Month: November 2010

By Ray Timus

A crucial issue in Forex investing is to deal with all that information that flows into the market. How you manage this area is up to your knowledge level.

You might find yourself being in one of the two situations: a forex beginner, or already a trader. If you are a forex beginner, start with learning about the market and its concepts, then play on a demo account and then, in a third stage of learning, start trading for real. You go back from time to time to upgrading your knowledge, simulating on a demo and then again trading for real, so you should see this as a continuous process.

On the other hand, if you are already active in the forex field, you should search for continuous improvement of your knowledge, regarding technical analysis, as well as fundamental analysis that has to do with international economics.

An important tool every trader should watch is the Economic Calendar, where you see chronologically the most important economic data that come from the big economies in the world. This is critical, as the data can influence also other markets, like the stock market or the bond markets.

The most traded currencies in the Forex investing world

In a 3 trillion dollar market a day, some important currency pairs concentrate almost all the interest of market participants.

First we have the “majors”, standing for the most traded currencies, representing the important economies in the world: USD – the American dollar, EUR – the European currency, GBP – the British pound, JPY – the Japanese Yen, AUD – the Australian dollar.

Secondly, we have a range of big economies or mid-sized economies, which represent different type of countries. Some economies are linked to services, like New Zealand, and here we have NZD – the New Zealand Dollar, other economies are linked to natural resources: CAD – the Canadian Dollar, RUB – the Russian Ruoble, BRL – the Brazilian Real, NOK – the Norwegian Kroner.

A separate category is RMB – the Chinese Reminbi (or Chinese yuan), because here we don’t have a full flexibility of the currency. Even though China is one of the biggest economies in the world, its currency has very limited fluctuations, and might not seem as interesting for forex investing. It is expected that in the future the importance and the flexibility of the Chinese currency will grow.

See all you need to know about Forex on www.forex-bestglobaltrading.com where you can find multiple resources on technical analysis, how to choose a broker, Economic Calendar and many other useful tools in the forex investing activity.

About the Author

Expert in Forex trading and stocks trading, having my own company in this field since 2006.

By Owen Trimball

If you’re an option trader and your main objective is to be able to quickly and efficiently create option positions with high ‘open interest’ and therefore great liquidity, then the underlying stocks that make up the Dow Jones Index might be just right for you.

The Dow Jones Industrial Index (DJIA) is made up of 30 large companies based in the USA. They all have options, so all you need to do is find a list of the DOW30 together with their stock symbols and create a watchlist in your charting package or broker account. Once you have that, simply analyze these price charts on a daily basis, looking for familiar patterns that to you, mean trading signals according to whatever criteria you use.

Because the Dow Jones stock are so highly traded, you can not only do simply buys of call and put options, but is is also much easier to create advanced options positions such as condors, butterfly, calendar and ratio spreads. These involve a combination of long and short positions which can involve a wide spread of strike prices. The DOW 30 is one place where you shouldn’t have any trouble locating “way out of the money” option strikes which still have great open interest.

Some option trading educators adopt the policy that it is a good idea to have a limited number of stocks that you follow anyway. The idea is that you ‘get to know’ these stocks intimately and become familiar with the way they trade. They become your trading ‘friends’ and you know which signals are the most reliable for each of them. Thirty stocks is a good sized watchlist for anyone, so you should have no problem finding enough trades.

You can use the Dow 30 stock for range trading strategies, delta neutral strategies, as well as vertical spreads, calendar spreads and ratio spreads.

It’s important that whatever option software you are using to trade these options, has the capability to give you the current implied volatility (IV) in the option premium compared to the historical volatility (HV) of the underlying stock. Due to the high ebb and flow of demand for Dow 30 stocks, their option prices can sometimes be overpriced or underpriced. This is critical information that you need to know, particularly if you’re considering using spreads or straddles.

Straddle options should always have low implied volatility and therefore be underpriced. You want them cheap so that if the stock price explodes, the increase in implied volatility in the option premiums that often comes with increased buying or selling volumes will add to your potential profit.

For spread positions, you should prefer higher IV on the short (sold) leg of the position compared to the IV for the long (bought) leg. This will give you an edge, particularly if the stock doesn’t move in your anticipated direction. It isn’t a problem if the IV is the same, but you definitely want to avoid spreads where the IV of the long position is greater than that of the short leg.

The Dow 30 stocks tend to trade in predictable patterns which produce reliable indicators and therefore, can be stocks of choice for better trading results.

If you decide to adopt these large US companies as your option trading friends, you should look for a reputable broker based in the USA that allows you to easily fund and withdraw from, your account from anywhere in the world. Set up your watchlist, wait patiently for the right entry signals, stick to your plan, manage your trading capital carefully and there is no reason why you shouldn’t realize some consistent cashflow.

About the Author

Owen has traded options for many years. Visit his popular site to discover the advantages of Option Trading and how strategies like Dow Jones Option Trading can provide a regular income without the need for large trading capital.

By James Woolley – One of the easiest ways to make money as a forex day trader is to wait for the price to trade in a narrow range before breaking upwards or downwards out of this range. However while this sounds easy on paper, there are two key points you have to consider when trading these potentially profitable breakouts.

First of all it’s important to note that the best breakouts will generally occur in the first half of the trading session before the big moves have got under way. That’s because the overnight trading range (from a UK perspective) is often very narrow for the major currency pairs, so any breakouts that subsequently occur will often be quite considerable.

So you should seriously consider trading around the time when the London and European markets open, and ideally a couple of hours before this as well because sometimes you get some breakouts that occur quite early in the day. You do not really want to be trading towards the end of the trading day when the European markets are coming to an end because even though the US markets are just getting going around this time, the big moves have usually already happened by this time.

The second key point I want to make is that breakout trading by it’s very nature is not a surefire way of making money. That’s because if you actually watch the price action on a daily basis, you will see that many of these breakouts will fizzle out very quickly.

To combat this problem it is always a good idea to take some profits as early as you can (with half your position), and move your stop loss up to break-even as soon as possible. That way you will usually generate some profits from a trade even if the breakout is a false one because there will always be a little bit of momentum right at the start of one of these price moves.

If the price moves back into the range you will have already banked a small profit, but if the price continues to move in the required direction you can potentially bank some massive profits. This is particularly true at the start of the day, as I’ve already mentioned, because there is often much more potential for the price to move strongly in a certain direction.

So what I am basically saying in this article is that if you do trade intraday forex breakouts, it is best to scale out of a position in two stages because by taking some small profits early and moving your stop loss to break-even you give yourself a risk-free trade. It is also a good idea to trade these breakouts early in the trading session because this is when the biggest and most predictable price moves generally occur.

About the Author

Click here to learn all about Forex Morning Trade, a new but highly effective day trading strategy, and to read a full Forex Profit Multiplier review.

By James McKee

Europe is not the only continent looking to tighten its belt at the cost of the common man for the sake of an improved economy. Forex traders should take note of the fact that the United States at large has begun a very real effort to tamper with its economy by any means necessary. Among the proposed initiatives is once again raising the retirement age and lowering Medicaid benefits. The rest of the world is encouraging such measures due to the fact that many other countries are not creating money to solve their problems, they are cutting their budgets.

Among the proposed measures in the US are provisions that would make capital gains and dividends taxable as income as opposed to investment revenue. At current none of the markets are reacting to these proposals, however as their possible implementation date (2012) draws near we are sure to changes in the forex currency exchange and elsewhere. Many financial experts believe that in the short term the dollar will remain at current levels, however once these new measures are implemented the dollar may become even more unstable.

Too little too late is the phrase on the lips of many economists as the United States struggles to find a viable solution to the strife currently being experienced there by citizens at all levels. While other countries such as France and England have undergone pre-emptive strategies to stabilize their economy through difficult measures the United States just continues to print money that diminishes the value of the US dollar. Traders should take notice of these issues with the US dollar when considering it in a pair on the Forex currency exchange. Indicators are abound where the US dollar is concerned and all signs continue to point to instability and as the Federal Reserve’s recent decision truly soaks in it will certainly have an impact.

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 James McKee

Many traders will have a favorite pair or trading system that they utilize to make money in the market. This can be a great thing for beginners because it allows one to become familiar with a particular currency on the Forex currency exchange however in the long term being flexible is vital to success. There are times when any currency or pair will be far from desirable to trade in due to extreme instability. While there are systems out there that make it possible to predict the behavior of currency some of the time there are no guarantees. This is why we as traders must stay nimble and adaptable at all times.

Bearing in mind that trading currency at different rates is the name of the game with regard to the Forex market. Trading different pairs on the forex currency exchange can be scary at first because each of the majors behaves differently but you must familiarize yourself with them. When trying a new pair or currency it is a great idea to utilize a demo account to avoid losses before familiarizing yourself with a currency. It is usually best to stick with somewhat “stable” majors such as the CAD or AUD when first starting out as a trader but eventually the JPY and USD should also be examined.

While some aspects of Forex trading do remain constant others are in constant motion that is what makes trading difficult. If it were simple there would be no room for profit and none of would have a “job”. Being grateful for the tumultuous nature of the market is a stretch for most, but being grateful that serious competition is less than common than elsewhere is not. Change is scary for everyone but most people do not face their fears and thus can never prosper in some ways. As traders it is our job to face our fears and insecurities and never be afraid to fail so long as we learn something.

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 Benjamin Stockton – Newcomers are often fired-up by visions of getting quick profits from forex trading that they hastily rush into it. Very unwise of them considering that the market is rather complex. Oftentimes they realize too late that they have much to learn before they can be successful in trading. The best commonsense forex advice one can give them? Study the market first, develop a trading strategy, and then go.

Despite many newcomers getting disappointed, there is money to be made in forex trading. Plenty of it. It’s just a matter of being more deliberate in your approach. For example, you do not use just any kind of forex software. There are many kinds and not all will be good. You want something that’s simple but has all the features that can help you develop a sound trading strategy. The software must have simple indicators that are easy to read and provides you all information and signals for setting-up trades with more than a better chance of earning profits.

One of the most important things a newcomer does to really prepare for forex trading is taking demo trading seriously. All softwares allow practice trading using live market situations as backdrop. Demo trading is crucial to your forex trading education. Not until have you applied the known theories of trading such as forex trends analysis using technical and fundamental analysis, forex leverage, forex margins, etc.., can you begin to really understand the market and earn from it.

You are not, of course, expected to master forex trading that easily. You will probably need a certain husbanding along the way. You will not believe it but forex companies, the good ones at least, which supply the softwares are totally dedicated to transforming into a hotshot trader. It’s in their interest that you become one and so assign technical support personnel to help you with certain problems. Another feature most software have is the trader’s community forum composed of traders using the platform. You can seek advice from any of the veteran traders in the forum for any knotty trading situations you encounter or ask them about some good forex strategies.

Succeeding in forex trading is not impossible. It’s just a question of how you make use of the resources available to you.

About the Author

Benjamin Stockton is a dedicated to three children and forex tracker. <html>To learn more about forex advice and the latest and most effective forex strategies, tools and mindset that will allow you to make lots of money from trading forex please visit http://learnforexstrategies.org now.</html>

By James McKee

When approaching an intraday trade it is very important that a trader always bear in mind the chance of false breakouts and prepare accordingly. When preparing to enter a trade it is important to look for ascending and descending triangles, this is because the pattern established creates a directional bias for the trade. With an ascending triangle bullish gains are being bought at ever increasing levels while the bearish levels are attempting to establish steady support. When trading within these patterns it is best for the trader to keep the pair’s previous pattern in mind before the triangle appeared.

The direction a triangle takes on is an effort to break the horizontal support or resistance. If the pair was going in this direction prior to the formation of the triangle it makes the trade very potentially profitable. The time of day one makes a trade in is also of the utmost importance, because trading when there is high volume as opposed to low volume is always a great idea. Due to this trading during the London session is a great way to achieve the goal of making high volume trades.

Making a trade during a time when there is high volume is key in avoiding false breakouts as is often the case near the close of the Japanese session. A trader’s schedule can be either be their best friend or their worse enemy depending on when they are active versus inactive within the market. The simple fact that many traders are not awake at 3AM eastern time means that they are missing out on the opening of the London trading session, the period which happens to produce the highest volume. False breakouts can of course occur during peak periods as well and as we all know there are no guarantees in the Forex currency exchange, but there are certainly advantages.

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 James McKee

The US dollar just does not seem to want to budge despite interventions and attempts by the Federal Reserve to stimulate the economy by pumping six hundred billion dollars into the US economy. Talks between the United States and South Korea are an attempt to stimulate an ailing US economy by increasing exports and raising the GDP. Talks however have broken down numerous times due to political tensions in America regarding free trade. A raise in GDP could signal an increase in the value of the USD on the Forex currency exchange. GDP is among the top indicators for currency value when it comes to any economy.

President Barack Obama visited South Korea in an attempt to start brokering a resolution to the current trade dilemma but was unable to do so. The goal of the United States president was to arrive at a resolution by the end of the G20 summit so that United States car manufacturers and beef producers could begin exporting it to South Korea. Such a deal if brokered has the potential to double United States export rates. Once the negotiations are completed and South Korea finds an amicable arrangement with the United States it will be single largest deal brokered by the US since NAFTA.

South Korean activists are very much against the importation of US beef due to a breakout of mad cow disease in 2003, at which time South Korea refused to import anymore US beef. This was a huge blow the US beef producers who have been making an effort to regain a presence in South Korea ever since. A re-negotiated agreement with South Korea would mean a large increase in US exports and this would in turn add considerable value to the US dollar. Traders in the Forex exchange should take note and keep a close eye on the USD.

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 Ashley Jessen

A number of profit awaits the day trader who knows how to take advantage of leverage for any instrument, be it Contracts for Difference, Forex, or Futures. Whilst the profits can add up to over 440% like Dave Limburg during a recent live trading competition the downside can be devastating. Today we’ll take a look at some CFD leveraging basics to keep you on the right side of the ledger.

The Fundamentals of Leverage

The absolute basic of leveraging your CFD, Futures or Forex account come down to this. By using a high level of leverage, you will have excessive wins and also excessive losses. This rule is inevitable. So your goal should be to use leverage to your advantage and maximize your gains whilst minimizing your losses. This may be too good to be true but we’ll check on what we can do to attain this. Small steps to leverage success

When you find yourself bitten by a trading bug and you end up with your big win you’ll discover that it may then be followed by a huge loss. Call this Murphy’s or any name you prefer but chances are if you haven’t experienced this there’s a great chance that you will. Large profits can be tempting but you should focus on how to protect yourself from the downside and minimize the amount of leverage you are to use. With that, start really small and avoid exceeding more than twice your leverage or your account size. This only means that on a $10,000 trading float you wouldn’t like to take total positions that go beyond $20,000. You may get more by using this small amount of leverage.

Your trading leverage should be at a respectable level

Here are basic advice you have to take note of when using CFD, Futures or Forex leverage. If you have little to no trading experience, do not exceed more than 3 times your account size. So for your $30,000 account you should not take total positions that go beyond $30,000. Once you gain more experience you can consider using more leverage but at the outset, don’t exceed this amount. You can consider much more leverage when you have become more experience but take note that leverage works like a two-edged sword. It can work wonders when it works in your favor but not when it is going against you. Stay small for as long as you can and enjoy a long term and healthy relationship with leverage.

About the Author

Learn about the 9 Rules to make You Safe when Investing Money to earn Money. By understanding these significant CFD Trading Rules you can be sure to be on the right side of the ledger more often. Learn more about the CFD revolution by checking to http://www.learncfds.com/

By Danielle Franklin – Back-testing via your forex demo account is the way to check whether your trading strategy is successful or not. The general idea behind back-testing is to find an effective strategy that worked well in the past and is most likely to produce the same winning results now.

Back-Testing Advantages

1. Recognition of the patterns that tend to repeat itself within a certain course of time.

2. Deeper understanding of the trading system and more precise decision making during the draw-down period.

3. Estimation of the potential profits and losses based on historical performance data.

Back-Testing Drawbacks

1. Some strategies require a specific spread conditions, meaning that those strategies might not be as effective during live trading compared to demo.

2. Summer and winter time changes may cause the confusion and mismatch price and history figures for specific charts.

3. Trading live means dealing with volatile market prices. Strategies based on order for entries may not work very well in live trading, since the entry prices between demo and live account might differ.

How to Back-Test?

1. Download MetaTrader 4 platform and Expert Advisor from your forex broker. 2. Open MetaTrader 4 platform and click on VIEW. 3. Click on Stategy Tester – a new window will pop up. 4. Choose the Expert Advisor you wish to test. 5. Select the currency pairs (EUR/USD, USD/JPY etc). 6. The field “Model” is the accuracy options. Using every tick is advisable. 7. Check the date box and choose the period of testing – the beginning and the end date. 8. Visual mode will show a chart with the actual trades. The disadvantage of the visual mode option is the significant delay in the back-testing process, therefore you might consider giving it up. 9. Period drop down menu shows the time frame of the chart. 10. At Expert Properties you can choose the initial deposit. 11. At Expert Properties choose the Inputs options. You might want to start with default settings for now and change in needed with time. 12. You are all done – click on start button and see your back- testing in action.

About the Author

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