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Monday, August 30, 2010

Forex Trader's Weekly Update (August 30 2010 to September 3 2010)

EUR/USD

EUR/USD dropped further to 1.2587 but turned sideway since then. Initial bias remains neutral this week and some more consolidations would be seen first. But upside should be limited by 1.2910 resistance and bring fall resumption. Below 1.2587 will target 61.8% retracement of 1.1875 to 1.3330 at 1.2431 next. Sustained trading below there will argue that medium term decline is likely resuming for another low below 1.1875. However, break of 1.2921 will argue that fall from 1.3330 is possibly completed and will turn focus back to this resistance.



In the bigger picture, note that EUR/USD is still limited below 55 weeks EMA (now at 1.3385) and thus, there is no indication of medium term bottoming. Whole decline from 1.6039 is possibly still in progress. Such decline is treated as correction to long term up trend and will target 1.1639 support after taking out 1.1875 low. On the upside, though, above 1.3330 will turn focus back to 55 weeks EMA and sustained trading above there will pave the way to further rise to upper trend line resistance (1.6039, 1.5143, now at 1.4699).



In the long term picture, the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, we'd expect strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 support to contain downside and bring another long term up trend. However, note that sustained break of 1.1209 key fibonacci level will dampen this view and open up the case of a take on parity.

Monday, August 23, 2010

3 Golden Ways To Approach News Events In Forex Trading

Recently, there are a few emails asking me how do we trade news when we do not even know what’s the outcome of the news releases/fundamental reports. It’s not only just that, how are we going to handle different sources of potentially high impact news and reports that are going to hit the forex market. So below I’m going to share on how to handle those in forex trading.

I understand how frustrating it can be when there a constant stream of data/fundamental reports that is releasing every now and then, and it may hinder your decisions for your trading. Forex traders seemingly have loads of stuffs to keep track before executing their trades like countries’ economic data, who is going to speak that will affect the market etc.

Well, I’m going to give you an example here. A stock trader only has to worry about the earnings reports of a certain company, but whereas retail sales reports may be useless to them. For a forex trader, he has to worry much about interest rate change, employment and unemployment figures and some other stuffs but do not really have to worry on what the president of European Central Bank (ECB) have to say. It is possible to narrow down on the items that will have an impact on the forex market that you trade because you can choose the calendar events that that you need to focus on for a certain currency pair. You can refer to a very popular news calendar in forexfactory.com. If you are trading USD pairs, then you should look out for any orange or red coded USD news as it will affect your trade. Below are the 3 ways to approach news events.

1) Predict ahead of the news releases, speech etc. and get into position.
No one can predict where the forex market can go and what the news releases may be. So this is definitely gambling to me and I’ll never recommend this to anyone if you want to trade forex the right way.

2) Avoid the news event by waiting and not trading.
This is the best forex strategy for me when I’m a short term trader. When there is a news events coming up, I will not trade 2 to 3 hours before the news are released, this is to keep me out from unexpected results and choppy markets. Sometimes the market will be very volatile and it can only be challenging but NOT profitable for most traders. So it’s better we stay out of the unpredictable and see how the market moves after that.

3) Trading in a timeframe where intraday swings do not have much impact.
This applies to traders who are not using intraday as their strategy. Instead, they are using short swings and long swings as their trading strategy. The approach here is that when you use swing trading strategy, you will have larger stop loss and these kind of intraday swings are just small fluctuations. But of course, you have to be able to take huge stop loss and your forex trading system must be proven to be able to take in these small swings. If your system can do that, it means the news releases are already factored into your trading system.

Do Not Trade Forex Until You Read These!

I found this interesting article by a fellow professional forex trader Walter Peters that talks about the 3 Trading Weaknesses and How to Overcome Them:

Do you know what your biases are? Where are your trading weak spots? Where do you let the pips slip from your grasp?

Trading is like any other skill. Profitable trading, like bowling, cooking, planting a tree or driving a motorcycle, can be learned - by anyone. That means you too.

If you would like to become a profitable forex trader, or simply make more pips trading, find out what your weak spots are, and then work on them.

Some common weak spots are:
# 1. Trading too often.

How many times have you had a profitable week, only to give it all back at the end of the week on a few silly trades? (You wouldn’t believe how profitable most traders could be if they simply learned to wait for the ideal trade setups.)

The other common problem with frequent trading is that many traders get into revenge mode. Many traders may try to “get their money back” from a market that handed them their most recent loss. Sometimes a little perspective is all that is needed to see the markets more clearly. By sitting in the bushes until the “free money” is lying there you force yourself to become a more disciplined trader.

Recall the last time you took a trade that was an ideal setup. Remember the feeling you had – knowing that the trade had an unbelievable success rate. You probably had very little doubt that it would work out. Now, consider this: what if EVERY trade you took felt like that. This is what patience can do for you. If you learn to sit and wait for the very best trades, not only can trading become very fun, but it can become extremely profitable.
# 2. Finding it difficult to re-enter a trade.

If you find that you are often stopped out on a trade, but the trade eventually goes in the expected direction without you, you may want to work on this skill. Learning to re-enter is tricky because it may lead to overtrading, but it is invaluable in making sure that you eventually collect your profits - especially for traders who trade lower timeframe (5 minute, 10 minute, etc) charts.

Deciding to re-enter a trade is a difficult decision because you are admitting that you were wrong. By re-entering the trade you have decided that the original timing of the trade was off, and that now is the better time to get into the market.

Note that this is very different from pyramiding, or scaling into a position. A re-entry is a trade that is taken after the first trade did not go well and you have exited this original position.When pyramiding, or scaling into a position you are still holding on to your original position.
# 3. Inconsistent risk management.

If you vary your risk from trade to trade, then you may get some value from learning a risk management “trading ritual.” What I mean by this is that you go through specific steps (for example, with a spreadsheet or calculator) to determine what % of your account is at risk on the next trade. If your money management strategy is to vary the risk on each trade, that is fine, but this ritual will really help you because you will know precisely how much is at risk on each trade. This way you are more likely to stick to your plan and exit the trade if the trade goes against you. This will also help you to avoid the painful exit from the trade simply because the trade has gone against you too much - by defining your risk beforehand you are more likely to be able to sleep (if you trade longer term charts) and less likely to exit before your stop is hit because you cannot handle the excessive drawdown.

Trading is simply like learning to ride a bike or drive a car, it is a skill that anyone can learn. Some people will tell you otherwise, that only talented people who are “born to trade” can extract profits from the markets. Trading doesn’t take extreme intelligence or any superhuman gifts, it simply is hard work, just like learning to drive a car.

Walter Peters, PhD is a professional forex trader and money manager for a private forex fund. In addition, Walter is the co-founder of Fxjake.com, a resource for forex traders. Walter loves to hear from other traders, he can be reached by email at walter@fxjake.com.

Sunday, August 22, 2010

Forex Trader's Weekly Update (Aug 16 2010 to Aug 20 2010)

EUR/USD

EUR/USD's sharp fall last week indicates that a short term top is at least formed at 1.3330 on bearish divergence condition in 4 hours MACD. Initial bias remains on the downside this week and break of 1.2731 support will suggest that whole rebound from 1.1875 is completed and will bring deeper decline to 1.2466 support next. On the upside, above 1.2935 will turn intraday bias neutral and bring recovery. But upside should be limited below 1.3330 and bring another fall.

In the bigger picture, while the rebound from 1.1875 was strong, it's limited below 55 weeks EMA (now at 1.3410) and reversed sharply. Break of 1.2731 support will indicate that such rebound is completed and suggest that whole fall from 1.6039 is possibly resuming. Such decline is treated as correction to long term up trend in EUR/USD and would possibly make another low below 1.1639 support before conclusion. On the upside, though, above 1.3330 will turn focus back to 55 weeks EMA and sustained trading above there will pave the wave to further rise to upper trend line resistance (1.6039, 1.5143, now at 1.4699).

In the long term picture, considering the five wave impulsive structure of the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, we'd expect strong support between 61.8% retracement of 0.8223 to 1.6039 at 1.1209 and 1.1639 support to contain downside and bring another long term up trend. However, note that sustained break of 1.1209 key fibonacci level will dampen this view and open up the case of a take on parity.

Pips Mover's Weekly Pivot Point for this week: 1.2891

Historical Levels up to date: 1.4865, 1.4675, 1.4420, 1.4090, 1.3840, 1.3600

Saturday, August 21, 2010

Trailing Stop Loss: Boost Your Profits With This Simple Method

Using trailing stops is one of the best techniques that an active trader can do to increase their profits. This trading method will allow you to reap profits will also protecting you from taking losses. This is very important as trades can turn quickly and what once was a winning trade can quickly turn into a loss if it is not managed properly. A trailing stop loss will eliminate this and allow you to leave trades open and let your profits run while simultaneously protecting you from taking a loss.

What is a trailing stop loss?

A trailing stop loss is a technique in which your stop is moved up as your trade moves into profit thereby locking in profits and eliminating the possibility of loss. This is extremely beneficial to traders because once a trade reaches this point the traders knows no matter what they will profit on the trade. The trader can then let the trade run and continue to make profits for them while also being protected from losses. This means unlimited profit potential with no chance of taking a loss. What more can a trader ask for?

How to use a trailing stop loss

If you want to implement trailing stops in your trading then its a simple as selecting it when you open a trade with your software. Most trading software gives you the ability to set stop orders that will automatically trail as your position moves deeper into profit. If you are unsure how to do this then you should consult the manual for your software or contact your broker for assistance. If for some reason your software doesn’t offer this capability built in then you can still manually trail your stop orders.

All you have to do is define the point at which you will move your stop order and also the increments in which you will move it. For example let’s say you are day trading the Eur/Usd in the forex market and your initial stop order is 20 pips away from your entry point, you could choose to move your stop order up another 20 pips for every 20 pips you move into profit. So once your position is 20 pips in profit you would move your stop order to break even and then when you reach 40 pips of profit you would lock in 20 pips of profit and so on and so forth. This is just an example as there are unlimited ways to trail your stops. How you choose to do should be based on your style of trading and risk tolerance.

A trailing stop loss provides traders with a great way to limit and even eliminate their losses while also keeping profit potential unlimited. This is a great method that is sure to help your trading once you find a way to implement it that suits your trading style. As with all new methods you should first test it out in a demo account until you figure out exactly how you want to implement it into your trading plan.

Day Trading Secrets: These Powerful Insider Tips Will Take You To The Next Level

If you are looking for day trading secrets then you have come to the right place. In this article I am going to give you some great information that is is sure to help you in your quest to become a better trader. Well without further ado here are my top 4 day trading secrets:

Dont trade after 12pm est.

The NYSE opens at 9:30 am eastern time and the bulk of action occurs within the first 2 hours of any session. Therefore if you want the best opportunity for profit then you need to be trading during this time. After the first couple of hours of trading market volatility and liquidity drop off considerably as most experienced traders exit the market. Not only does this mean less opportunity for profit but it also leaves the market more vulnerable to short term manipulation which can leave inexperienced traders with heavy losses. If you trade a market other than the U.S stock market then the same principle applies, only trade during the first 2 hours of the session.

The market always retraces.

Whenever there is a large move in the market you can bet your bottom dollar that the market will eventually retrace a portion of the move. This occurs becasue the people that have been in the move since the beginning start taking profit and also becasue of other traders that don’t think the move is sustainable begin to fade it. Both of these forces come together to push price back in the opposite direction of the move. So what does this mean for you day trading? It means that if you ever find yourself on the sidelines when a move occurs don’t fret over the missed opportunity for profit, instead just wait for the first sign that the move has run out of steam and then position yourself to trade the retracement

Only suckers trade the news.

There is no faster way to lose your money than trying to trade the news, and this is becasue of two reasons.For starters, you can’t predict the news so you have no way reliably positioning yourself before the news is released, and trust me listening to the analysts predictions on CNBC is no better than flipping a coin. Lastly, even if you were to guess correctly as to what the news will be there is no way you would then be able to predict how the market would react to it. Just becasue news is good doesn’t mean the market will go up and just becasue its bad doesn’t mean the market will go down. Oftentimes the market will react to surprising ways and many times it wont react at all and becasue of this it is a fools ambition to try to basing his trading around news releases. I’m sure you can get lucky and correctly predict what the news will be and how the market will react to it, but is that something that you can do day in and day out for any meaningful amount of time?

Always take profit.

While this may seem like common sense you would be surprised at how many new traders get this crucial point wrong. When you are in a trade and its in profit those are just paper profits, and what I mean by paper profits is that they are not real becasue you have not taken profit and therefore that money has not been deposited into your trading account. If the market for were to for whatever reason reverse direction all of your profits would be gone and you may even end up taking a loss. This is why its imperative that when you are in a trade and you have some good profits you need to bank them instead of holding on in the hope that the market will continue to move your way. This is probably the most important of all day trading secrets because at any time market conditions can change and what once was profit can quickly turn into a loss if you’re not careful.

So that’s it those are in my opinion the most important day trading secrets that new traders need to know. They are not all there is to know however as there are plenty of other little tidbits and pieces of information that will only come to you with time an experience. I’m still learning new things everyday myself in fact, the point of this article wasn’t to give you some magic day trading secrets that would turn you into a millionaire overnight, I’m afraid they don’t exist. I’m just trying to give you the information you need to become the best trader you can be. If I have helped you or you want to take issue with anything I have said then leave a comment in the box below.

By Jason Madison

Friday, August 20, 2010

Advantage Of Metatrader 4 Online Trading Platform

MetaTrader 4 is an online trading platform designed for financial institutions dealing with Forex, CFD, and Futures markets.

The platform includes all necessary components for brokerage services via internet including the back office and dealing desk.

Currently, over 100 brokerage companies and banks worldwide have chosen our solution to meet their high standards of business performance.
The MetaTrader 4 Platform has a user-friendly front-end trading interface. It provides technical analysis, charting and Expert Advisors to help you develop your own trading strategies.


Advantages


MetaTrader 4 is a solution for broker companies, banks, financial companies, and dealing centers. The main advantages of the system are:

Coverage of financial markets

The trading platform MetaTrader 4 covers all brokerage and trading activities at Forex, Futures and CFD markets.


Multi-currency basis


The system is designed on a multi-currency basis. It means that any currency can serve as a general currency used in the operation of the whole complex in any country and with any national currency.


Economy and productivity


Implemented data transfer and processing protocols are notable for their economy. It makes it possible to support several thousands of traders through a single server with the following configuration: Pentium 4 2 GHz, 512 DDR RAM, 80 GB HDD. New protocols reduce both the demands on datalink and their operational cost.

Reliability

In the case of damage to the historical data, the complex has backup and restoration systems. Also, the implemented synchronization allows to restore damaged historical databases within several minutes with the help of another MetaTrader 4 server.

Safety

To provide safety, all the information exchanged between parts of the complex is cripted by 128-bit keys. Such solution guarantees safekeeping of information transferred and leaves no chance for a third person to use it. A built-in DDoS-attacks guard system raises the stability of operation of the server and the system as a whole.

A new scheme of system working operation was created especially for DDoS-attacks resistance. With its help, you can hide the real IP-address of the server behind a number of access points (Data Centers). Data Centers also have a built-in DoS-attacks protection system; they can recognize and block such attacks. During distributed attacks at the system, only Data Centers are attacked; MetaTrader 4 Server continues its operation in regular mode. Thus, Data Centers increase the system's stability to DoS and DDoS attacks.

The implemented mechanisms of rights sharing make it possible to organize the security system with more effectiveness and to reduce the probability of ill-intentioned actions of company staff.


Multilingual support


MetaTrader 4 supports different languages, and a MultiLanguage Pack program is included into distributive packages. It provides translation of all program interfaces into any language. With the help of MultiLanguage Pack you can easily create any language and integrate it into the program. This feature of the system will bring MetaTrader 4 nearer to end-users in any country of the world.


Application Program Interfaces


MetaTrader 4 Server API makes it possible to customize the work of platform to meet your requirements. API can solve a wide range of problems:
»creating additional analyzers for finding a trend of monthly increase of traders;
»creating applications of integration into other systems;
»extending the functionality of the server;
»implementing its own system work control mechanisms;
»and do much more.


Integration with web-services


To provide traders with services of higher quality, the system supports the integration with web services (www, wap). This feature allows realtime publishing of quotations and charts on your site, dynamic tables containing contest results and much more.

Flexibility of the system

The platform possesses a wide range of customizable functions. You can set all parameters, from trade session time to detailed properties of financial instruments of each user groups.

Thursday, August 19, 2010

Fundamental Forex Trading… The Forgotten Art

Traders in the forex market use two types of analysis in their trading, fundamental forex analysis and technical analysis. Technical analysis seems to be the method of choice for most traders especially since it can be used to trade effectively on smaller time frames, but traders shouldn’t underestimate the value that fundamental analysis could bring to their trading. As in the stock market, forex fundamental analysis involves looking at the intrinsic value of a investment, but countries are not like companies in that they do not have balance sheets and income statements. So, in order to determine the value of a countries currency traders have to look at the economic conditions in the country that have an affect on the valuation of its currency. In this post we are going to take a look at some of these fundamental analysis factors.

The Economic Indicators

Economic indicators are reports that are released by the government or a private organization and they form the core of fundamental forex trading. These reports are similar to the financial statements that publicly traded companies are required to file with the SEC. These reports are released at a scheduled time and since they are the only formal way to measure the strength or lack thereof of national economies if there deviate from the norm then they can cause huge swings in the value of a currency. What follows is a list of the major economic indicators used in fundamental forex analysis.

Gross Domestic Product

GDP is designed to give a broad view of the strength of a economy and represents the total market value of all goods and services produced in a country during a given year. A positive GDP means that the economy as a whole has grown in size, which is good for the currency while a negative GDP means that the economy has contracted which may signal further economic issues.

Retail-Sales

The retail-sales report is a measurement of the total receipts of all retail stores in a given country. This measurement is gathered through a diverse sampling of a nations retail establishments. This report is important because it tells traders whether or not consumers are out spending money in the economy. High retail sales indicate a active economy which bodes well for the strength of the economy as a whole and also it’s currency.

Industrial Production

This report measures the overall change in the production of factories, mines, and utilities within a nation. It also reports how closely these factories are to operating at full capacity. If the factories of a nation are operating at or near full capacity and there is also an increase in overall production then that is a sign for future economic strength.

Consumer Price Index

The CPI measures the change in the price of consumer goods. This measurement is done across 200 categories of consumer goods. When compared to exports it can be an indicator of whether or not the country is making or losing money on its products and services.

Using These Indicators

These forex fundamental analysis factors are meant to be used as a guide to the strength of an economy and by extension the potential its currency has for appreciation. These reports are a good place to start if you are trying to get a grip on fundamental forex trading. However, there are a number of other factors that play also play a role in the valuation of a currency so don’t go opening trades any trades simple because a nations GDP has risen. This post is meant to give you a quick overview of fundamental analysis in the forex market and to give you another lens through which to view your trades.

Tuesday, August 17, 2010

Fundamental Forex Trading: All About GDP

If you are interested in fundamental forex trading then there is one economic indicator that definitely needs to be on your watch list and that is the gross domestic product or GDP for short. The GDP reflects the value of all goods and services produced by the economy during the time frame measured; taking into account consumer spending, purchases made by the government, inventories of private companies, construction costs, and the foreign trade balance. This thorough analysis of the economic activity within a country makes the GDP an important part of forex fundamental analysis.

Unlike other indicators used in fundamental forex trading the GDP is released on a quarterly basis which makes it less prone to fluctuations as the data is gathered over a larger period of time. It is also very comprehensive as it incorporates the information from many other economic indicators and combines them with the result being the GDP. So in a sense the GDP is an indicator of economic indicators as it brings all of the data from the other major economic indicators together to provide a clear picture of the state of a country’s economy.

How To Use The GDP In Fundamental Forex Trading

For your trading you are going to want to look at the rate of growth of the GDP. It is generally believed that a annual GDP growth rate of 2.5-3.5% is best for the economy of a country. Any lower and it may indicate future trouble for the country in terms of economic growth and may even foreshadow economic contraction. If the GDP is higher than 2.5-3.5% then it may signal inflationary pressures that may hurt country’s economy and value of its currency in the long run. So, as far as fundamental forex trading is concerned if the growth rate of a country’s GDP is in the optimal range of 2.5-3.5% then there is a strong likelihood that the value of its currency will increase. Too high above or below this range may signal problems that may lead to a future decline in value of the currency.

GDP is a a great tool for any fundamental forex trader. It takes a huge amount of information and compiles it into a simple number. This makes it both easy to understand and powerful, however it is not a magic bullet. You can’t just look at the GDP, make a trade, and then having everything work out. GDP is a tool to be used in conjunction with other tools to make an informed decision.