker. Put simply, a broker is a company that charges small commissions for executing buy & sell orders on the traders command.
At first, deciding on which broker to choose may be overwhelming as there are many available, the key is to do your research & follow these simple steps.
1.) Customer Service
Most importantly, a broker's customer service must be excellent! 24/7 customer service reps available is an absolute must & you can't do without it. A quality customer service team is the first step to finding the best broker for you.
2.) Platform
Analyze the brokers trading platform. Are you comfortable with it? Does it have all the necessary information you need to trade? Is there a market news feed somewhere in the corner or somewhere else on the site?
3.) Mini/Micro Accounts
If you are a beginner, try looking for a broker which offers Mini & even micro accounts. For just a few hundred bucks you can test your trading skills, hone your market savy & learn the tricks of trading forex.
4.) Instant Execution of Your Orders
This is an absolute must! If execution isn't instant, as soon as you place your order, find a new broker.
5.) Do Your Research
Look online & check out forums for reviews of the broker you're thinking of trading with. Make sure that they have been around for a long time & that traders have had good experiences.
Double Your Trading Account (GBPUSD) 3
GBPUSD continue to pullback down. I am already out of both trades with great gain.
I am waitting for a bounce at 1.6484. This may be where I will buy it again if my indicator gives me the signal to buy it. Also tonight is the GBP news. This will determine also where the price will likely mive for the next couple of the days. I will wait until then to make a trading decision. But overall, the long term uptrend is still intact and has not change yet.
The news will be around 23.00
Here is the what the news will be about and see how it can affect the pair we we are trading:
Upcoming News
Nationwide Consumer Confidence
Description:
Survey that queries economic participants on their current and future expectations for the UK economy. Rising consumer confidence generally precedes increased consumer spending, which drives both economic growth and inflation. The figure is released at the start of each month, making Nationwide Consumer Confidence a timely measure of consumer sentiment now and in the immediate future.
The headline figure is the index value for the Nationwide Consumer Confidence Index, where the May 2004 figure is 100.
Source of report: Nationwide Building Society
Web address: http://nationwide.co.uk/default.htm
Frequency: monthly, on the Wednesday before the Monetary Policy Committee announces its Base Rate decision
I am waitting for a bounce at 1.6484. This may be where I will buy it again if my indicator gives me the signal to buy it. Also tonight is the GBP news. This will determine also where the price will likely mive for the next couple of the days. I will wait until then to make a trading decision. But overall, the long term uptrend is still intact and has not change yet.
The news will be around 23.00
Here is the what the news will be about and see how it can affect the pair we we are trading:
Upcoming News
Nationwide Consumer Confidence
Description:
Survey that queries economic participants on their current and future expectations for the UK economy. Rising consumer confidence generally precedes increased consumer spending, which drives both economic growth and inflation. The figure is released at the start of each month, making Nationwide Consumer Confidence a timely measure of consumer sentiment now and in the immediate future.
The headline figure is the index value for the Nationwide Consumer Confidence Index, where the May 2004 figure is 100.
Source of report: Nationwide Building Society
Web address: http://nationwide.co.uk/default.htm
Frequency: monthly, on the Wednesday before the Monetary Policy Committee announces its Base Rate decision
Double Your Trading Account (GBPUSD) 2
Let's talk a moment about GBPUSD. We want to see how we are going to trade this for the long term before we really get into the trades.
Looking at the chart we notice that this pair is in a long term uptrend. It starts at the beginning of March this year and has been climbing up since. It has moved over 3000 point and it will continue to move. We expect to capture another 1000 to 2000 points on this pair.
A few weeks ago, it moves down about 800 pips.
Now it is getting pack online again.
Now, we need to know the right timing to get back in and ride it up.
This is what must be done on every currency pairs before trading it.
Base on the above information I gave you, you almost have enough information to start trading.
Weekly chart is giving up the long-term trend and it is up.
The Daily chart has start so align itself with the Weekly.
4 Hour is already up and is separated base on our indicator.
As far as the long term goes anyone can get into it now by placing a pending BUY trade at 1.6418
Looking at the chart we notice that this pair is in a long term uptrend. It starts at the beginning of March this year and has been climbing up since. It has moved over 3000 point and it will continue to move. We expect to capture another 1000 to 2000 points on this pair.
A few weeks ago, it moves down about 800 pips.
Now it is getting pack online again.
Now, we need to know the right timing to get back in and ride it up.
This is what must be done on every currency pairs before trading it.
Base on the above information I gave you, you almost have enough information to start trading.
Weekly chart is giving up the long-term trend and it is up.
The Daily chart has start so align itself with the Weekly.
4 Hour is already up and is separated base on our indicator.
As far as the long term goes anyone can get into it now by placing a pending BUY trade at 1.6418
Double Your Trading Account (GBPUSD)
Hi
I would like to start trading with some of you here.
I enjoy long-term trading and I want to share my strategy here for long-term trading.
I trade Forex for a living and I am also an MT4, C++ programmer.
I currently have a few accounts that are trading long term on the following pairs:
GBPJPY
EURJPY
GBPUSD
These accounts have been running strong on these pairs since February 2009
Is this thread, I will mainly be focusing on GBPUSD
Here is how we will do it:
You may have to open 2 demo accounts for this.
One account will be devoted to the long-term trading and the other will be devoted to short term day trades.
I will tell you when would be a good time to get into the long-term trade. Once this trade is triggered, we will not touch it at all, except when I tell you to.
It will get scary, but I want you to hang with me.
In the other account, we will trade the short term trades. This trade is for one day or a couple of hours.
Here is the trading rules:
Please, start your demo account with $10000.
Total risk is 4%
start each trade with 2%
Only 2 trades should open at a time.
Second trade should be closed once it reach the price of first trade.
Here is an Investment calculator (request free copy of this)
I would like to start trading with some of you here.
I enjoy long-term trading and I want to share my strategy here for long-term trading.
I trade Forex for a living and I am also an MT4, C++ programmer.
I currently have a few accounts that are trading long term on the following pairs:
GBPJPY
EURJPY
GBPUSD
These accounts have been running strong on these pairs since February 2009
Is this thread, I will mainly be focusing on GBPUSD
Here is how we will do it:
You may have to open 2 demo accounts for this.
One account will be devoted to the long-term trading and the other will be devoted to short term day trades.
I will tell you when would be a good time to get into the long-term trade. Once this trade is triggered, we will not touch it at all, except when I tell you to.
It will get scary, but I want you to hang with me.
In the other account, we will trade the short term trades. This trade is for one day or a couple of hours.
Here is the trading rules:
Please, start your demo account with $10000.
Total risk is 4%
start each trade with 2%
Only 2 trades should open at a time.
Second trade should be closed once it reach the price of first trade.
Here is an Investment calculator (request free copy of this)
Forex Trading Glossary 2
D
Day Trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
Dealer - An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Deficit - A negative balance of trade or payments.
Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.
Department of Communities and Local Government (DCLG) UK House Prices – A monthly survey produced by the DCLG that uses a very large sample of all completed house sales to measure the price trends in the UK real estate market.
Depreciation - A fall in the value of a currency due to market forces.
Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.
Devaluation - The deliberate downward adjustment of a currency’s price, normally by official announcement.
Discount Rate – Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.
E
Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.
European Monetary Union (EMU) - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.
EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).
European Central Bank (ECB) - the Central Bank for the new European Monetary Union.
Eurozone Organization for Economic Co-operation and Development (OECD) Leading Indicator – A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including: average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.
Eurozone Labor Cost Index – Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.
F
Factory Orders – The dollar level of new orders for both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month.
Federal Reserve (Fed) - The Central Bank for the United States.
First In First Out (FIFO) - Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.
Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price.
French Central Government Balance – The difference between the central government’s monthly income and spending.
Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.
Futures Contract - An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts - ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.
FX - Foreign Exchange.
G
G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
Going Long - The purchase of a stock, commodity, or currency for investment or speculation.
Going Short - The selling of a currency or instrument not owned by the seller.
Gross Domestic Product - Total value of a country’s output, income or expenditure produced within the country’s physical borders.
Gross National Product - Gross domestic product plus income earned from investment or work abroad.
Good ‘Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.
H
Hedge - A position or combination of positions that reduces the risk of your primary position.
“Hit the bid” - Acceptance of purchasing at the offer or selling at the bid.
I
Industrial Production – Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income.
Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.
Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Introducing Broker - A person or corporate entity which introduces accounts to FOREX.com for a fee.
ISM Manufacturing Index – An index that assesses the state of US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
ISM Non-Manufacturing – An index that survey service sector firms for their outlook, representing the other 80% of the U.S. economy not covered by ISM MANUFACTURING REPORT. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
J
Japanese Economy Watchers Survey – Measures the mood of businesses that directly service consumers such waiters, drivers, and beauticians. Readings above 50 generally signal improvements in sentiment.
Japanese Machine Tool Orders – Measures the total value of new orders placed with machine tool manufactures. Machine tool orders are a measure of the demand for machines that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase
K
Kiwi - Slang for the New Zealand dollar.
L
Leading Indicators - Statistics that are considered to predict future economic activity.
Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.
LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)
Liquidation - The closing of an existing position through the execution of an offsetting transaction.
Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.
Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.
Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
M
Manufacturing Production – Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measure the 13 sub sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial Production.
Margin - The required equity that an investor must deposit to collateralize a position.
Margin Call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Risk - Exposure to changes in market prices.
Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
Maturity - The date for settlement or expiry of a financial instrument.
N
Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.
O
Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price
Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.
One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.
Open order - An order that will be executed when a market moves to its designated price. Normally associated with Good ’til Cancelled Orders.
Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.
Overnight Position - A trade that remains open until the next business day.
Order - An instruction to execute a trade at a specified rate.
P
Personal Income – Measures an individuals’ total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.
Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.
Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor’s position.
Position - The netted total holdings of a given currency.
Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.
Price Transparency - Describes quotes to which every market participant has equal access.
Profit /Loss or “P/L” or Gain/Loss - The actual “realized” gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical “unrealized” gain or loss on Open Positions that have been Mark-to-Market.
Purchasing Managers Index Services (France, Germany, Eurozone, UK) – Measures an outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Readings above 50 generally indicate expansion, while reading below 50 suggest economic contraction.
Q
Quote - An indicative market price, normally used for information purposes only.
R
Rally - A recovery in price after a period of decline.
Range - The difference between the highest and lowest price of a future recorded during a given trading session.
Rate - The price of one currency in terms of another, typically used for dealing purposes.
Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
Retail Sales – Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of variety of different types and sizes. This data gives a look into consumer spending behavior, which is a key determinant of growth in all major economies.
Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.
Risk - Exposure to uncertain change, most often used with a negative connotation of adverse change.
Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
Roll-Over - A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies.
The spot forex market is traded on a two-day value date. For example, for trades executed on Monday, the value date is Wednesday. However, if a position is opened on Monday and held overnight (remains open after 1700 ET), the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest. Trades with a value date that falls on a holiday will also incur or earn additional interest.
Round trip - Buying and selling of a specified amount of currency.
S
Settlement - The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
Simple Moving Average (SMA) – A simple average of a pre – defined amount of price bars. For example, a 50 period Daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied here.
Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days.
Spread - The difference between the bid and offer prices.
Square - Purchase and sales are in balance and thus the dealer has no open position.
Sterling - slang for British Pound.
Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49. Refer to Trading Handbook for FOREX.com’s Stop Loss Policy.
Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Swissy - Market slang for Swiss Franc.
T
Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Tick - A minimum change in price, up or down.
Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.
Trade Balance – Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.
Transaction Cost - the cost of buying or selling a financial instrument.
Transaction Date - The date on which a trade occurs.
Turnover - The total money value of all executed transactions in a given time period; volume.
Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.
U
UK Producers Price Index Input – Measures the rate of inflation experienced by manufacturers when purchasing materials and services. This data is closely scrutinized since it can be a leading indicator of consumer inflation.
UK Producers Price Index Output – Measures the rate of inflation experienced by manufacturers when selling goods and services.
UK Jobless Claims Change – Measures the change in the number of people claiming benefits over the previous month.
Unemployment Rate – Measures the total United States workforce that is unemployed and actively seeking employment, measured as the percentage of the labor force.
University of Michigan’s Consumer Sentiment Index – Polls 500 US households each month. The report is issued in a preliminary version mid – month and a final version at the end of the month. Questions revolve around individuals attitudes about the US economy. Consumer sentiment is viewed as a proxy for the strength of consumer spending.
Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains’ Losses become Profits/Losses when position is closed.
Uptick - a new price quote at a price higher than the preceding quote.
Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.
V
Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.
Variation Margin - Funds a broker must request from the client to have the required margin deposited. Term refers to additional funds that must be deposited as a result of unfavorable price movements.
The VIX or Volatility Index – The market’s expectation of 30 day volatility. Constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a measure of market risk and is often referred to as investor fear gauge.
Volatility - A measure of a market’s price movements over time.
W
Wedge Chart Pattern – Chart where price highs in an ascending wedge are incrementally less, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout, and descending wedges typically terminate with upside breakouts.
Whipsaw - slang for a highly volatile market where a sharp price movement is followed by a sharp reversal.
Wholesale Prices – Measures the change in prices paid by retailers for finished goods. Inflation will show up here earlier than in the retail headlines.
Y
Yard - Slang meaning a billion.
Day Trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
Dealer - An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Deficit - A negative balance of trade or payments.
Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.
Department of Communities and Local Government (DCLG) UK House Prices – A monthly survey produced by the DCLG that uses a very large sample of all completed house sales to measure the price trends in the UK real estate market.
Depreciation - A fall in the value of a currency due to market forces.
Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.
Devaluation - The deliberate downward adjustment of a currency’s price, normally by official announcement.
Discount Rate – Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.
E
Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.
European Monetary Union (EMU) - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.
EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).
European Central Bank (ECB) - the Central Bank for the new European Monetary Union.
Eurozone Organization for Economic Co-operation and Development (OECD) Leading Indicator – A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including: average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.
Eurozone Labor Cost Index – Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.
F
Factory Orders – The dollar level of new orders for both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month.
Federal Reserve (Fed) - The Central Bank for the United States.
First In First Out (FIFO) - Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.
Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price.
French Central Government Balance – The difference between the central government’s monthly income and spending.
Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.
Futures Contract - An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts - ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.
FX - Foreign Exchange.
G
G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
Going Long - The purchase of a stock, commodity, or currency for investment or speculation.
Going Short - The selling of a currency or instrument not owned by the seller.
Gross Domestic Product - Total value of a country’s output, income or expenditure produced within the country’s physical borders.
Gross National Product - Gross domestic product plus income earned from investment or work abroad.
Good ‘Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.
H
Hedge - A position or combination of positions that reduces the risk of your primary position.
“Hit the bid” - Acceptance of purchasing at the offer or selling at the bid.
I
Industrial Production – Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income.
Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.
Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Introducing Broker - A person or corporate entity which introduces accounts to FOREX.com for a fee.
ISM Manufacturing Index – An index that assesses the state of US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
ISM Non-Manufacturing – An index that survey service sector firms for their outlook, representing the other 80% of the U.S. economy not covered by ISM MANUFACTURING REPORT. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
J
Japanese Economy Watchers Survey – Measures the mood of businesses that directly service consumers such waiters, drivers, and beauticians. Readings above 50 generally signal improvements in sentiment.
Japanese Machine Tool Orders – Measures the total value of new orders placed with machine tool manufactures. Machine tool orders are a measure of the demand for machines that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase
K
Kiwi - Slang for the New Zealand dollar.
L
Leading Indicators - Statistics that are considered to predict future economic activity.
Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.
LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)
Liquidation - The closing of an existing position through the execution of an offsetting transaction.
Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.
Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.
Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
M
Manufacturing Production – Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measure the 13 sub sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial Production.
Margin - The required equity that an investor must deposit to collateralize a position.
Margin Call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Risk - Exposure to changes in market prices.
Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
Maturity - The date for settlement or expiry of a financial instrument.
N
Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.
O
Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price
Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.
One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.
Open order - An order that will be executed when a market moves to its designated price. Normally associated with Good ’til Cancelled Orders.
Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.
Overnight Position - A trade that remains open until the next business day.
Order - An instruction to execute a trade at a specified rate.
P
Personal Income – Measures an individuals’ total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.
Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.
Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor’s position.
Position - The netted total holdings of a given currency.
Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.
Price Transparency - Describes quotes to which every market participant has equal access.
Profit /Loss or “P/L” or Gain/Loss - The actual “realized” gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical “unrealized” gain or loss on Open Positions that have been Mark-to-Market.
Purchasing Managers Index Services (France, Germany, Eurozone, UK) – Measures an outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Readings above 50 generally indicate expansion, while reading below 50 suggest economic contraction.
Q
Quote - An indicative market price, normally used for information purposes only.
R
Rally - A recovery in price after a period of decline.
Range - The difference between the highest and lowest price of a future recorded during a given trading session.
Rate - The price of one currency in terms of another, typically used for dealing purposes.
Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
Retail Sales – Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of variety of different types and sizes. This data gives a look into consumer spending behavior, which is a key determinant of growth in all major economies.
Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.
Risk - Exposure to uncertain change, most often used with a negative connotation of adverse change.
Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
Roll-Over - A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies.
The spot forex market is traded on a two-day value date. For example, for trades executed on Monday, the value date is Wednesday. However, if a position is opened on Monday and held overnight (remains open after 1700 ET), the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest. Trades with a value date that falls on a holiday will also incur or earn additional interest.
Round trip - Buying and selling of a specified amount of currency.
S
Settlement - The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
Simple Moving Average (SMA) – A simple average of a pre – defined amount of price bars. For example, a 50 period Daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied here.
Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days.
Spread - The difference between the bid and offer prices.
Square - Purchase and sales are in balance and thus the dealer has no open position.
Sterling - slang for British Pound.
Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49. Refer to Trading Handbook for FOREX.com’s Stop Loss Policy.
Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Swissy - Market slang for Swiss Franc.
T
Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Tick - A minimum change in price, up or down.
Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.
Trade Balance – Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.
Transaction Cost - the cost of buying or selling a financial instrument.
Transaction Date - The date on which a trade occurs.
Turnover - The total money value of all executed transactions in a given time period; volume.
Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.
U
UK Producers Price Index Input – Measures the rate of inflation experienced by manufacturers when purchasing materials and services. This data is closely scrutinized since it can be a leading indicator of consumer inflation.
UK Producers Price Index Output – Measures the rate of inflation experienced by manufacturers when selling goods and services.
UK Jobless Claims Change – Measures the change in the number of people claiming benefits over the previous month.
Unemployment Rate – Measures the total United States workforce that is unemployed and actively seeking employment, measured as the percentage of the labor force.
University of Michigan’s Consumer Sentiment Index – Polls 500 US households each month. The report is issued in a preliminary version mid – month and a final version at the end of the month. Questions revolve around individuals attitudes about the US economy. Consumer sentiment is viewed as a proxy for the strength of consumer spending.
Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains’ Losses become Profits/Losses when position is closed.
Uptick - a new price quote at a price higher than the preceding quote.
Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.
V
Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.
Variation Margin - Funds a broker must request from the client to have the required margin deposited. Term refers to additional funds that must be deposited as a result of unfavorable price movements.
The VIX or Volatility Index – The market’s expectation of 30 day volatility. Constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a measure of market risk and is often referred to as investor fear gauge.
Volatility - A measure of a market’s price movements over time.
W
Wedge Chart Pattern – Chart where price highs in an ascending wedge are incrementally less, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout, and descending wedges typically terminate with upside breakouts.
Whipsaw - slang for a highly volatile market where a sharp price movement is followed by a sharp reversal.
Wholesale Prices – Measures the change in prices paid by retailers for finished goods. Inflation will show up here earlier than in the retail headlines.
Y
Yard - Slang meaning a billion.
Forex Trading Glossary
A
Accrual - The portion of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of the deal.
Adjustment - Official action by change in internal economic policies to correct a payment imbalance or in the official currency rate or action by change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Appreciation - Currency appreciates when in response to market demand it strengthens.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better.
B
Balance of Trade - The value of a country’s exports minus its imports.
Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.
Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
Bear Market - A market distinguished by declining prices.
Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
Bid/Ask Spread - The difference between the bid and offer price.
Big Figure - The first two or three digits of a foreign exchange price or rate. Examples: If the USD/JPY bid/ask is 115.27/32, the big figure is 115. On a EUR/USD price of 1.2855/58 the big figure is 1.28. The big figure is often omitted in dealer quotes. The EUR/USD price of 1.2855/58 would be verbally quoted as “55/58″.
Book - In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
British Retail Consortium (BRC) Shop Price Index – Measures the rate of inflation at various surveyed retailers. This index only looks at price changes in goods purchased in retail outlets.
Bull Market - A market distinguished by rising prices.
Bundesbank - Germany’s Central Bank.
C
Cable - Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800’s.
Canadian Ivey Purchasing Managers (CIPM) Index – A monthly gauge of Canadian business sentiment issued by the Richard Ivey Business School.
Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Carry Trade – Refers to the simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and NZD/JPY.
Cash Market - The market in the actual financial instrument on which a futures or options contract is based.
Central Bank - A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
Cleared Funds - Funds that are freely available, sent in to settle a trade.
Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will ’square’ the postion.
Clearing - The process of settling a trade.
Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the ‘Asian Contagion’.
Collateral - Something given to secure a loan or as a guarantee of performance.
Commission - A transaction fee charged by a broker.
Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.
Construction Spending – Measures the amount of spending towards new construction, released monthly by the U.S. Department of Commerce’s Census Bureau.
Contract - The standard unit of trading.
Counter Currency - The second listed Currency in a Currency Pair.
Counterparty - One of the participants in a financial transaction.
Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
Cross Currency Pairs - A pair of currencies that does not include the U.S. dollar. For example: EUR/JPY or GBP/CHF.
Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc
Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD
Currency Risk - the probability of an adverse change in exchange rates.
Current Account – The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically is the key component to the current account.
Accrual - The portion of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of the deal.
Adjustment - Official action by change in internal economic policies to correct a payment imbalance or in the official currency rate or action by change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Appreciation - Currency appreciates when in response to market demand it strengthens.
Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better - An order to deal at a specific rate or better.
B
Balance of Trade - The value of a country’s exports minus its imports.
Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.
Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
Bear Market - A market distinguished by declining prices.
Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
Bid/Ask Spread - The difference between the bid and offer price.
Big Figure - The first two or three digits of a foreign exchange price or rate. Examples: If the USD/JPY bid/ask is 115.27/32, the big figure is 115. On a EUR/USD price of 1.2855/58 the big figure is 1.28. The big figure is often omitted in dealer quotes. The EUR/USD price of 1.2855/58 would be verbally quoted as “55/58″.
Book - In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
British Retail Consortium (BRC) Shop Price Index – Measures the rate of inflation at various surveyed retailers. This index only looks at price changes in goods purchased in retail outlets.
Bull Market - A market distinguished by rising prices.
Bundesbank - Germany’s Central Bank.
C
Cable - Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800’s.
Canadian Ivey Purchasing Managers (CIPM) Index – A monthly gauge of Canadian business sentiment issued by the Richard Ivey Business School.
Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Carry Trade – Refers to the simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and NZD/JPY.
Cash Market - The market in the actual financial instrument on which a futures or options contract is based.
Central Bank - A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
Cleared Funds - Funds that are freely available, sent in to settle a trade.
Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will ’square’ the postion.
Clearing - The process of settling a trade.
Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the ‘Asian Contagion’.
Collateral - Something given to secure a loan or as a guarantee of performance.
Commission - A transaction fee charged by a broker.
Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.
Construction Spending – Measures the amount of spending towards new construction, released monthly by the U.S. Department of Commerce’s Census Bureau.
Contract - The standard unit of trading.
Counter Currency - The second listed Currency in a Currency Pair.
Counterparty - One of the participants in a financial transaction.
Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
Cross Currency Pairs - A pair of currencies that does not include the U.S. dollar. For example: EUR/JPY or GBP/CHF.
Currency symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc
Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD
Currency Risk - the probability of an adverse change in exchange rates.
Current Account – The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically is the key component to the current account.
Foreign exchange market
The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies. [1]
The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.
In a typical foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market started forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of
* its trading volumes,
* the extreme liquidity of the market,
* its geographical dispersion,
* its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
* the variety of factors that affect exchange rates.
* the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
* the use of leverage
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements,[2] average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this. This approximately $3.21 trillion in main foreign exchange market turnover was broken down as follows:
* $1.005 trillion in spot transactions
* $362 billion in outright forwards
* $1.714 trillion in foreign exchange swaps
* $129 billion estimated gaps in reporting
The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.
In a typical foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market started forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of
* its trading volumes,
* the extreme liquidity of the market,
* its geographical dispersion,
* its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
* the variety of factors that affect exchange rates.
* the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
* the use of leverage
As such, it has been referred to as the market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements,[2] average daily turnover in global foreign exchange markets is estimated at $3.98 trillion. Trading in the world's main financial markets accounted for $3.21 trillion of this. This approximately $3.21 trillion in main foreign exchange market turnover was broken down as follows:
* $1.005 trillion in spot transactions
* $362 billion in outright forwards
* $1.714 trillion in foreign exchange swaps
* $129 billion estimated gaps in reporting
Is this a really secret of Stock Market
Dear Fellow Traders,
Everyone related to Stock Market is always focused on the goal of how much they can make buying/selling a stock, they forget to concern themselves with how much they risk loosing. Is it true that “The secret to great wealth in the stock market, is not big gains; its small losses”
Is this a strategy of keeping losses small? If we will win only 1 out of 3 times with our losers loosing 5% and our winners gaining 25% we can make extremely large profits. That’s do the math assuming that there is only 1 out of 3 winners. So if we make 9 trades of USD10,000 each in one month it means we will loose money on 6 and make money only 3. the 6 losers will cost us USD3000 (6*5% loss on each of USD 10,000 Trades) and the 3 winners will net us USD75000 (3*25% gain on each of USD 10,000 Trades) for a profit of USD 4,500
Regards
Everyone related to Stock Market is always focused on the goal of how much they can make buying/selling a stock, they forget to concern themselves with how much they risk loosing. Is it true that “The secret to great wealth in the stock market, is not big gains; its small losses”
Is this a strategy of keeping losses small? If we will win only 1 out of 3 times with our losers loosing 5% and our winners gaining 25% we can make extremely large profits. That’s do the math assuming that there is only 1 out of 3 winners. So if we make 9 trades of USD10,000 each in one month it means we will loose money on 6 and make money only 3. the 6 losers will cost us USD3000 (6*5% loss on each of USD 10,000 Trades) and the 3 winners will net us USD75000 (3*25% gain on each of USD 10,000 Trades) for a profit of USD 4,500
Regards
Euro Finding Offers Ahead of 1.5000; Kiwi Sell Recommendation Issued (Morning Slices)
The USD has been finding bids overnight, with the all currencies weakening against the Greenback, even after some managed to post fresh 2009 highs. Both Aussie and Kiwi are well off of their session and 2009 highs and the Euro has been struggling to stay above 1.4900.
MORNING SLICES
Fundys – The USD has been finding bids overnight, with the all currencies weakening against the Greenback, even after some managed to post fresh 2009 highs. Both Aussie and Kiwi are well off of their session and 2009 highs and the Euro has been struggling to stay above 1.4900. Many now however expect the major to test critical psychological barriers by 1.5000 in the very near-term. Data overnight was light with Swiss retail sales coming in weaker, while Eurozone trade also disappointed. Meanwhile, Sterling continued to shine, with the single currency building on impressive gains from Thursday. The more optimistic outlook on BoE monetary policy measures has been sourced as the primary driver for the relative strength. Elsewhere, Germany’s Wise Men have warned that the pace of economic recovery is “unsustainable” and that the country’s banks may face a fresh crisis over the next year. George Soros on the wires overnight saying that the world currency arrangements are fraught with danger and that global regulation is needed. The Yen has been offered on the day and underperforms with the currency potentially at risk for a pullback in the event of a major USD corrective rally which many have been anticipating. Analysts have cautioned that the DJIA move to 10,000 should be not be trusted, and this could prompt some renewed Yen buying as risk aversion sets in. Nevertheless, for the time being at least, US equity futures still point to a higher open, while commodities are slightly offered. Looking ahead, Canadian data takes center stage with the release of CPI (0.1% expected) due at 11:00GMT. US TICs data (30B expected) follows at 13:00GMT, with industrial production (0.2% expected) and capacity utilization (69.8% expected) shortly after at 13:15GMT. Michigan confidence (73.3 expected) caps things off for the week at 14:00GMT.
Techs - EUR/USD Despite the USD bid tone in overnight trade, the pair remains confined to an inside day and a break above 1.4970 or back below 1.4840 will be required for clearer directional bias. Above 1.4970 exposes direct test of psychological barriers at 1.5000, while back under 1.4840 could signal that a top is in place. USD/JPY continues the recovery out from 88.00 with gains extending thus far into Friday beyond 91.00. Key levels to watch over the coming session come in by 92.00 and 90.50. GBP/USD The impressive rally of the past 24 hours has stalled out by the 100-Day SMA and could be looking to roll back over. Ultimately, any additional rallies should be well capped ahead of 1.6500, while back below 1.6250 should accelerate declines. USD/CHF Trying to put in a bullish reversal day after bottoming out by 1.0115 on Thursday. However, a break back above 1.0200 will be required to take the pressure off of the downside. Back under 1.0115 exposes direct retest on 1.0000.
Flows – US investment house buying Gbp/Usd. UK clearer selling Eur/Gbp. US prime name buying Usd/Jpy. Model funds buying Aussie and Kiwi on dips.
Trade of the Day – Nzd/Usd: While daily studies are showing overbought, weekly studies are showing even more overbought and look severely stretched at current levels. The surge to 0.7500 directly coincides with the 78.6% fib retracement off of the major 2008 high-lows and as such, we like the idea of selling here in anticipation of a major corrective pullback. The trend has been intense so we will continue to trade cautiously and only recommend selling on an overdone intraday move. Look for stops above 0.7500 to be cleared with only limited upside follow through seen beyond the figure, before a very immediate and sharp reversal. STRATEGY: SELL @0.7510 FOR AN OPEN OBJECTIVE; STOP 0.7660. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NEW YORK CLOSE ON FRIDAY. POSITION SIZE SHOULD BE 3X EQUITY.
P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.
Sunday, October 4, 2009
Wild Card Gold 7 Sep 2009
Monday, 7 Sep 2009
Dollar Expects Low Volatility Today
Today is a quiet news day for the U.S. and Canada, as there are no economic data releases on the calendar today. However, Britain and Euro-zone appear to be releasing the bulk of today's news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations
The Wild Card
Gold Gold
prices rose significantly in the last week and peaked at $992.65 for an ounce. However, the daily chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
Dollar Expects Low Volatility Today
Today is a quiet news day for the U.S. and Canada, as there are no economic data releases on the calendar today. However, Britain and Euro-zone appear to be releasing the bulk of today's news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations
The Wild Card
Gold Gold
prices rose significantly in the last week and peaked at $992.65 for an ounce. However, the daily chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
The Wild Card Oil 2 Sep 2009
The Wild Card Oil 2 Sep 2009
Wednesday, 2 Sep 2009
The USD Benefits as Wall Street Slides
The greenback firmed on Tuesday as share prices fell, prompting investors to shed perceived riskier currencies. Despite better than expected numbers from the Institute for Supply Management, shares on Wall Street showed only muted enthusiasm to the data and quickly lost ground, lifting the U.S dollar, which has tended to be used as a safe haven against losses in equities. Ahead of the U.S. jobs data later today, traders said players were anxious about any negative surprises. As the market has become less sensitive to positive surprises from the U.S economic data, the effect of any weak figures would be bigger than the effect of any positive numbers.
The Wild Card
Oil
Crude Oil prices are once again dropping, and it is currently traded around $68.60 a barrel. And now, the 4 hour chart's Slow Stochastic is giving bullish signals, indicating that Oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.
Wednesday, 2 Sep 2009
The USD Benefits as Wall Street Slides
The greenback firmed on Tuesday as share prices fell, prompting investors to shed perceived riskier currencies. Despite better than expected numbers from the Institute for Supply Management, shares on Wall Street showed only muted enthusiasm to the data and quickly lost ground, lifting the U.S dollar, which has tended to be used as a safe haven against losses in equities. Ahead of the U.S. jobs data later today, traders said players were anxious about any negative surprises. As the market has become less sensitive to positive surprises from the U.S economic data, the effect of any weak figures would be bigger than the effect of any positive numbers.
The Wild Card
Oil
Crude Oil prices are once again dropping, and it is currently traded around $68.60 a barrel. And now, the 4 hour chart's Slow Stochastic is giving bullish signals, indicating that Oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.
Turtle trading
Well I've just finished reading the turtle trading book that was written by one of the turtle, Curtis Faith, and I have to say it was excellent.
From doing a lot of reading and looking at Curtis's forum etc...it appears that the initial system they were using was a typical breakout using an ATR type system rather than a typical trend following program as such. Its clear from doing a little back testing over the past 5 years that this specific turtle system would have had a fairly tough run.
Luckily, in Curtis's book he also documents the result of some of his backtesting of over turtle minded systems and its one of these systems that I propose to test.
So i'm going to run a little experiment here and see what sort of results I get from being a purely systems trader using a Bollinger Band Based entry and exit.
At this stage,i wont give you the exact recipe (buy curtis's book) although its pretty simple and basic, But I will be posting my trades as I make them. So hopefully it will be basically live.
I'm using marketiva to trade and I will be starting with around 112usd. Not very much but enough for a test. My risk on any give trade wiill be 1% of funds with a max risk of 2N. I will also likely be trading medium term trades during New York Session.
My ultimate goal is to experience gains of around 8% per month.
So thats it...follow along with me as I either burn my tiny mini account or actually start turning a discipline into a profitable trading system.
From doing a lot of reading and looking at Curtis's forum etc...it appears that the initial system they were using was a typical breakout using an ATR type system rather than a typical trend following program as such. Its clear from doing a little back testing over the past 5 years that this specific turtle system would have had a fairly tough run.
Luckily, in Curtis's book he also documents the result of some of his backtesting of over turtle minded systems and its one of these systems that I propose to test.
So i'm going to run a little experiment here and see what sort of results I get from being a purely systems trader using a Bollinger Band Based entry and exit.
At this stage,i wont give you the exact recipe (buy curtis's book) although its pretty simple and basic, But I will be posting my trades as I make them. So hopefully it will be basically live.
I'm using marketiva to trade and I will be starting with around 112usd. Not very much but enough for a test. My risk on any give trade wiill be 1% of funds with a max risk of 2N. I will also likely be trading medium term trades during New York Session.
My ultimate goal is to experience gains of around 8% per month.
So thats it...follow along with me as I either burn my tiny mini account or actually start turning a discipline into a profitable trading system.
S&P hits the lowest point of 12 years
It's very easy to correct this. 1 Billion at most.
CDO Derivatives have been invisible for years. No one knows what they are worth. Because they are not on an exchange, and publicly transparent. That is what these 'toxic assets' really are. CDO derivatives of all makes and models. Companies hold them on their balance sheets, but no one really knows what they are worth. They're not tracked. Someone quite literally - invents a number, and that's what everyone else is supposed to believe.
And the transparent markets have only one choice. Find out the truth. So in the face of a lie, risk pricing will assert the truth. That's putting the transparent markets in the role it's always held. Find the truth. No matter how destructive and horrendous that process is. If you try to hide it, the method of seeking out the truth through free market forces will be even more destructive.
I'll tell you when I'll start dispersing my 86% cash position to investing again? When I hear:
"We are going to take a billion dollars, and create a derivatives exchange for any sort of derivative, that is not currently tracked, day by day, on an exchange. Packaged up debt obligations? They must now adhere to new accounting regulations and be tracked, every single day, on an exchange where their value can be traded, or bought and delivered by anyone that is adequately funded. Anyone who currently holds a CDO or other debt derivative, has eight months to de-leverage according to the new accounting standards.
Oh, and by the way? Everyone that currently has a mortgage now has a 4.5% rate on their mortgage. Congratulations. Everyone else? Well, you get the best rate you can find, you're on your own. Banks start screaming about price fixing the rate? Well ... guess you guys shouldn't have been overleveraged huh?
Oh, and as an added little cookie? From this day forward? Any financial instrument that is invented, or can be devised of any type, anywhere that is either bought or sold, OTC or not? 11:1 leverage. Anything greater than that will result in a penalty of ..."
I'll leave the rest of that statement to the retributive imaginative minds of those who have suffered by ignoring so many of us who have called for a public CDO exchange for YEARS, and were told: Nah, we don't need that. Everything is fine. Trust us. If I heard the above statements? I'd be hopeful. Maybe even optimistic.
Fix the invisibility of the OTC derivatives.
Fix the over-leverage problem.
Fix the housing problem.
Very cheap, and it'd be very effective. Do that, and the problem can start working on an economic resolution and an economic bottom. Until then? Expect more deflation across the board. They are facing a hyper-deflationary spiral, the likes of which mankind has never seen (Anyone want to go back to the days of earning $1.00 an hour? A day?), and they still refuse to put the OTC derivatives on a transparent exchange.
CDO Derivatives have been invisible for years. No one knows what they are worth. Because they are not on an exchange, and publicly transparent. That is what these 'toxic assets' really are. CDO derivatives of all makes and models. Companies hold them on their balance sheets, but no one really knows what they are worth. They're not tracked. Someone quite literally - invents a number, and that's what everyone else is supposed to believe.
And the transparent markets have only one choice. Find out the truth. So in the face of a lie, risk pricing will assert the truth. That's putting the transparent markets in the role it's always held. Find the truth. No matter how destructive and horrendous that process is. If you try to hide it, the method of seeking out the truth through free market forces will be even more destructive.
I'll tell you when I'll start dispersing my 86% cash position to investing again? When I hear:
"We are going to take a billion dollars, and create a derivatives exchange for any sort of derivative, that is not currently tracked, day by day, on an exchange. Packaged up debt obligations? They must now adhere to new accounting regulations and be tracked, every single day, on an exchange where their value can be traded, or bought and delivered by anyone that is adequately funded. Anyone who currently holds a CDO or other debt derivative, has eight months to de-leverage according to the new accounting standards.
Oh, and by the way? Everyone that currently has a mortgage now has a 4.5% rate on their mortgage. Congratulations. Everyone else? Well, you get the best rate you can find, you're on your own. Banks start screaming about price fixing the rate? Well ... guess you guys shouldn't have been overleveraged huh?
Oh, and as an added little cookie? From this day forward? Any financial instrument that is invented, or can be devised of any type, anywhere that is either bought or sold, OTC or not? 11:1 leverage. Anything greater than that will result in a penalty of ..."
I'll leave the rest of that statement to the retributive imaginative minds of those who have suffered by ignoring so many of us who have called for a public CDO exchange for YEARS, and were told: Nah, we don't need that. Everything is fine. Trust us. If I heard the above statements? I'd be hopeful. Maybe even optimistic.
Fix the invisibility of the OTC derivatives.
Fix the over-leverage problem.
Fix the housing problem.
Very cheap, and it'd be very effective. Do that, and the problem can start working on an economic resolution and an economic bottom. Until then? Expect more deflation across the board. They are facing a hyper-deflationary spiral, the likes of which mankind has never seen (Anyone want to go back to the days of earning $1.00 an hour? A day?), and they still refuse to put the OTC derivatives on a transparent exchange.
99% Accuracy Manual Trading System
99% Accuracy Manual Trading System
Forex Bible Manual Trading System--What makes this software so special?
* It's the only trading system that actually has the ability to upgrade itself according to the changes that occur in the market. This is very important, because the market is changing constantly and any static algorithm will certainly become outdated sooner on later.
*Profit in 15M, 30M, 1H time frame to adapt to different types of traders.
*Its performance is really impressive: live $700 to $59698.91 in 23 days, live 3,100 to $64841.68 in 25 days, no drawdown, no loss.
* You can start with as little as $100.
* It will only take you 30 seconds to download, install and start trading with Forex Bible System.
* This program has a low stop loss system to minimize risk.
* It offers full service support for life and unlimited access to new trading indicators.
* Their staff is extremely helpful and will respond promptly to all your questions.
* This tool can work worldwide, so it doesn't matter where you live.
* You don't have to know anything about the forex markets, because it will do all the work.
www.forexbiblesystem.com
Forex Bible Manual Trading System--What makes this software so special?
* It's the only trading system that actually has the ability to upgrade itself according to the changes that occur in the market. This is very important, because the market is changing constantly and any static algorithm will certainly become outdated sooner on later.
*Profit in 15M, 30M, 1H time frame to adapt to different types of traders.
*Its performance is really impressive: live $700 to $59698.91 in 23 days, live 3,100 to $64841.68 in 25 days, no drawdown, no loss.
* You can start with as little as $100.
* It will only take you 30 seconds to download, install and start trading with Forex Bible System.
* This program has a low stop loss system to minimize risk.
* It offers full service support for life and unlimited access to new trading indicators.
* Their staff is extremely helpful and will respond promptly to all your questions.
* This tool can work worldwide, so it doesn't matter where you live.
* You don't have to know anything about the forex markets, because it will do all the work.
www.forexbiblesystem.com
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