Month: September 2010

By Warren Seah – Forex money management has long been a topic shun by many retail traders due to being restrictive to the vast potential of the profits one may gain. It is true that there is a huge potential to gain the market if one is willing to risk some capital but that may be only just an once in a while moment. In order to make consistent and profitable trades it takes just more than just plonking in huge amount of capital into a single trade. It requires forex money management skills to do so.

Ask yourself these few questions to begin with:

1. Do you always lose more than what you are comfortable with in a single trade?

2. Do you always enter more trades than usual when you have just lost a trade?

3. Do you have a threshold of how much you can afford to lose before your account goes bust?

If you have answered Yes to any of the above questions, it is time to re-look into your trading plan and you may want to add forex money management to your planning.

For beginners who are looking to earn big bucks off the market, you are normally eager for huge success in a short period of time but trust me it is also the surest way to burn your account in the shortest time.

It is always advisable to start small with risking amount of money that you are comfortable to the point that should you lose this in a trade, it will not upset your life balance. For starters, risking 1%-2% per trade is good. It allows you to build up your confidence slowly in trading and when you are ready, you can afford to risk more but I would suggest no more than 5% per trade.

There are simple ways to perform money management to your trades which you can explore:

1. Having equity stop in place

-You decide how low you can go before you go crazy over the losses

2. Have a trading time frame

-Trade at times when you are absolutely at ease, cause you won’t want to get emotionally involved with your trade.

3. Don’t over-trade

-Overtrading causes you to lose your focus and putting your money into more trades that you could not afford more to lose

Always keep check of your trading behavior during trades and do a reflection upon your actions after your trades. Document your trading behaviors and rectify them as soon as possible. Forex money management practices are to be encouraged if you want your trading journey to be more successful and consistent.

About the Author

Warren Seah

“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”

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By James Woolley – A lot of the major financial institutions take very long-term positions on the various different currency pairs, but amongst individual traders there are very few traders who trade this way. So why is this?

Well I think the main reason is because people who trade for themselves from the comfort of their own home simply do not have the patience to hold on to these long-term trades. Although you can potentially make huge profits from riding these long drawn out trends (often totalling several thousand points), the majority of traders prefer the excitement of day trading or prefer to place trades that last one or two days at the most.

Another reason why many people are put off of the idea of long-term trading is because they do not know when to exit a position. This can be a real problem because it you call it correctly, do you bank a profit of 500 points, for instance, or do you try and hold on for another month or two in the hope that it falls another 2000 points? If you hold on, the price could quite easily bounce back and wipe out your current 500 point profit.

This is a real dilemma and is one reason why many traders prefer to trade short-term charts. If they get it wrong they know that another trading opportunity will be along very soon. However this isn’t always the case when you trade the long-term charts such as the daily or weekly charts, for example, because you may be waiting months for the next decent set-up.

Finally there is one other reason why people stick to short-term trading and that’s because if you trade the daily or weekly charts, you obviously have to employ pretty large stop losses in order to give the position a chance to unwind. You can’t target gains of 500, 1000 or 2000 points, for instance, if you use a stop loss of 20 or even 50 points, because this simply isn’t big enough. So because you need to use a larger stop loss, you obviously need a decent amount of capital to trade with otherwise one loss could destroy your account.

So to summarize, although I believe that long-term trading is the easiest and most profitable way to trade the forex markets, I accept that it’s not for everyone. For a start you need a decent amount of capital behind you, and you also need a great deal of patience and discipline in order to extract maximum profits from these long-term trades.

About the Author

Click here for a complete list of forex brokers and to read a full review of Forex Mastery.

By Cedric Welsch – Finding a forex trading system that works will require a little bit of knowledge and first-hand experience with forex markets and trading. Way it works is that traders can use the forex market to buy and sell currency pairs. The profit comes from currency fluctuations that create a difference in the relative values of the currency pair.

The key to it is to know when and where the fluctuations and long-term currency changes will come. For this, forex traders have developed systems that use strategies based on multiple indicators. There is a large range of possibilities to construct or buy a trade system.

The trader first has to decide on which strategy to use. Trading systems have built in strategies that depend on a combination of indicators. It is even possible to build one, and forex trading courses usually teach traders how to do this. But it’s a bit like reinventing the wheel, when one needs to buy a car.

It’s also difficult to point towards a forex trade system that works more efficiently than the rest. There are new ones that pop up in the market every other day. Traders who haven’t used one previously and are having difficulties sorting out the good ones from the rest should visit a few forex review sites.

It’s also a good idea to try out the system first, in case the vendor offers a free trial. If not, the least that can be done is to study all the historical data related to the system. Find out the average pip gain the system can rack up in a week or a month for a specific number of trades.

Before buying into a system, it might be advisable to learn a little more about how the system is built and how it works. Building one from scratch is not strictly necessary in order to know how to use it, but it does help. When one knows how the system in question is able to combine indicators to execute the trading strategy, it makes it easier to extract the most from the system.

Some traders are able to fine tune the entire process so that the system can be automated and is able to enter and exit trades without any supervision. The computer is left on, the system plugs into the trading platform, and will execute trades 24/7. To summarize, before starting to look around for a forex trade system that works, try to find out how these systems work.

About the Author

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AUDUSD broke above 0.9404 (2009 high). Further rise is still possible next week and next target would be at 0.9600 area. Support is at 0.9240, as long as this level holds, uptrend from 0.8771 could be expected to continue. However, a breakdown below 0.9240 level will indicate that a cycle top has been formed on daily chart, then pullback to the lower border of the rising price channel could be seen to follow.

For long term analysis, AUDUSD has formed a cycle bottom at 0.8066 level on weekly chart. Rise towards 0.9849 (2008 high) is still possible in a couple of weeks.

Weekly Forex Forecast

EWI’s Senior Tutorial Instructor Jeffrey Kennedy gives you practical lessons — free

By Elliott Wave International

There are two camps of market analysts out there: the fundamental camp and the technical one. Fundamental analysts look at things like the GDP, unemployment, interest rates, etc. to make logical assumptions about where the stock market is going.

Technical analysts use none of that. They look at the market’s internals to gauge the trend: things like momentum, trend channels — and yes, Elliott wave patterns.

And this is your free chance to learn how they do it.

We’ve put together a free 54-page Club EWI resource for you, “The Ultimate Technical Analysis Handbook.” Below is a short excerpt from chapter 3. Enjoy! (For details on how to read this free report in full, look below.)

The Ultimate Technical Analysis Handbook
Chapter 3: How To Integrate Technical Indicators Into an Elliott Wave Forecast
By EWI’s Senior Tutorial Instructor Jeffrey Kennedy

I love a good love-hate relationship, and that’s what I’ve got with technical indicators. Technical indicators are those fancy computerized studies that you frequently see at the bottom of price charts that are supposed to tell you what the market is going to do next (as if they really could). The most common studies include MACD, Stochastics, RSI and ADX, just to name a few.

I often hate technical studies because they divert my attention from what’s most important — PRICE. … Nevertheless, I have found a way to live with them, and I do use them. Here’s how: Rather than using technical indicators as a means to gauge momentum or pick tops and bottoms, I use them to identify potential trade setups.

Out of the hundreds of technical indicators I have worked with over the years, my favorite study is MACD (an acronym for Moving Average Convergence-Divergence). … Even though the standard settings for MACD are 12/26/9, I like to use 12/25/9 (it’s just me being different). An example of MACD is shown in Figure 6 (Coffee).

The simplest trading rule for MACD is to buy when the Signal line (the thin line) crosses above the MACD line (the thick line), and sell when the Signal line crosses below the MACD line. Although many people use MACD this way, I choose not to… I like to focus on different information that I’ve observed and named: Hooks, Slingshots and Zero-Line Reversals. Once I explain these, you’ll understand why I’ve learned to love technical indicators. …

By CountingPips.com

U.S. Consumer Prices increased for the second month in a row as energy price increases helped push the index higher, according to a report released today by the U.S. Department of Labor. The Consumer Price Index, a key measurement of inflation, increased by 0.3 percent in August following an increase of 0.3 percent in July. Today’s data matched economic forecasts that were expecting a 0.3 percent increase. Consumer prices had been in decline for three straight months before July.

The annual rate of consumer prices rose by 1.1 percent when compared to August 2009 following an increase in July by 1.2 percent. Rising energy prices were a significant contributor in the increased inflation as the report showed that energy prices rose by 2.3 percent and gasoline prices increased by 3.9 percent for the month. Food prices rose by 0.2 percent in August after a 0.1 percent decline in July.

The core inflation reading, excluding volatile food and energy prices, was flat for the month and below the market forecasts expecting a 0.1 percent gain. The annual rate of core inflation increased by 0.9 percent for August following an increase of 0.9 percent in July.

US Dollar on defensive in Forex Trading

The U.S. dollar has been mostly lower in forex trading today against the other major currencies in the early going of the US trading session. The dollar has been gaining versus the Canadian dollar while trading lower against the British pound sterling, New Zealand dollar, Australian dollar, Swiss franc and the Japanese yen, according to currency data by Oanda. The dollar is currently trading almost unchanged against the euro at time of writing.

The US stock markets, meanwhile, have had a positive session to start the day with the Dow Jones rising by over 40 points, the Nasdaq increasing by over 10 points and the S&P 500 showing a quick 5 point gain.  Oil has traded about unchanged at $74.60 while gold has risen to a new record high by gaining $7.70 to $1279.60 per ounce.

By Anton Eljwizat – The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, as I demonstrate below, the 8-hour chart signals that a bearish reversal is imminent, and it might have the potential of reaching towards 111.00 in the coming days. This might be a good opportunity for forex traders to enter the trend at a very early stage and a great entry price.

• Below is the 8-hour chart of the EUR/JPY currency pair.

• The technical indicators used are the Slow Stochastic, Williams Percent Range, and Relative Strength Index (RSI).

• Point 1: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 2: The Relative Strength Index (RSI) signals that the price of this pair currently floats in the over-bought territory, indicating downward pressure.

• Point 3: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure.

EUR/JPY 8-Hour Chart

Forex Market Analysis provided by ForexYard.

© 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 GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

Dollar performance was mixed amid a relatively quiet session as equities were flat on the day. A disappointing US manufacturing print helped nudge USDJPY higher with no BoJ in sight but the most notable currency movers in the G10 during the US session were the Swiss franc crosses following the SNB’s surprisingly dovish comments. But otherwise, oil drifted lower and gold is $1274.13 at the time of writing. EURUSD traded 1.2976-1.3117, USDJPY 85.23-85.84. Treasury Secretary Geithner testified before Congress on China’s exchange rate policy and said China needed to allow a “significant, sustained” appreciation of its currency and said the US would continue to seek progress along with the G20 on the issue, though he stopped short of any concrete actions. Senator Dodd emphasized that unilateral intervention by “Japan, China or any other nation, represents a gap in international cooperation on exchange rate policy.” In US data, jobless claims fell to 450k and it appears that despite some Labor Day holiday-related volatility, claims are trending down after a midsummer jump. Meanwhile, the Philadelphia Fed rose less than expected to -0.7 and details of the survey were less constructive. PPI figures were in line and the current account deficit widened as expected to 3.4% of GDP, largely on imports. US data has avoided any major disappointments of late but fears of further Fed easing likely remain, though concerns elsewhere are helping mitigate dollar downside at this stage.

EUR

A relatively successful Spanish bond auction helped boost the euro into the US session and it held its gains throughout the day. The bid-cover ratio on the 2020 Spanish bonds was 2.32 compared to 1.89 at an earlier, similar auction. The bid-cover on the 2041 issue was lower but still above two times. A French auction went smoothly but sovereign concerns remain. Portugal announced it would sell bonds maturing in 2014 and 2020 on September 22.
Eurogroup Chairman Juncker again expressed displeasure with Japan’s unilateral intervention but did not think the decision will trouble relations. He said interventions are only fruitful if coordinated and the yen is not overvalued against the euro. He also said problems in Ireland remain but the Irish government is able to deal with them.
JPY

USDJPY was relatively quiet as the BoJ was not seen but several policymakers in both the US and Europe expressed displeasure with the recent intervention. BoJ Governor Shirakawa spoke, but offered no clarity on whether the injection of yen liquidity brought about by the initial intervention would be sterilized. Instead, he again repeated his misgivings about quantitative easing, saying it only had a limited effect on prices, and a limited effect in stimulating the economy. Without citing sources, Nikkei news reported that the intervention would in fact be unsterilized and that intervention was the largest single-day yen selling intervention on record.
GBP

Sterling was hit by far weaker than expected retail sales figures overnight, with August core consumption declining by 0.4% on the month, and headline sales declining by -0.5%. BoE Policymaker Posen said that inflation expectations matter greatly, although policymakers will not need to overreact to the recent elevated inflation readings as long as they can credibly persuade others that the rise in inflation is due to a shock.
Our team continues to see sterling suffering under a weaker growth environment and data has taken a material turn for the worse of late. The BoE will target inflation expectations but the growth rhetoric is clearly to the downside.

CHF

The SNB left rates unchanged with a target range around 0.25% and delivered a remarkably dovish statement. A strong consensus had looked for unchanged rates (UBS went for a hike) but most will have been surprised by the dovishness of the statement. The inflation forecast has been revised down over the entire forecast horizon and the meeting marked a sharp reversal from the June statement, when it appeared that monetary tightening was imminent. The only hawkish element left over was the admission that the expansionary monetary policy was ‘currently appropriate, although it poses long-term risks to price stability’. It seems clear that the strength of the franc has been the key factor in the decision. So if one objective of the SNB was to weaken the franc, the message will likely achieve that target. Many investors will be worried by the gloomy assessment of the SNB and reconsider their CHF longs. The one upside risk for the franc would be if markets more broadly were to become risk averse on the back of the message, in which case safe haven flows would strengthen.
For the next few days, however, it seems likely that the franc will continue to suffer from the realisation that rate hikes are unlikely for the time being. EURCHF may well rise to 1.34 before becoming heavy once again.

TECHNICAL OUTLOOK

EURUSD NEUTRAL Model is neutral; 1.3334 and 1.2588 mark the key near-term directional triggers.
USDJPY NEUTRAL Upside near 85.91 ahead of 86.70 Fibonacci resistance. Near-term support lies at 85.20.
GBPUSD BULLISH While support holds at 1.5297, expect gains towards 1.5731 with scope for 1.5999.
USDCHF BEARISH Focus on 0.9918 with next support at 0.9786. Near-term resistance comes in at 1.0278 ahead of 1.0466.
AUDUSD BULLISH Bullish pressure held at 0.9458 with next resistance at 0.9563. Near-term support is at 0.9309 ahead of 0.9196.
USDCAD BEARISH Following the break of 1.0248, model has turned bearish. Next support at 1.0108 with resistance at 1.0509 ahead of 1.0673.
EURCHF BEARISH Move above 1.3163 exposes 1.3345 next, but broader focus is on the downside with support at 1.2991 intraday low ahead of 1.2766.
EURGBP NEUTRAL 0.8532 and 0.8142 mark the key directional triggers.
EURJPY NEUTRAL Break of 114.74 would put odds in favour of positive tone. Next resistance at 116.68. Support holds at 107.73 ahead of 105.44 key low.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: ForexYard

This past week’s news has given some investors hope that an economic recovery is indeed underway in America, even if recent news has begun to comment about a pause. The US IBD/TIPP Economic Optimism gauge on Tuesday was 1.2 points higher than expected, while American retail sales also beat forecasts. Wednesday saw a minor slowdown in industrial production, but yesterday’s PPI, unemployment claims, and TIC long-term purchases reports all showed forecast-beating growth in the US economy.

Economic News

USD – USD Declines as Data Shows Growth and Risk Appetite Returning

The USD appears to have declined against the bulk of its currency counterparts, with a few exceptions. The EUR/USD has climbed above 1.3100 as of late-Asian trading, while the GBP/USD is climbing towards 1.5650. It appears as if the stronger currencies of the early months of summer are now seeing an autumn correction. The dollar, Swiss franc, and Japanese yen are all losing ground while riskier assets are on the rise.

This past week’s news has given some investors hope that an economic recovery is indeed underway, even if recent news has begun to comment about a pause. The US IBD/TIPP Economic Optimism gauge on Tuesday was 1.2 points higher than expected, while American retail sales also beat forecasts. Wednesday saw a minor slowdown in industrial production, but yesterday’s PPI, unemployment claims, and TIC long-term purchases reports all showed forecast-beating growth in the US economic recovery.

If inflationary figures and economic optimism continue into today’s reports of the same nature, we should see current USD trends continue. Expected today is the US release of its Consumer Price Index (CPI) data, measuring the growth of consumer inflation. If the CPI data is released in-line with yesterday’s Producer Price Index (PPI) growth, then we should see riskier assets continue to rule the market.

The University of Michigan (UoM) is also set to release its Preliminary Consumer Sentiment report which is expected to show confidence on the rise in the United States, fueling the return of risk appetite further.

EUR – Poor European Data Offset by Japanese Currency Intervention

Since the start of the Asian trading session this morning, the EUR has climbed against 15 of its 16 major counterparts. The only currency appearing to outpace the EUR’s recent ascent has been the Australian dollar. Against the US dollar, the euro has soared above 1.3100 and looks to have the momentum to carry on higher. Against the Japanese yen, the 16-nation single currency has risen to as high as 112.35 in late-Asian trading.

Europe’s light news week has helped other economies take the lead in global currency valuation. The United States has released a heavy stream of economic reports which appeared to have dominated market attention. The trend in America seems to be a modest return to growth, for this week’s data at least, while in Europe the few reports published appear to have been far worse than expected.

The shocking drop in the ZEW economic sentiment reports on Tuesday pushed many traders in the direction of safe-haven investments. But the euro was able to rebound sharply following Japan’s intervention in the currency market, devaluing one of the primary global safe-havens, and after the US released report after report showing positive growth. The result was an offsetting jump in the value of riskier assets such as the EUR, despite its own economic woes.

JPY – JPY Plummeting; Will There Be Further Intervention from BOJ?

The Japanese yen remains under the pressure of Wednesday’s intervention by the Bank of Japan (BOJ). The JPY fell to a 5-week low against the US dollar, hitting just below 86.00 after appreciating 71 pips. Against the euro, the JPY has seen a much sharper drop, falling 181 pips to a recent low of 112.35; the GBP/JPY, likewise, has climbed modestly, with a current price just over 134.10.

Despite the absence of further intervention by the BOJ, many speculate that the yen-selling by the central bank may not have yet come to an end. Analysts have recommended keeping an eye on JPY pairs for the second sell-wave, which many claim could happen as early as next week.

Crude Oil – Crude Oil Price Pares Losses, Trading Over $76 a Barrel

The start of this past week saw a rather sharp boom in the price of Crude Oil as a pipeline delivering oil from Canada to the American mid-west suffered a leak, forcing the pipe to be shut down. The resulting speculation of a dip in supply, both from the pipeline leak and from hurricanes in the Gulf of Mexico, led to strong support for oil prices. News that the leak would be fixed by the end of this week has resulted in a paring of those gains, however, as concerns of an over-supply are now hitting the market.

Analysts have begun to claim that despite minor setbacks in production, the fundamentals for Crude Oil remain weak. Even with a short-term decline in supply, inventories remain at record highs. This has been the case especially since the world’s major energy consumers are experiencing a minor pause in recovery. Without a major shift in fundamentals, few are expecting oil prices to break out of the current range between $72 and $77 a barrel.

Technical News

EUR/USD

The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart’s RSI. Going short with tight stops may turn out to pay off today.

GBP/USD

The price of this pair appears to be floating in the over-bought territory on the 4-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the daily chart’s Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

USD/JPY

The USD/JPY cross has experienced a bullish trend for the past 3 days. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

USD/CHF

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the 4-hour chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.

The Wild Card

Gold

Gold prices rose significantly in the last week and peaked at $1279 for an ounce. However, the 8-hour 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.

Forex Market Analysis provided by ForexYard.

© 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.

EUR/USD

Extends recovery from 1.2643 higher low, clearing key 1.2931 and 1.3045 resistances, to approach 1.3158, 76.4% retracement of 1.3332/1.2586. Break here to open 1.3227 next, with full retracement at 1.3332 not ruled out. Downside, 1.3047/35 zone offers initial support.

Res: 1.3158, 1.3186, 1.3227, 1.3260
Sup: 1.3047, 1.3035, 1.3010, 1.2975

GBP/USD

Continues to trend higher, clearing the first barrier at 1.5700, en route to 1.5728, 61.8% retracement of 1.5997/1.5295 decline. This may offer a stronger resistance, together with overbought hourly conditions, to trigger a correction before continuing the uptrend. Downside, 1.5650 offers initial support, while below 1.5535 risks deeper pullback

Res: 1.5728, 1.5760, 1.5820, 1.5865
Sup: 1.5650, 1.5595, 1.5575, 1.5535

USD/JPY

Extends rally following the downside rejection at 82.86, with clearance of 85.91 to focus 86.40, 13 Aug high, and 86.67, 38.2% of 92.10/82.86 descend. Correction lower should be contained by yesterday’s higher platform at 85.21, to keep immediate bulls in play.

Res: 85.91, 86.40, 86.89, 86.99
Sup: 85.50, 85.21,  85.00, 84.72

USD/CHF

Soared through 1.0050/61 resistance yesterday, to extend corrective phase off 0.9931. A lower top is anticipated near 1.0197, 76.4% retracement / trendline drawn off 1.0625, 12 Aug high, for a return to 0.9997/31. Break above 1.0276, 10 Sep high, needed to trigger a stronger recovery.

Res: 1.0197, 1.0210, 1.0240, 1.0276
Sup: 1.0137, 1.0110, 1.0060, 1.0050