Month: April 2011

By David Adams

Let me say from the onset that there are a great number of individuals who rely heavily on trading daily pivot points in their e-mini trading. I am not one of those individuals, but I do chart daily pivots as a frame of reference in my trading. On some days, the market pays especially close attention to pivots, and on other days they are completely irrelevant, as if they did not exist. I have yet to find a system that can tell me which day pivot points are going to be relevant, and on which days they are going to be irrelevant.The basic formula for calculating pivots is:

Pivot point = P = (H + L + C)/3
First area of resistance = R1 = 2P – L
First area of support = S1 = 2P – H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P – (R2 – S1)

There are, however, a number of different pivot point systems of which you should be aware. These systems include:
• Floor Pivot Points: These calculations are referenced above. They have been popular with traders for years and calculate up to three support/resistance levels. You can actually get more support and resistance levels by continuing the formula, but it is generally not necessary.
• Woodie’s Pivot Points: This pivot point system is similar to the floor formula but use a different calculation method. In this system, more weight is emphasized on the close of the previous period. I personally use this particular pivot system.
• Camarilla Pivot Points: While not explicitly defined as pivot points, the system identifies eight levels which resemble support/resistance level for a given period. The origin and methodology of this system is unclear, and they enjoy limited popularity.
• Tom DeMark’s Pivot Points: This system is another hybrid pivot point system designed to predict the highs and lows in a selected trading time frame.

As you can see, there are a number of systems that traders use to calculate pivots. In the truest sense, pivots are a leading indicator (though hypothetical) for market performance and directionality. In my experience, most traders use Floor Pivots and Woodie’s Pivots, while a minority uses the other two pivot systems. Regardless of their effectiveness, it is a daily ritual for me to draw in specific pivots on my chart. It should be a habit you should also develop.

In summary, we have pointed out that pivots can be very important on certain days and on other days can be of lesser importance. I have even seen days when during the morning session the market ignores pivot points, yet in the afternoon session it adheres to them strictly. For that reason alone, pivots should be on your daily chart. We have also identified several different pivot calculation methods and pointed out the most popular systems in use. For most people, Floor Pivots will be a logical starting point, and experimentation with other systems may improve your trading.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By David Adams

I had a new e-mini trader in my trading room last week and he had funded an account with $5000. According to his broker’s calculations, this gave him the right to trade up to 5 e-mini contracts, if he or she chose to do so. Of course, with this newfound flexibility and trading freedom, he promptly began trading 5 ES e-mini contracts and parted with $2000 in about three hours. It’s not hard to do. Needless to say, this turn of events was a frustrating experience and he sought out my counsel. Of course, I was shocked that he decided to trade 5 contracts with such a small account. It is the recipe for disaster.

How many contracts should you trade?

I don’t recommend anyone risk more than 3% of their futures account value on a single e-mini trade. For example, the trader referenced above should have been trading 1 e-mini contract, or 2 contracts at the very most. I’m not convinced that lower day trading margins have served e-mini traders, especially new traders, and a positive way. Low day trading margins give a new trader a tremendous amount of control over a large amount of money, more money than he or she is probably ready to trade. This problem is compounded by the tendency of new traders to take too many trades during the course of the day. The answer is to learn sound money management practices and never deviate from the practices you have established.

Many new traders who are fresh off reading their new trading system book and excited about entering a market do not fully understand the treacherous arena in which they have entered. Since futures trading is a zero sum game, the goal of every trader is to make money at your expense. For every contract, there is a winner and a loser. Someone parts with their hard-earned money, and the other individual puts that money in his or her pocket. This is an important concept to understand when trading; trading is a zero sum game, there are only winners and losers.

What can you do as a trader?

As I mentioned above, limit yourself to trading a small portion of your futures account, say 3%. This will keep you from realizing catastrophic losses on any given day. One of the most difficult concepts to teach new e-mini traders is that there are only so many good trade setups every day. Learn not to trade every set up that looks like it might be good; take the trades that are well known in your experience and high probability in nature. For me, this means taking about 3 to 5 trades on an average day. I also have a profit target for my daily trading, and when I reach that target I generally stop trading. Again, I realize that losing trades are part and parcel in the trading business. I like to bank my gains once I have reached my profit target.

In summary, I have stated that because your broker allows you to trade a large number of contracts that does not mean you are obliged to do so. Don’t risk more than 3% of your futures account balance on any given e-mini trade and remember that not every set up is going to be a winner. Focus on taking high probability trades, and don’t over trade. Finally, set a profit target for each day and when you reach that target… Stop.

About the Author

Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here

By Cedric Welsch

If you are considering trading on the Forex market it is important to review Forex trading historical data to make informed investments. Investors who review historical trends have leverage over those who do not. While uncertainty will always exist in the market no matter what type of market you invest in, educating yourself of trends through daily history reports will give you insight on the best avenues of investment. Analyzing the Forex system is important. It is important to access complete and accurate information for analysis. Understand what to look for when you are searching for data and make an informed decision.

Several expert traders and financial consultants publish historical figures on the Internet that can be accessed for free. Free trend information is a wonderful resource if you know you are accessing figures published by a reliable resource. Investing in Forex trading information can become quite expensive. If you find a reliable source online posting accurate figures and trends free of charge you have found a very valuable tool.

There are some drawbacks to referencing free trend information. The first drawback is not knowing who is actually posting the information. Because anyone on the Internet has the freedom to post articles no matter what level of expertise they have you will need to dig deeper to ensure the source is credible and the information is not skewed. Free Forex information can be manipulated, indicative, or simply incomplete. Some data providers are well-respected in the industry and are dedicated to providing true and accurate figures that are not compromised. It is important to find data providers with a positive reputation before relying on the information that is supplied.

There are two types of prices published in trend data compilations. One provider may post data prices reflecting past occurrences while another may post prices based on how the market is currently performing. It is important to know what you are looking at. Combining current and historical figures is strongly recommended. Wise investors will refer to data that is based on a market consensus rather than one source.

When you are investing your hard-earned money you want to know what to expect. The Forex market offers no guarantees. While there is uncertainty involved with any type of investing, you can take less risky approaches to investing if you do your research. Refer to reliable Forex trading historical data and see how the market has performed over time.

About the Author

The habit of forex news online reading is an investor’s asset.
Many forex trading reviews are read by successful investors.

Traders can expect a light trading day today, as the Easter holiday has resulted in the closing of European markets. Still, news out of the US may impact dollar pairs in afternoon trading. The greenback has tumbled against its main currency rivals over the last several weeks. Positive news may help give the currency a short term boost to start off the week.

Here is a roundup of today’s main economic news:

14:00 GMT- US New Home Sales

Analysts are predicting the number of new homes sold in the US increased over the last month to 280K. Should the figure turn out to be true, it will likely be seen as evidence of further improvements in the US economy and may give the dollar a short term boost. At the same time, traders should be aware that a worse than expected figure may take the dollar below its current record lows against its main currency rivals.

By Cedric Welsch

Forex trading, or trading the currency markets, is potentially the most profitable type of trading you can engage in. Yet it is amazing how many people enter foreign exchange trading without any clear idea how to proceed, and then lose money and give up. Without Forex trading strategies, you will be very unlikely to be successful.

Foreign exchange trading consists of buying and selling currency “pairs”. For instance, you might open a trade to buy the USD/EUR pair because you believe the US dollar will rise against the Euro. If it rises to the level you expect, you will close the trade with more Euros for your dollar than you bought, thus making a profit. However, you must set a “stop-loss” rate, that is, specify the exchange rate at which your trade will close automatically if you are wrong and the dollar falls instead of rising. That means you lose only your margin, or your investment amount, but no more.

This is an example of the most important of the Forex trading strategies, that of money management. This means, putting limits on the risks you take. Good money management is what separates the successful from the unsuccessful trader. One of the main rules of money management is always to put stops, or stop losses, on all your trades. Another rule, equally important, is that you never risk more than 1 percent of your total equity on any trade. That means that you can be wrong 20 times and still have 80 percent of your equity left.

In fact, understanding equity is extremely important in working out your Forex trading strategies. For example, if you have an account balance of $100,000 and have an open position of $10,000, your core equity is $90,000. You must always calculate your 1 percent risk on your core equity, that is, the amount you have left after opening a position so your next trade would not exceed $900. For this reason, you are better to diversify your trades by trading in several different currencies, because by trading only one currency pair, you generate very few entry signals. So if you decide to trade EUR/USD and GBP/USD with a $10,000 (1 percent risk) position, it would be safe to trade $5,000 in each pair. This way, you will only be risking 0.5 percent on each pair.

There are many more Forex trading strategies which you can use to optimize your profits. The idea of strategy is to set discipline and limit risk, while placing you at the most advantageous position in the market. You can succeed in Forex, as long as you use the right strategies and make the right decisions.

About the Author

Sift in instant fx news on a continual basis to broaden your trading wisdom. Checking out different broker forex review is another way of broadening your wisdom.

USDJPY remains in downtrend from 85.51, the price action from 81.62 is treated as consolidation of downtrend. Resistance is at the upper border of the price channel on 4-hour chart, downtrend could be expected to resume after touching the channel resistance. However, a clear break above the upper border of the channel will indicate that a cycle bottom has been formed, and the fall from 85.51 has completed at 81.62 already, then the following upward movement could bring price back to 83.50 area.

Daily Forex Forecast

By Cedric Welsch

If you are in that place where you are wondering if you should use a Forex trading hours chart or a daily one, you should first understand that when it comes to Forex trading, everything is resumed to pretty much the same thing, which is determining which way the trend is going. This is because it is impossible to trade with the trend if you have no idea where it is going. And when trying to find out the direction of the trend, deciding for a trade frame is the next big concern that most beginners have.

There are many different methods of doing single and multiple time frame market analysis. However, this article will cover a specific one using the Forex trading hour charts that you may find useful and compatible with your trading style. Specialists suggest newcomers in this field to choose their trend chart as the first thing they do. Now, some people choose a monthly, weekly, daily or even an hourly diagram. The next step is to select an entry graphic representation. The entry chart should be more dynamic, so it could very well be the 5 minute time frame. Lastly, the timing chart should be even more dynamic.

To better understand the principle, we should have a look at an example. Let us assume that you are utilizing a daily chart as your trend-chart. Therefore, you will be using Fibonacci ratios, price bars, trend tools or other types of analysis methods in order to determine the trend of the foreign exchange market. In this case you should be using a 4-hours chart as your entry graph, as this would best help you see if there are any patterns in the market fluctuation. If you thus conclude that both the trend and entry chart are showing signs of a downward trend, you should be looking at the 5-minutes graph to determine the best time for an entry. This is nothing else than the moment you actually place an order on a particular currency pair.

A good trader must have a strict plan on when to enter and when to exit a trade, and this plan is recommended to be based on at least two different time frames. This allows you to see the wider picture of what is happening on the market and what is the best time to enter it with a selling or buying order. In conclusion, ensure you make good use of the Forex trading hours chart and of the other time frame charts to not get fooled by the market’s fluctuations.

About the Author

Many sites offering trading news are often good for your intake.
But beware with forex brokers review sites that are biased.

By Cedric Welsch

There are many Forex brokers who allow their clients to use a Forex trading demo account where they can play on the market in real time, but with fake money only. Since most of the people entering this specific market come with the expectation to make big bucks, a demo account is the ideal way for them to test their trading skills and determine if they are actually ready to start investing real money. When opening a practice account, you get a certain amount of virtual money you can trade in real market conditions.

A Forex trading demo accounts is very helpful for a new investor to decide what broker or what platform he or she is most comfortable with. While some of the platforms are very simple and easy to use even for those people who never trade foreign exchange currencies before, others are more complex and difficult to learn and use. Most brokers include a lot of useful features in their platforms such as technical indicators, live news, daily market comments and even rumors about important and relevant rumors that can influence the foreign exchange market. While some brokers only allow you to trade using standard lots, others will offer you mini-lots as well or even separate units, such as a single dollar.

Learning to trade Forex without losing a dime is a great opportunity that you should not miss. That is the whole idea of the demo accounts: you may risk and risk again without losing your hard earned money. There is no doubt that this kind of investment is extremely risky even for the experienced traders, and it can cause you significant loss of capital and a lot of stress if you cannot manage to do it right. All of these can be avoided if you choose to play on a Forex trading demo account until you are certain that your trading strategy is safe and you can apply it on a real account with real money.

Lastly, another important benefit of the demo accounts is that they allow you to test many trading systems, included the automated ones. There are many people who have no intention to trade currencies on their own, but they only want to let a robot or a piece of software to do that for them. The internet if overwhelmed with a plethora of different trading robots and automated systems that claim to trade on your behalf and bring good profits, without you having to do anything. Whether these work or not, you do not have to lose any money as you can test them using a Forex trading demo account.

About the Author

Accumulating currency news trading info is a must for every trader.
Acquiring forex broker review opinions is one good example to this.

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators trimmed their long positions of the Euro against the US dollar while continuing to raise bets against the Japanese yen. Non-commercial futures positions, those taken by hedge funds and large speculators, added to their long positions for the British pound sterling, Swiss franc, Canadian dollar, New Zealand dollar and the Mexican peso while decreasing bets in the favor of the euro, Japanese yen and the Australian dollar as of April 19th.

This week’s notable changes were Japanese yen positions declining a bit lower for a fourth straight week to the lowest level in just about a year while Mexican peso positions rose for a fourth straight week and to their highest level in over a year.

EuroFx: Currency speculators decreased their net long positions for the euro against the U.S. dollar very slightly after increases for four consecutive weeks. Futures positions in the euro dipped to a net total of 62,195 long positions as of April 19th following a total of 64,985 long positions on April 12th.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling bets increased as of April 19th to a total of 30,175 net long positions after falling the week before to a total of 26,671 long contracts on April 12th.

JPY: The Japanese yen net contracts edged lower for a fourth straight week. Yen contracts decreased to a total of 52,983 short contracts following a total of 52,877 net short contracts reported on April 12th. This is the lowest level for yen contracts since May 4,2010 when short contracts totaled 65,612.

CHF: Swiss franc long positions rose higher for a second consecutive week. Franc positions increased to a total of 17,374 net long contracts following a net of 14,657 long contracts on April 12th.

CAD: The Canadian dollar positions edged higher to a total of 65,035 contracts as of April 19th after CAD net contracts had declined to a total of 63,741 net long contracts on April 12th.

AUD: The Australian dollar long positions edged lower for a second consecutive week. AUD contracts totaled a net amount of 84,961 long contracts as of April 19th after AUD positions had totaled 90,651 net long contracts on April 12th.

NZD: New Zealand dollar futures positions increased higher for a fifth consecutive week. NZD contracts increased to a total of 9,339 long positions as of April 19th from a total of 6,336 long contracts on April 12th.

MXN: Mexican peso long contracts continued to increase to a new high for the year at a total of 134,129 net long contracts on April 19th. MXN positions had increased the week before to a total of 124,846 long contracts as of April 12th.

COT Data Summary as of April 19, 2011
Large Speculators Net Positions vs. the US Dollar

EUR: +62,195
GBP: +30,175
JPY: -52,983
CHF: +17,374
CAD: +65,035
AUD: +84,961
NZD: +9,339
MXN: +134,129

Further COT Resources from around the web:

• Forecast The FX Market With The COT Report

• The Only Indicator You Will Ever Need

Forex trading fees are the costs that stem from trading based on a commission. There are numerous costs associated with exchanges on the Forex market, so investors will need to keep track of these costs in order to handle their finances properly. The two most common fees are “rollover”, which involves holding trades overnight, and “spread”, which comes from direct commissions.

Spread Fees

A bid/ask spread is the popular method that Forex brokers use to generate profits. With this technique, the broker will provide an array of currency pairs, and investors can use their own currency to buy into the other currencies that the broker is holding, as long as it is relative to the current spread. If you are interested in a specific currency, the broker will sell it for a much higher price than he/she would buy it back. This method insures profit for the broker, although it is fairly expensive for investors. Spread will allow brokers to sell high and buy low. As an investor, you should find a broker who has small spreads.

Rollover Fees

Amateur traders often get confused with rollover fees because it works differently than most other costs. Instead of having to pay a certain amount of money, the cost is simply credited to the investors. Rollover fees are used when all the main markets have closed and a Forex position is used. The investor usually has to wait for a few hours for the transaction to complete, so he usually loses the interest that he otherwise could have profited from by putting it in his bank account.

Rollover fees define the difference for the interest rates of sold and bought currency. If investors buy into a certain currency with a higher-than-normal interest rate, they will be paid the proper rollover reimbursement at the beginning of the next trading session. Conversely, if they buy into a currency at a lower-than-normal interest rate, they will be charged for the next trading session.

Margins

Margin trading is another prevalent cost in the Forex market. Forex trading generally requires a high leverage fee, so traders who do not have enough money must trade on credit. Most Forex brokers are allowed a 100:1 ratio for leverage, which means that investors only have to own 1 dollar for every 100 dollars that they invest. Margin trading is very risky, since losing the money can lead to significant debt. Smart traders should avoid margin Forex trading fees and methods unless the trade is guaranteed to succeed.

About the Author

Accumulating currency news trading info is a must for every trader.
Acquiring forex broker review opinions is one good example to this.