Month: October 2010

By David Adams

Like a lot of people, I have a college education. Years ago I planned a career in corporate America and live the middle class American dream. I was lucky, I fell into the trading business and learned about money. It wasn’t on purpose, I didn’t suddenly decide that being a trader was a great idea…the job was offered to me.

During one the current recession, I have made one very interesting observation about the US population. We don’t have the slightest idea on how to make money efficiently with a level of low risk. We’ve forgotten the principle of the American dream. It’s shocking

I have a friend who is a university professor and has found his salary cut back drastically and has decided he is going to start a restaurant. Of course, it will take all of his savings and a hefty loan from a banking friend to finance his operation, and then there is the problem of running a successful restaurant. He knows nothing about restaurants, or making money, but a restaurant was the best idea he could come up with. And he is going to risk his life savings and mortgage his future on a bet that he can make the thing work out. I hope he does…

What’s wrong with this picture? We are a country of technology and education, but the true sense of entrepreneurship we enjoyed in the past is fading.

Do you have a Plan B? Sure, you can sell some fruity health drinks that promise everlasting life, sell berries to lose weight, or pester your friends to death with the latest MLM opportunity, complete with ads of successful MLMer’s driving Ferrari’s and living in mansions. I think anyone who has every been involved in an MLM knows how the story usually works out. It ain’t pretty, or cheap.

What wrong with learning a skill specifically designed to make money?

This is the point where I become completely baffled. I trade, all I do is try to make money. I don’t try to sell anyone, and my income is is not dependent on someone else buying the latest gizmo I am trying to hawk. I have a distinct and specialized skill that is easily taught and readily learned and yet this business is often ignored. Oh, some people might look into it a little bit, and usually get frustrated with the terminology or the fact that it may take a bit of learning, time and practice to get good. But once you got it, baby, you become a money making machine. A goose that lays golden eggs, yet few people will take the time to learn this relatively easy skill.

In my opinion, most people know more about their lawn than they do their money, and this recession is eating away the money they have.

It doesn’t have to be that way. I just don’t understand.

About the Author

I write mainly about financial topics, specifically daytrading the ES and YM emini contract, and many of my more advanced techniques can be found at my blog, The Fractal Futures Trader.

I also write an ongoing commentary, which is a bit more opinionated, at The Fractal Traders Commentary

By Cedric Welsch – To discover why forex pairs that correlate act as they do, a study of the economies of the issuing nations is necessary. This forex pair is a comparison and is the basis of the exchange rate of one currency for another. Changes and anomalies in the economy of a nation whose note is included in this comparison will cause proportional changes in the exchange rate. Those changes that violate this range of proportions provide arbitrage opportunities. Some of those economic changes are related to the currency itself, and others are related to the economy that the currency represents.

A major factor that affects forex pairs that correlate is that the common idea in the upper circles of the finance world is that inflation is good. There is nothing as certain as the lust of a secretive administer of a fiat monetary system to inflate the money supply. In fact, the money supply could be inflated by printing more money and purchasing anything with it. Nevertheless, one can rest assured that if inflation is considered good, and it is possible to create it at the will of the printer, there will be more of it. It is the comparison of the change in inflation rates that interests those who trade currencies. A factor that interacts with this phenomenon is the actual production of a nation’s goods and services.

The value of currency is arrived at by comparing the quantity of money in the system and the amount of goods and services that could possibly be traded for it. With all else being equal, if the money supply is inflated, and the productions of goods and services remains the same or decreases, the value of each unit of money deflates. Therefore, it is equal to fewer goods, services, and any given foreign currency than it was in the past. The change in the money supply and the change in the production of goods and services are the two main factors in the study of exchange rates.

Forex pairs that correlate represent economies that correlate. The economies correlate in terms of their special products, services, and currencies and the growth or decline thereof. There are other factors, such as the cost to acquire their special raw materials and the price available from the market for their special production. Each nation has its specialty, and it is always a common thought when thinking about the currency, its prospects, and the forex pairs that correlate with it.

About the Author

Do you want to really make profits with forex? Make sure you get fresh updates ahead of everybody else here: Forex News

Also, you need to know how to read and analyze the trading market well. Learn Currency Trading News

By David Adams

Is there any real value in predictive statistics that traders seem to pull out of thin air? The proponents of the random market theory (efficient market theory and it’s many variations) would say “absolutely not.” But the army of Fibonacci proponents and a sea of floor traders who use them beg to differ, because they have watched prices stop on Fibonacci numbers time after time. The question, then, is a simple one; Someone has to be right and someone has to be wrong, why do the market adherents in each camp disagree on something so fundamental?

Do you find it ironic that we understand the more about the subatomic world of molecules than we know about how the market and it’s functions? Some of the best and brightest academics claim there is no predictive ability in using Fibonacci trading. Why? The science of predictive indicators does not pass the litmus test of scientific legitimacy. If you have ever traded Fibonacci numbers, can you tell me whether the market will turn on 38% retracement, 50% retracement, 61.8 retracement? That’s the problem academics have with these systems, there are no empirical facts. Yet many traders swear by them and are very successful in trading them profitably.

Welcome to the world of day trading. It’s a world where traders use systems that are wildly varied and the results are unpredictable. Because the functions of the market are not well understood, as evidenced by the universe of varying opinions on market price action, you will find a plethora of divergent theories and traders who vociferously defend the system they trade to the exclusion of other trading systems. Further, you are unlikely to find two traders who trade identically, even if their investment philosophy is identical.

Let’s start with the Fibonacci numbers. The ratio used to calculate this set of numbers is 1.618 and it stays constant throughout the sequence. Originally identified by mathematician Leonardo Fibonacci in the thirteenth century, their popularity has increased exponentially in day trading. The question is whether they work, and why do they work. Anyone who has traded Fibonacci numbers comes to realize that the market often pauses, sometimes turns, and often blasts right through the sequence of Fibonacci retracements. There is no denying the numbers are relevant, and traders pay attention to them.

But why does the market stop and start so often on these numbers? In trading we don’t necessarily worry about the “why” questions, if something works or has predictive value it is used. You cannot necessarily predict which Fibonacci number the market will choose to honor. On the other hand, many people identify market high and possible lows using Fibonacci ratios, but any trader could identify these point using the alternate method of support and resistance. Yet this support and resistance often occurs right at the 50% or 61.8% Fibonacci levels. Sheesh…..

It is my opinion that Fibonacci numbers work just fine, but the reason they work is because so many technical traders use the system. When the market makes a move from trough to peak, most technical traders will immediately add the Fibonacci retracements to the entire move, and hence the system becomes a self fulfilling prophecy. And that’s okay. Many true Fibonacci traders take offense to this explanation, and claim there is relevance in the ratio. Perhaps there is, but I’m not buying that explanation. As a chaos theory adherent, I feel the only scientifically relevant explanation is the self-fulfilling prophecy argument. The Fib people point to ancient architecture and a wide variety of natural phenomena that use the Fibonacci sequence. It’s true, lots of ancients architects and unexplained phenomena have relevance in their respective fields, but I cannot connect the dots. Which is to say, “yes there are Fibonacci numbers all about, but what does that have to do with investing?” The answer is a resounding “nothing at all.”

But I still use Fibonacci numbers in my trading…

As a day trader, my job requires me to take profitable trades. Whether the Fibonacci sequence is scientifically verifiable is irrelevant to me, as I am only concerned with profitable trades. I cannot recommend using only Fibonacci ratios in your trading. However, I always trace in the retracements after a significant market move, up or down. You would be surprised how often the market honors them, too. I especially like to trade the Fibonacci when it has already stopped and turned on a specific number, as this establishes real legitimacy for this point on the chart. Then I can go to work trading, based on the info the Fibonacci has imparted.

So there you have it, the reason the Fibonacci ratios work is unclear, and I am unwilling to bestow mythic credibility based on the history of the ratio. On the other hand, there is no denying the market pays attention to these numbers. Whether I believe they are a self-fulfilling prophecy is irrelevant, because as traders we only deal in profitable trades and growing account balances. The “why” just doesn’t matter.

About the Author

Many academics cannot find relevance in the Fibonacci sequence and give it short shrift, yet many Fibonacci traders swear by the system. I take a look at the facts of the system and try to sort through how the Fibonacci works, and why it works.

By Bemjamin Stockton – The biggest financial market and most liquid in the world, that’s what the forex market is. You can just imagine the kind of profit earning opportunities it offers. Sadly, as what many new to traders found out, it is not that easy. The forex market is complex; with many factors influencing currency movements that you always have to be alert for developing opportunities and dangerous situations as well. It’s a good thing forex companies and brokers have come up with various tools and software to help you with forex analysis. All traders, veterans and newcomers, rely on effective and efficient forex analysis to earn money from the forex market and avoid getting wiped-out.

What exactly is forex analysis? It’s the process of predicting where currency values will be going in the next minutes, hours or days. You earn money by buying a currency which you think will go up in price in the future and selling when that happens. Seems simple enough but currency values do not usually stay put or go the same direction for long periods of time. Along the way are sharp fluctuations which offer chances of earning but great dangers as well.

There are two kinds of forex analysis – fundamental and technical. Of the two fundamental analysis is perhaps easier but you have to have a firm grasp on the economics of the countries which issue the currencies and the various other factors make currencies fluctuate. Among the Internal factors that determine currency values are economic and political policies, balance of payments, employment, and a host of others. There are also external factors you have to consider. Fundamental analysis helps you have holistic view of the market and if the analysis is correct is a good basis for developing a good trading approach.

Technical analysis is more involved. It is a method of assessing currency values by studying the statistics produced by the trading activities in the forex market like volume and past prices. It is not the intrinsic value of the currency that’s measured, however, but possible movements vis-à-vis other currencies using charts and graphs in the hope of identifying certain patterns from which future trading activities can be based on. This analysis helps you identify favorable entry and exits points, ensuring that you earn money from every trade and avoid losing more than you can afford.

These seem a lot of hard work, but forex brokers are always ready to provide you appropriate forex trainings and even demo trades where you can practice until you have perfected a trading scheme that’s sure to bring in some money.

About the Author

Bemjamin Stockton is a dedicated father and forex tracker. If you want some invaluable advice on forex analysis please visit http://learnforexstrategies.org now.

By Cedric Welsch

The latest announcement made by the US Fed and the impact of this on the value of the US dollar seems to suggest that the state of the economy is indeed affecting the value of the dollar. The latest Fed statement that it is prepared to provide further stimulus to the US economy is indicative of two points. First that the Fed is acknowledging that the US economy is still weak, and second that the Fed may undertake quantitative easing to address the situation of a weak economy.

The poor performance on the consumer spending, employment front, lower housing wealth and soft prices, seem to have urged the Fed to make such a statement. Overall, the US economy grew 1.6% in the second quarter as compared to 3.7% in the previous quarter reflecting the slowing pace of economic recovery. Quantitative easing will imply that the Fed is open to purchasing more assets and flooding the economy with more liquidity. This effectively implies that the supply of dollars in the economy will go up and the markets feel that the value of the dollar should fall in line with such an eventuality.

The immediate impact of the Fed statement was a loss in the value of the dollar versus major trading currencies like the Yen, the Euro and the Canadian dollar. Analysts have interpreted the US Fed statement to suggest that while the chances of a double dip recession have dipped, the risk of deflation is high. The Fed has indicated that it is uncomfortable with the present levels of inflation and may indulge in purchase of bonds. Quantitative easing or an increase in money supply could help counter deflation as there will be more money chasing the same goods and services in the economy, which could put an upward pressure on prices and ward off deflation.

Quite clearly, the slowdown in the US economy and the measures that the Fed could take to counter the slowdown are leading to loss in the value for the US dollar. While, the markets may have reacted sharply to the Fed announcement, the US dollar continues to be the major risk aversion currency and could rise in case of the announcement of any untoward economic development. Such a development could force investors to turn to the safety of the US dollar and make it go up.

The US Fed’s announcement that it could take steps to stimulate the economy further led Asian stocks to recede, indicating some sellout. The funds from such sales could move back to US treasuries and boost the dollar, which would indicate the risk aversion sentiment. While, the Yen also acts as a risk aversion currency, any real substitute to the US dollar for the purpose is yet to be established.

However, the act of printing more money to induce inflation and to stimulate the economy could have an overbearing impact on the long term value of the US dollar. In the past, such acts have led to currencies plunging, though the US is likely to be careful in its quantitative easing such that no drastic fall takes place in the value of the dollar.

About the Author

Do you want to really make profits with forex? Make sure you get fresh updates ahead of everybody else here: Forex News Also, you need to know how to read and analyze the trading market well. Learn Currency Trading News

By James McKee

The Japanese Yen has begun to slide against other major currencies, which signals some headway being made by the Bank Of Japan regarding devaluing the Yen so inflation does not hurt their export revenues. Considering that Japan is an almost exclusively exporting country their economy would suffer more than many nations would if inflation takes hold of the island nation. Due to inflation that has already occurred Japan has shut down many factories due to decreased demand for their goods, and in turn unemployment and poverty in Japan have risen exponentially. The homeless population in Japan has also exploded prompting the construction of shelters to house Japanese citizens who find themselves falling on hard times.

The Bank Of Japan has lowered its interest rates as close to zero as it ever has, and only a week later does it take any sort of effect. This is ominous for Japan because there are no more cards left to play where their central bank is concerned. The United States who has always been an ally of Japan is far too busy with their own financial turmoil to aid the country as it slumps further and further into quagmire which no one can see the end of.

While the Yen has dropped slightly today a correction is certainly in the works for the near future. I would avoid pairing the Yen with the USD due to the USD’s extremely volatile nature as of late. The AUD still has some steam in it from the recent increases in the value of gold, considering Australia is the world’s third largest producer of gold it is a logical connection to make that the AUD will be rising in the short term. Considering that the value of gold is going nowhere but up since the world’s economies are going through the floor the AUD is definitely one to pair with the JPY due to its imminent correction. Stay vigilant and be critical of any data coming in that contradicts your instincts, happy trading!

About the Author

Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.

By Justin Thomas

You can minimise the risks and get the most favourable exchange rate for a currency transfer if you carefully examine all options the market has to offer

Today”s globalised world is a place where currency transfer have grown into routine for the vast majority of people. Reasons vary from sending money to relatives, to moving or buying property abroad, to financing the activities of businesses of all kinds. While demand for the service is growing, so is supply. Therefore, it is time to consider currency fluctuations in the cost of the transfer itself.

First of all, anybody who wants to move funds abroad will have to buy the destination currency or convert his home currency into it. Hence, you automatically come under the sway of currency exchange rates and currency transfer fees, and have to examine very carefully not only the current exchange rates but also all applicable charges and fees involved in the transfer.

Calculating the cost of the transfer and all affiliated expenses could be an arduous task so a good approach to the problem is to consult a currency transfer expert. Many banks charge a high commission on money transfers abroad plus they offer exchange rates, which not always reflect the actual market situation. Thus, a transfer of, say, $10,000 could result in losing several hundred U.S. dollars after paying all applicable fees and taxes, and converting your dollars in the destination currency.

You cannot avoid fees and/or commissions but can minimise them by selecting a reliable service provider which offers reasonable prices for currency conversions and transfers. As mentioned above, high street banks provide reliable solutions but they cost dear. The same applies to most of the high street money transfer agencies so a possible solution is to look for a currency transfer agency specialising in currency exchange and transfer operations.

As a matter of fact, these types of companies operate in a way similar to that of large banks and money transfer companies but they take advantage of the ever fluctuating exchange rates. In the past couple of years alone, the value of the British pound against the euro fluctuated by 30%, and only an expert is able not to fall victim of currency fluctuations on such a volatile market. Currency exchange companies, also called Forex companies, trade on the international financial markets purchasing and selling large volumes of different currencies and diversify the risks of bad currency exposure, making good profit margins. This way they can offer their clients currency exchange rates close to the market prices, while most banks and money transfer companies will offer you a rate, which is on average 2-3% lower than the current market exchange rates.

Another advantage of using currency specialists is that most of them provide online services and some of them even offer fixed exchange rates for a particular period of time, which is your insurance against future currency fluctuations. However, you should remember that using the services of such a company requires a bank account, too, and is also subject to all applicable regulations. Money transfer companies are regulated companies as well but they are a good choice if you send several hundred dollars to a relative abroad. The transfer of larger sums definitely requires the services of a bank specialist or a currency transfer expert, and it is up to you to decide which service is better, more advantageous and less costly.

By David Adams – The TRIN was developed in 1967 by Richard Arms and is commonly referred to as the Arms Index. It is a widely used index among institutional traders, and used less by individual traders. This can be attributed to the difficult nature of interpreting the indicator, as it contrarian by nature. The TRIN has it’s roots in the analysis of volume, or the breadth of the market. Mathematically it looks like:

Arms Index = (# of advancing issues / # of declining issues) / (advancing volume/declining volume)

It is intuitively obvious from the formula that up and down volume as it relates to share volume is the basis for it’s calculation. Like all indicators a smoothing number of periods is added to give the indicator meaning. For short-term traders and swing traders periods of 4 or 5 days are typically used, but longer term traders use period basis as high as 55. In my experience, it takes a good bit experimentation with the TRIN to find the number of periods that best suits your trading style. As an intraday trader, I seldom use periods over 5, sometimes 5. Many traders graph the TRIN, but my experience is that most traders park it in the upper left hand corner and show it as a simple ratio.

The TRIN has never been an oscillator traders use as a primary indicator, but more as a broader indicator in the package of indicator used to evaluate market conditions. A reading of 1.0 on the TRIN is considered neutral and the market is considered to be in equalibrium. Any reading beneath 1.0 is considered to be a bullish indicator, and conversely, any reading above 1.0 is considered to be bearing. I suppose the real value of the TRIN is to give a trader a quick reading on how the market is actually performing. Another popular interpretation of the Arms indicator relates to it’s ability to predict overbought and oversold levels. If the level is below 1.0 the market is considered to be oversold and the corollary interpretation applies to readings on the indicator over 1.0 as being overbought. In my opinion, the difference in the interpretations is merely a semantic difference, but there are traders that will argue till they are blue in the face there is a definite difference in bullish and bearish vs overbought and oversold. The primary argument centers around the time period indication of the indicator, as the bullish and bearish camp would argue their interpretation indicates buying and selling opportunities.

As I mentioned earlier, I would be hesitant to trade the TRIN as a primary indicator because it suffers, as all oscillators do, as a lagging indicator and therefore requires support from other market indicators to truly be valuable. On the other hand, it lends genuine credence to a bullish or bearish trend when used in conjunction with a primary indicator.

One important distinction to note, and it is a mistake I have seen made, is the inverse relationship the TRIN shares with it’s cousin the TICK indicator, which are often used together. It is important to note that a rising tick indicates a bullish sentiment, while a rising TRIN indicates a bearish sentiment. In a set up using these indicators, then, the TICK and the TRIN would be moving in opposite directions. Of course, divergences (as they always are) from this primary relationship are of great interest to traders and indicate dangerous trading opportunities.

It is important to note that while the TICK indicates the ratio of rising and falling issues, the TRIN is adept at indicating the volume flowing into rising vs falling issues. This distinction is important to note as it indicate two very different monetary relationships. The TICK tells us the ratio of rising vs falling issues while the TRIN differentiates the volume of money flowing into rising and falling issues.

Finally, I would caution most traders to spend some time with the volume studies popularized by Richard Arms, especially his EquiVolume system before diving headlong into the use of these indicators, as the relationship between the two can be difficult to trade without the proper study and trading. On the other hand, once these two indicators are fully understood they can be pure gold in analyzing a market and discerning real trading opportunities.

In summary we have defined the nature of the TRIN, or Arms index, and noted that it moves in a contrary fashion than most indicators. Further, a reading of 1.0 indicates a market that is neutral or in relative equilibrium. On the other hand, readings below 1.0 are indicative of a bullish market sentiment, and readings above 1.0 are indicative of bearish sentiment. Many traders substitute the terms oversold and overbought, respectively, for these conditions and consider the reading genuine buying opportunities. It is important to remember the the TICK and TRIN, both Richard Arms indicators move in opposite directions in a trend, not the same direction.

About the Author

You can learn to trade from a 15 year veteran trader, not a salesmen. This program comes with a lifetime mentoring program and an educational package that is second to none. Additionally, the trading system is time tested and has been in use more than ten years. You can get your free emini starter pack (valued at $500) by going to Click here for your free trading pack at Trading Concepts, Inc

AUDUSD broke below the rising price channel on daily chart, suggesting that a cycle top has been formed at 0.9998 level. Deeper decline to 0.9300 is expected in a couple of weeks. As long as 0.9300 level holds, the fall from 0.9998 is treated as consolidation of uptrend and one more rise to 1.1000 area is still possible. However, below 0.9300 level will indicate that the uptrend from 0.8066 has completed at 0.9998 already, then the following downward move could bring price back 0.8700 area.

For long term analysis, AUDUSD is in uptrend from 0.8066, further rise to 1.1000 area is still possible in next several weeks.

Weekly Forex Analysis

By David Adams

One of the simplest and informative trading indicator one can utilize is some version of a moving average. I use them in my own trading, and you should consider doing the same. They are simple in structure and most charting programs have several different types of moving average formulas built into their indicator package.

In my trading, I strike an 89 period moving average on every chart I trade. If the price action is significantly below the 89 period moving average, or has spent most of the day below the average, I simply eliminate any long trade from my thinking.

Why?

I hate trading against the trend and prolonged action significantly below the 89 period SMA tells me the trend for the day is short. Not wanting to imitate a salmon swimming upstream, I simply concentrate on short trading for the rest of the day and avoid the pitfalls of counter trend trading. I realize some people absolutely love digging out that one great countertrend trade, because often they are big gainers, but the number of countertrend trades that set-up looking great, then turn tail back short far outweigh my risk tolerance. I let the others hit the home runs, and settle for three or four singles, with an occasional double thrown in for good measure. In any event, trading with the trend keeps me out of harms way and those devastating big losing trades. I also use the formula for long trades, if the price action is significantly above the 89 period SMA, or stays above the 89 period SMA for a prolonged time, I eliminate any short trades from my thinking. Same principle, I want to stay in the trend.

If the price action is alternating above and below the 89 period SMA all trades are on the table, as no clear trend is established. Further, I don’t concern myself if the price action is one to three points within the 89 period SMA because this certainly isn’t significant deviation from a daily trend. Normal market noise will have the price action oscillating above and below the moving average. No, I am looking for major breaks below the 89 period SMA for my decision process.

So, what is a simple moving average, anyway?

Let use a simple five period simple moving average. The last five periods price has been:

5+6+5+7+4=27 (27/5)=5.4

So the moving average for this five period average has been 5.4. As each period passes a new SMA is calculated and a smooth line connecting these points forms. Voila! You have yourself a moving average line. It’s not uncommon to calculate two different moving averages simultaneously and gauge your entries and exits based on the intersection of these lines. The length of the time period for each SMA depends entirely on the time frame of your trading, with longer term traders using much longer SMA period numbers and short term traders using much shorter SMA period numbers.

Try incorporating some of these moving average techniques into your own trading and you may find a bounty of information you have been missing. Moving averages are valuable tools in the trading process and because of their simplicity are often overlooked.

About the Author

I endorse a state of the art trading program for beginners at Trading Concepts, Inc It’s an awesome product that will have you well on your way to success. Plus, it has a money back guarantee…you have nothing to lose and thousands to gain.