Month: July 2010

By Jonathan Dayan – Every activity you’ll ever try supplies its own list of shameful errors and online financial trading is no different. They’re the mistakes you make which are too obvious or too embarrassing for you to tell anyone else about. They haunt you in your sleep and they hurt you in your wallet. We’ve all made at least a few of them and none of us like to talk about it. But in the interest of keeping these sloppy mistakes under wraps in the future, here named and shamed are the classic mistakes traders make when trading Forex, indices and commodities online. And don’t worry we all make them; regardless of whether we’re starting out or we’ve been in the market long enough to know better.

1. What’s In A Name? – Confusing “Ask” And “Bid”

It’s the mistake we don’t own up to but getting confused between “Bid” (that’s buy … I think) and “Ask” (sell) whether you’re trading online or through the phone is all too common. “Why couldn’t they just name them up and down” is what you may start wondering if you make this costly error. Because in Forex trades a pair of currencies is being traded every time – one currency bought and one currency sold simultaneously – it’s the error that’s almost bound to creep in at some point or other.

What to do when it happens to you: exit the position and learn better for next time.

What to say to your friends: absolutely nothing.

2. “It Can Also Go Down?” – Misunderstanding Margin

Margin, leverage, leverage, margin: sometimes you’re only completely sure about what it all means when one of them is at $0, the other is at 400x and you find yourself wishing it was the other way around. Yes, for the all time future avoidance of doubt, your margin will decline if a trade goes against you and yes you should always keep enough money in your account to cover the scale of the positions you have open – the more leveraged your positions, the more money you’ll need.  Think of margin, the funds in your account and leverage as three friends in a field – the closer they are together the better everyone gets along, the further apart they move the more quickly your likely to see the friendship fall apart; and realize to your sadness that all three are gone.

What to do when it happens to you: register for the eToro Forex course.

What to say to your friends: it was a vital experiment within my long term strategy.

3. Oops I Did It Again – Forgetting Your Stop Loss When You’re Trading On The Fly

Few mistakes can be more common or more costly than this one. In the middle of a volatile trading session – with action happening all around you – it’s easy to neglect your stop loss but it can be a fatal mistake. Once they’re opened, most brokers will keep your trades open until you close them, so if you exit your platform or otherwise forget a trade and leave it to run on, the results can devastate your account. Even if you’re not so unfortunate, keeping unlimited positions open when you’re trading under heavy leverage can very quickly eat into your funds if the market moves against you suddenly. Unless you’re a serious scalper, think twice about opening a position without a stop loss. Never forget that acts of God and acts of technology conspire all too often to leave your account at risk.

What to do when it happens to you: blame it on lack of sleep and know better for next time.

What to say to your friends: stop loss is for sissies (and so is making money)

4. Too Much Of A Good Thing – Getting Drunk On Leverage

Nothing feels so much like easy money as trading under leverage when you’re starting out. Instead of investing with the $500 or $1000 which you thought you had available, suddenly you’re able to start making deals worth many hundreds of $1000’s. That kind of power can easily go to a trader’s head: and all too often it does. Getting intoxicated with leverage is a risky business. Keeping your leverage within a reasonable range – of between 10 to 50x for the majority of positions you enter will help you develop a more reliable feel for the trading market. It should also shield you from the short sharp market shocks which often leave the 400x leverage trader with nothing left to hold on to but his memories.

What to do when it happens to you: remind yourself you’re not demo trading – it’s time to trade sensibly

What to say to your friends: it was only $—– (fill in as appropriate)

5. How To Lose Money And Alienate Profits – Setting Your Stop Loss Too Close For Comfort

As we’ve already discussed stop loss (and also take profit) orders are really important for effective and secure Forex and financial market trading. However, even these faithful tools can let you down in a crunch if you haven’t yet mastered how to use them. The most common error traders fall in to with stop loss limits is placing them to close to their entry points. At first glance this strategy seems to make sense because it offers a way for you to protect your account from unfavourable market movements. In practice, however, the markets rarely run smoothly and even the most favourable trend on an asset which you’re trading will see moments of reversal within the wider positive trend. To avoid you’re trades closing prematurely at a loss make sure your stops are set a fair distance away from the open rate – a few pips isn’t going to do it. Alternatively, employ a trailing stops approach where you move your stop loss level forward or backwards in-line with the direction of trade.

What to do when it happens to you: re-examine your trading strategy. If you’re anxious to contain your losses consider reducing the leverage in your trades instead of shortening your stops.

What to say to your friends: I may not have made money but I didn’t lose that much

If reading through this catalogue of errors has left you feeling ready for a Forex refresher course ask your Forex broker what they can offer or visit the eToro website www.eToro.com for more Forex hints and tips.

By Greg Holden – The euro has been falling since Friday against most of its currency counterparts, but few traders are concerned since many indicators are pointing toward an impending correction. As can be seen below, the EUR/JPY has reached the lower border of a steady bullish channel and many of the corresponding indicators appear to be anticipating a bullish correction over the remainder of the day.

– The chart below is the EUR/JPY 4-hour chart provided by ForexYard. The indicators used are the Stochastic (slow) and Williams Percent Range.

– Point 1: on the chart below you can see the bullish channel lines drawn in red. The price has recently fallen to touch the lower border of this channel and may experience a technical correction.

– Point 2: the Stochastic (slow) on this chart appears to be providing us with a fresh bullish cross, indicating that the next major movement may be in an upward direction.

– Point 3: the Williams Percent Range has the price indicator far below the -80 mark, indicating the price is over-sold and should see some upward pressure.

EUR/JPY – 4-Hour Chart

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The U.S currency dropped to its weakest level in 2010 against the Japanese Yen as signs the U.S. economic recovery is losing momentum supported speculation that the Federal Reserve will keep borrowing costs low for the rest of the year. The USD also declined versus the EUR for the first time since May as a gauge of U.S. consumer confidence dropped more than economists expected and corporate revenue missed analyst forecasts.

Economic News

USD – Dollar Weakens on Signs of Economic Slowdown

The U.S Dollar fell the most against the EUR in 14 months and dropped to the lowest level this year versus the Yen as economic reports added to evidence that the U.S. recovery is losing momentum.

The greenback touched a level weaker than $1.30 versus the European currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth.

On Friday, a private survey showed U.S. consumer sentiment weakened in early July to an 11-month low and capped a week which saw U.S. data on the softer side, raising questions about the sustainability of the U.S. recovery.

Investors are closely watching the USD/JPY for the possibility of the greenback dropping to a 15-year low by breaching the November 2009 trough of 84.00 yen. Analysts said with U.S. yields heading lower, the Dollar could break past support around its 7 month low of 86.25 yen in the next few days.

EUR – EUR May Erase Gains on Bank Stress Tests

The European currency rose for a 3rd straight week against the U.S Dollar ahead of partial results of stress tests on the region’s banking system, which are due on July 23. The 16 nation currency has surpassed $1.30 on Friday for the first time since May and traded around $1.2950.

The EUR has rallied 8.9% versus the Dollar since reaching a 4 year low of $1.1877 on June 7 as concern eased that Europe’s sovereign-debt crisis would undermine the region’s economic recovery.

However, the EUR may reverse its recent advances against the U.S Dollar given the slim likelihood of a very positive surprise from European bank stress tests this Friday, analysts said. European regulators will be examining the strength of 91 banks to determine if they can survive potential losses on sovereign bond holdings. The European currency is unlikely to fall past $1.20 unless there is a major negative surprise given that U.S. economic growth shows signs of slowing down.

JPY – Yen Rises Towards Year’s High

The Japanese Yen rose toward its strongest level this year against the U.S Dollar as signs the U.S. economy is losing momentum added to speculation that the Federal Reserve will keep interest rates at almost zero this year. The Yen also rose against the Dollar as falling U.S. yields continued to weigh on the U.S. currency, with traders targeting stop-loss orders placed under 87.00 Yen.

Japan’s currency gained versus all 16 of its major counterparts and rose toward the strongest level this year. The Japanese currency traded at 87.20 per USD from 87.40 yesterday, after climbing to 87.17, approaching this year’s high of 86.97 set on July 1.

Crude Oil – Crude Falls below $76 On Poor U.S. data

Crude Oil prices fell below $76 a barrel in early Asian trading Monday, extending the previous session’s decline on concern about the U.S. economic outlook after data showed consumer sentiment fell to a near one-year low.

However, analysts said marginal slide in Oil prices shows that Crude was receiving ample support at above $74 a barrel, thanks to bullish inventory reports that showed large draw downs in U.S. Crude stockpiles over the past three weeks.

Technical News

EUR/USD

Following the prolonged upward movement the pair has experienced recently, it appears a bearish correction may be imminent. The Relative Strength Index on the 8-hour chart is currently in overbought territory, as is the Stochastic Slow on the daily chart. Traders are advised to go short with tight stops today.

GBP/USD

Mixed technical signals indicate that no clear direction for this pair is presenting itself at this time. While the Stochastic Slow on the 4-hour chart indicates the pair may experience upward movement later today, the Relative Strength Index on the 8-hour chart shows the opposite. Traders may want to take a wait and see approach for this pair today.

USD/JPY

Most technical indicators are showing this pair trading in oversold territory, indicating that an upward correction will likely occur today. The Stochastic Slow on the daily chart shows a bearish cross forming, and the Relative Strength Index on the 8-hour chart supports the theory that upward movement is forthcoming. Going long may be the preferred strategy today.

USD/CHF

Practically all technical indicators show the pair currently trading in neutral territory, with no clear direction at this time. These include the Stochastic Slow and Relative Strength Index on the 8-hour and daily charts. Traders are advised to take a wait and see approach for this pair today.

The Wild Card

Hang Seng Index

The Slow Stochastic on the 8-hour chart shows a bearish cross forming, indicating that upward movement could occur in the near future. The Relative Strength Index on the 4-hour chart supports this theory. CFD traders are advised to go long with tight stops today.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By eToro – Equity markets were hammered as a combination of weaker than expected earnings and a disappointing consumer sentiment index, hurt investor sentiment. Bank of America’s 8% drop led financials lower, erasing the S&P 500 index’s weekly gains amid concerns the economy is expanding too slowly to spur corporate growth. Adding to the jitters was a morning report that showed consumer sentiment dropped to its worst level since March 2009. The S&P 500 lost 13 points or 1.3%.

Click here for the full review

Forex Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

USDCAD bounced strongly to as high as 1.0523 last week. Further rise towards 1.0676 previous high is still possible later today, and pullback would more likely be seen before breaking above this level. Key support is now at 1.0500, a breakdown below this level will indicate that a cycle top has been formed on 4-hour chart, then another fall towards 1.0000 could be seen. If 1.0676 key resistance gives way, next target will be at 1.0852 (May 25 high).

Daily Forex Forecast

GBPUSD broke above the falling price channel on daily chart and is facing 1.5522 key resistance. Minor consolidation would more likely be seen next week before breaking above this level and the trading range would be within 1.4940-1.5470. However, another rise towards 1.5522 key resistance is still possible after consolidation, and a break above this level will indicate that the long term downtrend from from 1.7042 has completed at 1.4230 already, then the following uptrend could bring price to 1.8000 area.

For long term analysis, GBPUSD might be forming a cycle bottom at 1.4230 level on weekly chart. Key resistance is at 1.5522, a break above this level is needed to confirm the cycle bottom.

Weekly Forex Analysis

ood day men and ladies of forex! From my last post about the Cable or the GBPUSD pair back on July 2 (kindly see it here), the have continued to trek along an ascending channel. After it met some resistance at around 1.5200, it fell back only to bounce back again from the channel’s support. It eventually broke above 1.5200 and continued to race past 1.5400. Recently, it marked a new 2-month high at 1.5472. Though with the stochastics already turning south and a likely wall just at the nearby resistance of the channel, the pair could soften for awhile before moving up again. If it weakens, then its likely support would be somewhere around 1.5200. But when it bounces north, it could rise until it encounters some selling pressure at 1.5500.

The pound continued to pound the greenback as the latter continued to show some broad-based weakness against the majority of the other majors. Despite Google’s weak second quarter showing, the demand for the non-dollar currencies remained high. But today, its rise was a bit cut off in spite of the stellar numbers by General Electric, Citigroup and Bank of America.

for today, the pound could extend its rally against the USD if the University of Michigan Consumer sentiment index for July prints a better-than-expected score. The index is seen to have fallen to 74.2 from 76.0. Though given the recent string of rallies in the global markets, the investors sentiment could have picked up during the period. Watch out for the its release today at 1:55 om GMT.

More on LaidTrades.com …

In my last post about the EURCAD pair several days ago (July 9), I mentioned that the Loonie could be preparing for a revolt against the Canadian dollar. Back then, the pair already broke its downtrend line and appeared to be in the phase of forming the right shoulder of an inverted head and shoulders pattern. However, the pair did not fall back down to the bottom of the left shoulder. Instead, it found some support at 1.3000 before springing back up again. And just recently, the pair finally broke out from the mentioned formation. Having said that, this move could now be a reversal that could send the euro back towards 1.4500 against the Loonie. A break below the neckline again could push it back down to 1.3000.

Fundamentally, today’s worse-than-expected drop in the University of Michigan Consumer Sentiment Survey for July (66.5 versus 74.2) caused the investors to dispose the more favored currency, the Loonie, vis-a-vis the euro. Though the projected 0.25%  increase (to 0.75% from 0.50%) in Canada’s interest rate this coming Tuesday (July 20) could propel the CAD higher over the euro again. Still, given the unexpected slide in June retail sales of -1.2%, hence a drop in business activity could be enough for the BOC to pause its rate hike. If this happens, then the Loonie would surely weaken as the market already expects that it would raise it. Stay tune!

More on LaidTrades.com …

By CountingPips.com

Canada’s Leading Indicators rose for the 13th straight month in June, according to a report from Statistics Canada today. The Leading Indicator Index, which is a measure of future economic activity, increased by 1.0 percent in June following a revised increase of 1.1 percent in May. The index has now increased every month going back to June 2009.

Eight out of ten of the measured sectors that make up the leading indicator index showed increases for the month. Durable goods orders was the leading sector with a gain of 2.3 percent while the money supply and average workweek both increased by 0.8 percent. The US Conference Board indicator rose by 0.5 percent and business & personal services employment advanced by 0.4 percent for the month.

The housing index indicator was the largest negative contributor for the month with a decrease by 1.9 percent while other durable goods sales fell by 0.5 percent.

By Dan Eduard – Over the last month and a half, USD/SEK has been stuck in a prolonged downward trend. The U.S. dollar has been bearish across the board, but against the SEK, it has seen particularly heavy losses. Since June 7th, the pair has tumbled an astounding 8000 pips. As we will see, technical data will indicate that an upward correction is finally set to take place.

We will be looking at the daily chart for USD/SEK, provided by ForexYard. The technical indicators we will analyze are the Bollinger Bands, Stochastic Slow and Relative Strength Index (RSI).

1. The pair is currently trading along the lower band, indicating that an upward correction is due to take place. Furthermore, the Bollinger Bands are beginning to widen, spreading further apart. This typically means that a price shift is likely to take place.

2. A cross in the Stochastic Slow is currently forming below the lower support line. This is typically seen as a clear indicator that a bullish correction is imminent.

3. Looking at the RSI, we can see that it is well below the lower support line. Traders can take this as a clear sign that upward movement is likely to take place, further supporting our original theory.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.